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YanGuFang International

Filed: 5 Aug 22, 5:09pm

As filed with the U.S. Securities and Exchange Commission on August 5, 2022.

Registration No. 333-[•]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________________________________

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

__________________________________

YanGuFang International Group Co., Ltd.

(Exact name of Registrant as specified in its charter)

__________________________________

Not Applicable
(Translation of Registrant’s name into English)

__________________________________

Cayman Islands

 

2000

 

Not Applicable

(State or other jurisdiction of
incorporation or organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer
Identification number)

3/F, Building 3,
33 Suhong Road, Minhang District
Shanghai, China, 201100
Tel: +86 (21) 52966658
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive office)

__________________________________

Puglisi & Associates
850 Library Avenue, Suite 204
Newark, DE 19711
Tel: (302) 738
-6680
(Name, address, including zip code, and telephone number, including area code, of agent for service)

__________________________________

Copies of all communications, including communications

sent to agent for service, should be sent to:

Richard I. Anslow, Esq.
Wei Wang, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas, 11
th Floor
New York, NY 10105
Tel: (212) 370
-1300

 

Louis Taubman, Esq.
Guillaume de Sampigny, Esq.
Hunter Taubman Fischer & Li LLC
48 Wall Street, Suite 1100
New York, NY 10005
Tel: (212) 530
-2210

__________________________________

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company 

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 7(a)(2)(B) of the Securities Act. 

____________

         The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

  

 

Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS

 

Subject to Completion, DATED AUGUST 5, 2022

[•] Ordinary Shares

YanGuFang International Group Co., Ltd.

This is the initial public offering of ordinary shares of YanGuFang International Group Co., Ltd., a Cayman Islands exempted company. Throughout this prospectus, unless the context indicates otherwise, references to “YanGuFang Group” are to YanGuFang International Group Co., Ltd., a holding company and references to “we,” “us,” “our,” “our company,” the “Company” or similar terms used in this prospectus are to YanGuFang Group and its consolidated subsidiaries, and the variable interest entities (the “VIEs”) and their subsidiaries. Our subsidiaries and/or the VIEs and their subsidiaries conduct operations in the People’s Republic of China (“China” or the “PRC”), and the VIEs and their subsidiaries are consolidated for accounting purposes but are not entities in which we own equity, and YanGuFang Group, as a holding company, does not conduct any material operations of its own.

We are offering [•] ordinary shares, par value $0.0001 per share on a firm commitment basis. We expect the initial public offering price of the shares to be in the range of $[•] to $[•] per share. Prior to this offering, there has been no public market for our ordinary shares. We have applied to have our ordinary shares listed on the Nasdaq Capital Market (or Nasdaq) under the symbol “YGF.” We cannot guarantee that we will be successful in listing our ordinary shares on the Nasdaq; however, we will not complete this offering unless we are so listed.

We are both an “emerging growth company” and a “foreign private issuer” as defined under the U.S. federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for this and future filings. SeeProspectus Summary — Implications of Being an Emerging Growth Company” and “Prospectus Summary — Implications of Being a Foreign Private Issuer.”

Investors are cautioned that you are not buying shares of a China-based operating company but instead are buying shares of YanGuFang Group. YanGuFang Group is not a PRC operating company but a Cayman Islands holding company with operations conducted by our subsidiaries and through contractual arrangements with the VIEs based in China and this structure involves unique risks to investors.

Because we are subject to restrictions on foreign investment in the value-added telecommunications business, we have entered into contractual arrangements with Shanghai YanGuFang E-Commerce Co., Ltd., or YanGuFang E-Commerce, one of the VIEs, to seek control of such entity. While there are no restrictions or prohibitions on foreign investment in the businesses operated by the other VIEs, namely Inner Mongolia YanGuFang Whole Grain Industry Development Co., Ltd. (“YanGuFang Whole Grain”) and Inner Mongolia YanGuFang Contract Farming Development Co., Ltd. (“YanGuFang Contract Farming”) the VIE agreements were also set up to allow for potential engagement in value-added telecommunications businesses in China in the future, which businesses are subject to restrictions on foreign ownership in China. We do not have any equity ownership of any of the VIEs, instead we seek to control and receive 100% of the economic benefits of the VIEs’ business operations through the VIE agreements.

The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where the PRC law prohibits direct foreign investment in the operating companies. As a result, investors will not and may never directly hold equity interests in such China based operating companies. We have evaluated the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 810 (“ASC 810”), and determined that we are the primary beneficiary of the VIEs, for accounting purposes, based upon such contractual arrangements. Accordingly, under U.S. GAAP, the results of the VIEs are consolidated in our financial statements. If the VIEs or the sole shareholder of the VIEs fail to perform their respective obligations under these contractual arrangements, our recourse to the assets held by the VIEs is indirect and we may have to incur substantial costs and expend significant resources to enforce such arrangements in reliance on legal remedies under PRC law. These remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. In addition, uncertainties exist as to our ability to enforce the VIE agreements, and the VIE agreements have not been tested in a court of law. The PRC regulatory authorities could disallow our structure, which would likely result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including a significant decline in the value of such securities or such securities becoming worthless. For a description of our corporate structure and VIE agreements as well as related risks, see “Corporate History and Structure” on page 95 and “Risk Factors — Risks Related to our Corporate Structure” beginning on page 69.

In addition, as we conduct substantially all of our operations in China through the VIEs, we are subject to unique legal and operational risks associated with having substantially all of our operations in China through VIEs, including risks related to the legal, political and economic policies of the PRC government, the relations between China and the United States, or Chinese or United States regulations, which risks could result in a material change in our operations and/or cause the value of our ordinary shares to significantly decline or become worthless and affect our ability to offer or continue to offer securities to investors. Recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. As of the date of this prospectus, no relevant laws or regulations in the PRC explicitly require us to seek approval from the China Securities Regulatory Commission (the “CSRC”), Cyberspace Administration of China (“CAC”) or any other PRC governmental authorities for our overseas listing plan, nor has our company, any of our subsidiaries or the VIEs received any inquiry, notice, warning or sanctions regarding our planned overseas listing from the CSRC, CAC or any other PRC governmental authorities. However, since these statements and regulatory actions by the PRC government are newly published and 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 our daily business operation, the ability to accept foreign investments and list on an U.S. exchange. The Standing Committee of the PRC National People’s Congress (the “SCNPC”) or other PRC regulatory authorities may in the future promulgate laws, regulations or implementing rules that requires our company, the VIEs or their subsidiaries to obtain regulatory approval from Chinese authorities before listing in the U.S. If any of the VIEs or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on any U.S. exchange, continue to offer securities to investors, or materially affect the interest of the investors and cause significant depreciation in the price of our ordinary shares. See Risk Factors” beginning on page 27 for a discussion of these legal and operational risks and other information that should be considered before making a decision to purchase our ordinary shares.

Furthermore, as more stringent criteria have been imposed by the SEC and the Public Company Accounting Oversight Board (the “PCAOB”) recently, trading in our ordinary shares may be prohibited if our ordinary shares are listed on Nasdaq if the PCAOB determines that it cannot completely inspect or investigate our auditor, and as a result Nasdaq may determine to delist our ordinary shares. On December 16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, 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. Our auditor, Friedman LLP, an independent registered public accounting firm headquartered in the United States with no branches or offices outside the United States, was not included in the determinations made by the PCAOB on December 16, 2021. Our auditor is currently subject to PCAOB inspections and has been inspected by the PCAOB on a regular basis. However, in the event it is later determined that the PCAOB is unable to inspect or investigate completely our auditor, then such lack of inspection could cause our securities to be delisted from the stock exchange. See “Risk Factors — Risks Related to Doing Business in China — The HFCA Act, together with recent joint statement by the SEC and PCAOB, Nasdaq rule changes, a determination by the PCAOB that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong 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 add uncertainties to our offering.”

 

Table of Contents

As a holding company, YanGuFang Group’s intentions to distribute earnings or settle amounts owed under the VIE agreement will be done through its PRC subsidiary. YanGuFang Group may rely on dividends and other distributions on equity paid by its PRC subsidiary for its cash and financing requirements, and its PRC subsidiary receives substantially all of its revenue from the VIEs in the form of services fees under the VIE agreements. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to us. We are in the process of adopting our formal cash management policies which will dictate the purpose, amount and procedure of cash transfers among our holding company, subsidiaries and VIEs. Historically, one PRC operating entity provides financial support for other entities’ operations by inter-company loans and we have not experienced difficulties or limitations on our ability to transfer cash between subsidiaries and the VIEs. Prior to our reorganization for purpose of our initial public offering, cash transfers among our PRC operating entities and their subsidiaries were generally approved by the management of the company providing the funds. After our reorganization, cash transfers among our holding company, subsidiaries and VIEs of less than RMB5 million (US$0.78 million) must be reported to, reviewed and approved by the finance department of the company initiating such cash transfers; cash transfers equal to or in excess of RMB5 million (US$0.8 million) but less than RMB20 million (US$3.1 million) must be approved by the chief executive officer and the chief financial officer of YanGuFang Group; cash transfers equal to or in excess of RMB20 million (US$3.1 million) must be approved by the board of directors of YanGuFang Group. Among YanGuFang Group, its subsidiaries, and the VIEs, cash is transferred from YanGuFang Group and YanGuFang HK as needed in the form of capital contributions or working capital loans, as the case may be, to the PRC subsidiary as we are permitted under PRC laws and regulations to provide funding to our PRC subsidiary only through loans or capital contributions, and to the VIEs only through loans, and only if we satisfy the applicable government registration and approval requirements. We believe that there is no restriction 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 transfer of funds involving money laundering and criminal activities. However, to the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets. As of the date of this prospectus, no transfers, dividends or other distributions have been made to date from our subsidiaries or the VIEs to our holding company nor have we or any of our subsidiaries and VIEs ever paid dividends or made distributions to U.S. investors to date. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, YanGuFang Group, through YanGuFang HK, made capital contributions to our PRC subsidiary of $9,794,012, $1,510,000 and nil, respectively. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, our PRC subsidiary provided working capital loans to the VIEs of $9,749,850, $1,509,849 and nil, respectively. See “Prospectus Summary — Financial Information Related to the VIEs” on page 5, “Risk Factors — Risks Related to Doing Business in China — To the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies” on page 46, and “Financial Information Related to the VIEs” on page 5. In the future, cash proceeds raised from overseas financing activities, including this offering, may be transferred by us based on current statutory limits to our Chinese operating entities including the VIEs via capital contribution or shareholder loans, as the case may be.

 

Per Share

 

Total

Public offering price

 

$

[•]

 

$

[•]

Underwriting discounts(1)(2)

 

$

[•]

 

$

[•]

Proceeds to us, before expenses

 

$

[•]

 

$

[•]

Proceeds to selling shareholders, before expenses

 

$

[•]

 

$

[•]

____________

(1)         Represents underwriting discounts equal to (iseven percent (7%) per share (or $[•] per share), which is the underwriting discounts we have agreed to pay on investors in this offering introduced by the underwriters; and (ii) two and one half percent (2.5%) per share (or $[•] per share), which is the underwriting discounts we have agreed to pay on investors in this offering introduced by us.

(2)         Does not include a non-accountable expense allowance equal to one percent (1%) of the gross proceeds of this offering, payable to the underwriters, or the reimbursement of certain expenses of the underwriters. For a description of the other terms of compensation to be received by the underwriters, see “Underwriting.”

We have granted a 45-day option to the representatives of the underwriters to purchase up to an additional [•] ordinary shares, solely to cover over-allotments, if any.

This prospectus also relates to the public offering of an aggregate of 3,000,000 ordinary shares which may be sold from time to time by the selling shareholders named in this prospectus. The selling shareholders will not sell any shares pursuant to this prospectus until such time as our ordinary shares are traded on Nasdaq. We will not receive any proceeds from the sale by the selling shareholders of its ordinary shares. The selling shareholders have not engaged any underwriter in connection with the sale of its ordinary shares. The selling shareholders may sell ordinary shares in the public market based on the market price at the time of sale or at negotiated prices or in transactions that are not in the public market. The selling shareholders may also sell their ordinary shares in transactions that are not in the public market in the manner set forth under “Plan of Distribution.”

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ordinary shares to purchasers against payment therefor on or about [•], 2022.

EF HUTTON
division of Benchmark Investments, LLC

The date of this prospectus is [•], 2022.

 

Table of Contents

TABLE OF CONTENTS

 

PAGE

ABOUT THIS PROSPECTUS

 

ii

PROSPECTUS SUMMARY

 

1

RISK FACTORS

 

27

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

84

USE OF PROCEEDS

 

86

DIVIDEND POLICY

 

87

CAPITALIZATION

 

88

DILUTION

 

89

ENFORCEABILITY OF CIVIL LIABILITIES

 

90

SELLING SHAREHOLDERS

 

92

PLAN OF DISTRIBUTION

 

93

CORPORATE HISTORY AND STRUCTURE

 

95

SELECTED CONSOLIDATED FINANCIAL DATA

 

99

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

 

100

INDUSTRY

 

112

OUR BUSINESS

 

117

REGULATION

 

136

MANAGEMENT

 

155

PRINCIPAL SHAREHOLDERS

 

164

RELATED PARTY TRANSACTIONS

 

166

DESCRIPTION OF SHARE CAPITAL

 

168

SHARES ELIGIBLE FOR FUTURE SALE

 

181

TAXATION

 

182

UNDERWRITING

 

188

EXPENSES OF THIS OFFERING

 

196

LEGAL MATTERS

 

197

EXPERTS

 

197

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

197

INDEX TO FINANCIAL STATEMENTS

 

F-1

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with information different from what is contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We and the selling shareholders are not, and the underwriters are not, making an offer to sell securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of the securities. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside of the United States of America (the “United States” or the “U.S.”): Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our ordinary shares and the distribution of this prospectus outside of the United States.

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ABOUT THIS PROSPECTUS

Unless otherwise indicated, in this prospectus, the following terms shall have the meaning set out below:

“APP”

 

A self-developed phone application available through iOS and Android and owned by Shanghai YanGuFang E-Commerce Co., Ltd., for our e-commerce business.

“BVI”

 

British Virgin Islands.

“China” or the “PRC”

 

The People’s Republic of China, excluding Taiwan and the special administrative regions of Hong Kong and Macau for the purposes of this prospectus only.

“Code”

 

The Internal Revenue Code of 1986, as amended.

“Exchange Act”

 

Securities Exchange Act of 1934, as amended.

“Nasdaq”

 

Nasdaq Capital Market.

“ordinary shares”

 

Ordinary shares, par value $0.0001 per share, of YanGuFang International Group Co., Ltd.

“PCAOB”

 

Public Company Accounting Oversight Board.

“RMB”, “Chinese Yuan” or “Renminbi”

 

Legal currency of China.

“SEC”

 

The United States Securities and Exchange Commission.

“Securities Act”

 

The Securities Act of 1933, as amended.

“US”, “U.S.” or “USA”

 

The United States of America.

“US$,” “U.S. dollars,” “$,” and “dollars”

 

Legal currency of the United States.

“VIE”

 

Variable interest entity.

“variable interest entities” or “VIEs”

 

The variable interest entities, Shanghai YanGuFang E-Commerce Co., Ltd., Inner Mongolia YanGuFang Contract Farming Development Co., Ltd., and Inner Mongolia YanGuFang Whole Grain Industry Development Co., Ltd., each of which is 100% owned by a PRC entity YanGuFang Agroeco Tech, and is consolidated into our consolidated financial statements in accordance with U.S. GAAP as if it were our wholly-owned subsidiary.

“we,” “us,” “our company,” “our,” “the Company”

 

All references to “we,” “us,” “our,” “our company,” “the Company” or similar terms used in this prospectus are to YanGuFang International Group Co., Ltd., and its consolidated subsidiaries, and the VIEs and their subsidiaries, unless the context otherwise indicates.

“WFOE” or “YanGuFang China”

 

Inner Mongolia YanGuFang Whole Grain Nutrition Health Industry Technology Co., Ltd., a limited liability company organized under the laws of China, which is wholly-owned by YanGuFang HK.

“Yanna Technology”

 

Shanghai Yanna Technology Co., Ltd., a limited liability company organized under the laws of China and a wholly-owned subsidiary of WFOE.

“YanGuFang Group”

 

YanGuFang International Group Co., Ltd., a Cayman Islands company.

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“YanGuFang HK”

 

YanGuFang International Holding Group (HK) Co., Limited, a limited company organized under the laws of Hong Kong and a wholly owned subsidiary of YanGuFang Group.

“YanGuFang Agroeco Tech”

 

Inner Mongolia YanGuFang Ecological Agriculture Technology (Group) Co., Ltd., a company limited by shares organized under the laws of China and the sole shareholder of each of the VIEs.

“YanGuFang Contract Farming”

 

Inner Mongolia YanGuFang Contract Farming Development Co., Ltd., a limited liability company organized under the laws of China and a VIE contractually controlled by WFOE.

“YanGuFang E-Commerce”

 

Shanghai YanGuFang E-Commerce Co., Ltd., a limited liability company organized under the laws of China and a VIE contractually controlled by WFOE.

“YanGuFang E-Commerce (Inner Mongolia)”

 

Inner Mongolia YanGuFang E-Commerce Co., Ltd., a limited liability company organized under the laws of China and a wholly-owned subsidiary of YanGuFang E-Commerce.

“YanGuFang Whole Grain”

 

Inner Mongolia YanGuFang Whole Grain Industry Development Co., Ltd., a limited liability company organized under the laws of China and a VIE contractually controlled by WFOE, and where appropriate, its branches and subsidiary.

“YanGuFang I&E Trading”

 

Inner Mongolia YanGuFang Import and Export Trading Co., Ltd., a limited liability company organized under the laws of China and a wholly-owned subsidiary of YanGuFang Whole Grain.

“YanGuFang Hainan I&E Trading”

 

YanGuFang Import and Export Trading (Hainan) Co., Ltd., a limited liability company organized under the laws of China and a wholly-owned subsidiary of YanGuFang I&E Trading.

“YGF Oats”

 

YGF Oats Life LLC, a limited liability company organized under the laws of the State of Texas in the United States, a wholly-owned subsidiary of YanGuFang Group.

Our reporting currency is the US$. The functional currency of our entities is RMB. This prospectus contains conversion of certain RMB amounts into U.S. dollar amounts at specified rates solely for the convenience of the reader. The conversion of RMB into U.S. dollars in this prospectus is based on the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this prospectus are made at the rate of RMB6.3726 to US$1.00, the rate in effect as of December 31, 2021. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange.

Numerical figures included in this registration statement may be subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

For the sake of clarity, this prospectus follows the English naming convention of first name followed by last name, regardless of whether an individual’s name is Chinese or English. For example, the name of our Chairman will be presented as “Junguo He”, even though, in Chinese, Mr. He’s name is presented as “He Junguo”.

Our fiscal year end is June 30. References to a particular “fiscal year” are to our fiscal year ended June 30 of that calendar year. References to a particular “year” are also to our fiscal year ended June 30 of that calendar year unless the text indicates otherwise. Our audited consolidated financial statements have been prepared in accordance with the generally accepted accounting principles in the United States (the “U.S. GAAP”).

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Except where indicated or where the context otherwise requires, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.

We obtained the industry, market and competitive position data in this prospectus from our own internal estimates, surveys, and research as well as from publicly available information, industry and general publications and research, surveys and studies conducted by third parties. None of the independent industry publications used in this prospectus were prepared on our behalf. Industry publications, research, surveys, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this prospectus, and to risks due to a variety of factors, including those described under “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these forecasts and other forward-looking information.

We have proprietary rights or license to trademarks used in this prospectus that are important to our business, many of which are registered under applicable intellectual property laws. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are without the ®, ™ and other similar symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

This prospectus contains additional trademarks, service marks and trade names of others. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other person.

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PROSPECTUS SUMMARY

Investors are cautioned that you are not buying shares of a China-based operating company but instead are buying shares of YanGuFang Group. YanGuFang Group is not a PRC operating company but a Cayman Islands holding company with operations conducted by our subsidiaries and through contractual arrangements with the VIEs based in China and this structure involves unique risks to investors.

This summary highlights certain information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before buying shares in this offering. You should read the entire prospectus carefully, including our financial statements and related notes and the risks described under “Risk Factors.” This summary contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”

Overview

YanGuFang Group is a holding company incorporated as an exempted company on May 28, 2020 under the laws of the Cayman Islands. As a holding company with no material operations of its own, it uses a VIE structure and conducts substantially all of its operations through its PRC subsidiary and the VIEs based in China.

We are primarily engaged in the production, research and development, and sales of oat and grain products through our own sales team and distribution network. We are driven by a creative and experienced management team, led by Junguo He, our Chairman and CEO, with a focus on the healthy food industry and a fresh take on our mission, building from our deep understanding of and commitment to oat-based food science.

Our mission is to build a new type of healthy food company with core values of safety, health, nutrition and sustainability, supported by our advocates of scientific diet structure and different approaches to our brand and commercial strategy.

We have a bold vision for a food system that is better for people. We believe that transforming the healthy food industry is necessary to face humanity’s greatest challenges across climate, environment, health and lifestyle. Nowadays changes are rocking the customer’s food preference, as the growing concerns for the chronic diseases caused by imbalanced dietary patterns and unhealthy lifestyle, environment, and interest in health and nutrition have started to drive real, scaled behavior changes around customer purchase choices.

In this context, we believe what customers really care about are safety, health, nutrition, quality, and sustainability. Driven by customer concerns, we provide our customers with a solution through our product and technology innovations that enables them to make thoughtful and informed choices in line with these values. In 2014, we produced a new kind of oat germ groats in the form of whole grains through our patented equipment, which brought healthier oat products to the daily diets of the consumers.

Our commitment to oats has resulted in core technical advancements that enable us to unlock the breadth of our product portfolio, which is broadly categorized into oat series products (including, but not limited to, oat germ groats, oatmeal, oat flour, oat bran, some of which are organic or green food series) and oat nutrient and health series products (including, but not limited to, oat peptide series, dietary fiber powder, oat biscuits, oil series, oat hand cream and soap, and oat toothpaste). Based on our vision and understanding of oats, we also source products from third party suppliers that complement our product portfolio.

We seek to build our market position both in the PRC and internationally. In the PRC market, our business operations cover a number of provinces and cities of China, which currently are Beijing, Shanghai, Jiangsu, Zhejiang, Fujian, Guangdong, Inner Mongolia, Anhui and Chongqing. We also seek to establish our presence internationally and currently sell our products through a distributor in Thailand. As part of our plan to expand our international footprint, we expect to commence sales of our products in the United States during the second half of 2022.

With the expansion of our customer base, the demand for our products has grown in recent years. As of the date of this prospectus, we own an industrial park of oats production — “YanGuFang Whole Grain Eco-Tech Park” in Inner Mongolia, China, covering a total construction area of approximately 70,710 square meters. The construction

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of the park commenced in August, 2017 and we expect to complete construction in December 2022. As of the date of this prospectus, part of the park has been put into use as Factory No. 2 covering a construction area of approximately 34,856 square meters, with the rest anticipated to be fully operational in the second quarter of 2023.

As of the date of this prospectus, the VIEs have two production facilities with a total of eight auto production lines in Wuchuan County, Inner Mongolia, five of which have been put into use with the remaining three being installed and tested and expected to commence production by the end of 2022. Our production lines currently in use have a combined production capacity of 13,720 tons per year and are expected to reach 33,348 tons once the remaining three lines are put into use.

We generate revenues primarily through sales of our products. During the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, our revenues were $18,775,430, $29,837,029 and $24,089,699, respectively, and net income was $3,917,594, $10,543,554 and $6,508,327, respectively.

Our Corporate History and Structure

YanGuFang Group is a holding company incorporated as an exempted company on May 28, 2020 under the laws of the Cayman Islands. As a holding company with no material operations of its own, YanGuFang Group conducts substantially all of its operations through its PRC subsidiary and the VIEs in China.

YanGuFang HK, formed on June 29, 2020 under the laws of Hong Kong, is our wholly-owned subsidiary in Hong Kong and a holding company with no business operations, which, in turn, wholly owns all of the equity interest of YanGuFang China, a wholly foreign-owned enterprise formed on December 8, 2020 under the laws of China. WFOE wholly owns all of the equity interest of Yanna Technology, a limited liability company organized on February 25, 2021 under the laws of China.

On December 20, 2020, YanGuFang China entered into a series of contractual arrangements with each of YanGuFang E-Commerce, YanGuFang Contract Farming and YanGuFang Whole Grain and their respective shareholder. The VIE agreements were designed to provide YanGuFang China control over the VIEs and thereby enable it to consolidate the financial statements of the VIEs under U.S. GAAP. Each of the VIEs is wholly owned by one same shareholder, Inner Mongolia YanGuFang Ecological Agriculture Technology (Group) Co., Ltd (“YanGuFang Agroeco Tech” or the “VIE Shareholder”). See “— Contractual Arrangements with the VIEs.” YanGuFang E-Commerce wholly owns YanGuFang E-Commerce (Inner Mongolia). YanGuFang Whole Grain wholly owns Inner Mongolia YanGuFang Import and Export Trading Co., Ltd. (“YanGuFang I&E Trading”), which in turn, wholly owns YanGuFang Import and Export Trading (Hainan) Co., Ltd. (“YanGuFang Hainan I&E Trading”).

On February 22, 2021, we formed a new wholly-owned subsidiary, YGF Oats, a limited liability company organized under the laws of the State of Texas in the United States, to develop and grow our business in the United States.

On February 25, 2021, Yanna Technology was formed under the laws of China, which is a wholly-owned subsidiary of WFOE. As of the date of this prospectus, it has not commenced operation yet.

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The chart below summarizes our corporate structure, including our subsidiaries, the VIEs and their subsidiaries, as of the date of this prospectus:

As shown in the above diagram, we wholly own YGF Oats, YanGuFang HK and YanGuFang China. However, we do not have any ownership interest in the VIEs, which accounted for substantially all of our revenue for the fiscal years ended June 30, 2021 and 2020 and the six months ended December 31, 2021 and 2020. We seek to control the VIEs through our VIE agreements with the VIEs, and the VIE Shareholder, YanGuFang Agroeco Tech. Our Chief Executive Officer and Chairman, Mr. Junguo He, our Chief Technical Officer and Director, Mr. Zhu Sun, and our Chief Operating Officer, Mr. Ya Zhang, are major shareholders of YanGuFang Agroeco Tech, holding 51.75%, 25.50% and 13.75%, respectively, of the equity interests of YanGuFang Agroeco Tech (“YanGuFang Agroeco Tech Shareholders”). The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where the PRC law prohibits direct foreign investment in the operating companies. As a result, investors will not and may never directly hold equity interests in the VIEs. Our current corporate structure and business operations and the market price of our ordinary shares may be affected by the newly enacted PRC Foreign Investment Law which does not explicitly classify whether the VIEs that are controlled through contractual arrangements would be deemed foreign-invested enterprises if they are ultimately “controlled” by foreign investors. Our ordinary shares offered in this prospectus are shares of our Cayman Islands holding company YanGuFang Group, and, as a shareholder of YanGuFang Group, you will have an equity interest in an entity which does not have ownership of the VIEs which produce the oat products and generate substantially all of the consolidated revenue. Because we do not have ownership of the VIEs, we must rely on the VIE Shareholder and YanGuFang Agroeco Tech Shareholders to comply with their contractual obligations.

Contractual Arrangements with the VIEs

As part of the reorganization for our initial public offering, on December 20, 2020, YanGuFang China, our WFOE, entered into Exclusive Option Agreements, Exclusive Technology Development, Consulting and Services Agreements, Equity Pledge Agreements and Powers of Attorney with each of the VIEs and the VIE Shareholder (collectively, the “VIE Agreements”), on the substantially similar terms. The VIE Agreements are designed to enable WFOE, among other things, to (i) exercise control over the VIEs and (ii) receive substantially all of the economic

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benefits of the VIEs. As a result of these contractual arrangements, under U.S. GAAP, we are considered the primary beneficiary of the VIEs for accounting purposes and thus consolidate their results in our consolidated financial statements.

A summary of the VIE Agreements is set forth below.

Exclusive Option Agreements

Pursuant to the Exclusive Option Agreements, the VIE Shareholder has irrevocably granted WFOE or its designee an exclusive option to purchase all or part of the equity interests of each VIE either at the purchase price of RMB100, or the lowest price permitted by applicable PRC laws if a share valuation is required by PRC law in exercising the option, or upon separate agreements between WFOE and the VIE Shareholder, at a specific amount.

Each VIE has also granted WFOE or its designee an exclusive option to purchase all or part of its assets either at the purchase price of RMB100 or the lowest price permitted by applicable PRC laws, or upon separate agreements between WFOE and each VIE, at a specific amount.

Exclusive Technology Development, Consulting and Services Agreements

Pursuant to the Exclusive Technology Development, Consulting and Services Agreements, WFOE provides each VIE with technology development, consulting and services for which WFOE collects a consulting and service fee (“Service Fee”) quarterly from each VIE. The Service Fee is generally calculated based on the balance between all revenues of each VIE and its related expenses and costs, or, upon separate negotiations of the parties, a specific amount.

Equity Pledge Agreement

Pursuant to the Equity Pledge Agreements, the VIE Shareholder has pledged all of its equity interests of each VIE to WFOE as collateral to guarantee the performance by such shareholder of its obligation to pay the Service Fee under each Exclusive Technology Development, Consulting and Services Agreement. As of the date of this prospectus, all pledge documents have been duly filed with the local government. As a pledgee, WFOE is entitled to receive all dividends and interests in cash or cash equivalents generated from the pledged equity interests of each VIE.

Powers of Attorney

Pursuant to the Powers of Attorney, the VIE Shareholder has irrevocably authorized WFOE or its designee to act as its exclusive agent to exercise all of its rights as a shareholder of each VIE, including, but not limited to, attending shareholder’s meetings and executing shareholder resolutions; exercising all shareholder rights permitted by law or regulated in the articles of associations of VIEs, including without limitation, voting rights, sell, transfer, pledge or dispose of any or all of the shares; nominating, designating or appointing the legal representative, chairman, the directors, supervisors, general manager and other senior management. Unless otherwise provided, with the oral or written instruction of the VIE Shareholder, WFOE is also entitled to allocate, use or otherwise dispose of all cash dividends and non-cash interests generated from the equity interests of each VIE.

The VIE Agreements do not provide us with an equity interest in the VIEs and the VIE structure may be less effective than direct ownership in providing us with control over the VIEs. If any of the VIEs or the VIE Shareholder fails to perform their respective obligations under the VIE Agreements, our recourse to the assets held by the VIEs is indirect and we may have to incur substantial costs to enforce the terms of the arrangements and expend significant resources to enforce such arrangements in reliance on legal remedies under PRC law. All of these VIE Agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these agreements would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal system could limit our ability to enforce these VIE Agreements. In the event that we are unable to enforce the VIE Agreements, or if we suffer significant time delays or other obstacles in the process of enforcing the VIE Agreements, it would be very difficult to exert effective control over the VIEs as the direct ownership may afford, and our ability to conduct our business and our financial condition and results of operations may be materially and adversely affected. In addition, there are still uncertainties regarding the status of the rights of the Cayman Islands holding company

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with respect to the VIE Agreements with the VIEs and the VIE Shareholder, and the challenges we may face enforcing the VIE Agreements due to legal uncertainties and jurisdictional limits as the VIE Agreements have not been tested in a court of law. The PRC regulatory authorities could disallow the VIE structure, which would likely result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or become worthless. See “Risk Factors — Risks Related to Our Corporate Structure — We conduct substantially all of our operations through the VIEs, which are established in the PRC, and we rely on the VIE Agreements with the VIEs and the VIE Shareholder to operate our business, which may not be as effective as direct ownership in providing operational control and we may incur substantial costs to enforce the terms of the VIE Agreements, which could result in a material change in our operations and a material change in the value of the securities we are registering for sale, and cause the value of such securities to significantly decline or become worthless” beginning on page 72.

We believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations. Our PRC legal counsel, Beijing Sunland Law Firm, based on its understanding of the relevant laws and regulations, is of the opinion that each of the VIE Agreements is valid, binding and enforceable in accordance with its terms. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. 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, and thus the determination by the PRC court is less certain than that by a common law court if the regulations regarding certain issue are unclear. Due to the PRC legal system and the unclear regulations regarding the contractual arrangements, there are uncertainties regarding the status of the rights of the Company with respect to its contractual arrangements, and we may face challenges enforcing these contractual agreements due to legal uncertainties and jurisdictional limits. Thus, the PRC governmental authorities may take a view contrary to the opinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structure will be adopted or if adopted, what they would provide. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations. See “Risk Factors — Risks Related to Our Corporate Structure — The VIE structure poses risks to investors. Investors will not and may never directly hold equity interests in the VIEs. The VIE structure may be less effective than direct ownership and the Company may incur substantial costs to enforce the terms of the VIE Agreement. If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, 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, which may therefore materially reduce the value of our ordinary shares or render it worthless if the determinations, changes, or interpretations result in our inability to assert contractual control over the assets of our PRC subsidiary or the VIEs that conduct substantially all of our operations.

Financial Information Related to the VIEs

The VIEs and their subsidiaries contributed to 100% of our consolidated revenue for the six months ended December 31, 2021 and 2020 and the fiscal years ended June 30, 2021 and 2020. The following tables present selected condensed consolidating schedules of YanGuFang Group and its subsidiaries and the VIEs as of and for the six months ended December 31, 2021 and 2020, which have been derived from our unaudited consolidated financial statements for the same period, and the fiscal years ended June 30, 2021 and 2020, which have been derived from our audited consolidated financial statements for those years.

The tables below demonstrate the quantitative metrics of the condensed consolidating schedule that disaggregates operations and depicts the financial position, results of operations and cash flows of YanGuFang Group, its subsidiaries, including WFOE (the primary beneficiary of the VIEs), and the VIEs as of December 31, 2021, June 30, 2021 and 2020, and for the fiscal years ended June 30, 2021 and 2020 and the six months ended December 31, 2021 and 2020.

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Condensed Consolidating Schedule — Statement of Operations

 

For the Six Months Ended December 31, 2021

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 

Subsidiaries **

 


VIEs*

 


Eliminations

 

Consolidated
Total

Revenues

 

$

 

 

$

 

 

$

 

$

18,775,430

 

$

 

 

$

18,775,430

Cost

 

$

 

 

$

 

 

$

 

$

4,834,363

 

$

 

 

$

4,834,363

Gross profit

 

$

 

 

$

 

 

$

 

$

13,941,067

 

$

 

 

$

13,941,067

Income (loss) from
operations

 

$

(470,687

)

 

$

(249

)

 

$

 

$

5,535,993

 

$

 

 

$

5,065,057

Income for equity method investment

 

$

3,917,594

 

 

$

 

 

$

 

$

 

$

(3,917,594

)

 

$

Income from VIE and its subsidiaries

 

$

 

 

$

4,405,504

 

 

$

 

 

 

$

(4,405,504

)

 

$

Net income

 

$

3,917,594

 

 

$

4,405,176

 

 

$

351

 

$

4,405,504

 

$

(8,811,031

)

 

$

3,917,594

Comprehensive income

 

$

4,121,002

 

 

$

4,617,719

 

 

$

341

 

$

4,618,050

 

$

(9,236,110

)

 

$

4,121,002

   
  

For the Six Months Ended December 31, 2020

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 

Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated
Total

Revenues

 

$

 

 

$

 

 

$

 

$

10,882,096

 

$

 

 

$

10,882,096

Cost

 

$

 

 

$

 

 

$

 

$

3,695,143

 

$

 

 

$

3,695,143

Gross profit

 

$

 

 

$

 

 

$

 

$

7,186,953

 

$

 

 

$

7,186,953

Income from
operations

 

$

 

 

$

 

 

$

 

$

3,172,626

 

$

 

 

$

3,172,626

Income for equity method investment

 

$

2,470,846

 

 

$

 

 

$

 

$

 

$

(2,470,846

)

 

$

Income from VIE and its subsidiaries

 

$

 

 

$

 

 

$

 

$

 

$

 

 

$

Net income

 

$

2,470,846

 

 

$

2,486,700

 

 

$

 

$

2,486,700

 

$

(4,973,400

)

 

$

2,470,846

Comprehensive income

 

$

3,470,269

 

 

$

3,587,385

 

 

$

 

$

3,587,385

 

$

(7,174,770

)

 

$

3,470,269

   
  

For the Fiscal Year Ended June 30, 2021

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated
Total

Revenues

 

$

 

 

$

 

 

$

 

$

29,837,029

 

$

 

 

$

29,837,029

Cost

 

$

 

 

$

 

 

$

 

$

8,200,913

 

$

 

 

$

8,200,913

Gross profit

 

$

 

 

$

 

 

$

 

$

21,636,116

 

$

 

 

$

21,636,116

Income (loss) from
operations

 

$

(142,457

)

 

$

 

 

$

 

$

13,033,049

 

$

 

 

$

12,890,592

Income for equity method investment

 

$

10,721,625

 

 

$

 

 

$

 

$

 

$

(10,721,625

)

 

$

Income from VIE and its subsidiaries

 

$

 

 

$

10,721,639

 

 

$

 

$

 

$

(10,721,639

)

 

$

Net income

 

$

10,543,554

 

 

$

10,721,594

 

 

$

31

 

$

10,721,639

 

$

(21,443,264

)

 

$

10,543,554

Comprehensive income

 

$

11,329,496

 

 

$

11,866,863

 

 

$

31

 

$

11,866,909

 

$

(23,733,803

)

 

$

11,329,496

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For the Fiscal Year Ended June 30, 2020

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated
Total

Revenues

 

$

 

$

 

$

 

$

24,089,699

 

$

 

 

$

24,089,699

Cost

 

$

 

$

 

$

 

$

10,112,832

 

$

 

 

$

10,112,832

Gross profit

 

$

 

$

 

$

 

$

13,976,867

 

$

 

 

$

13,976,867

Income from operations

 

$

 

$

 

$

 

$

8,394,983

 

$

 

 

$

8,394,983

Income for equity method investment

 

$

6,508,327

 

$

 

$

 

$

 

$

(6,508,327

)

 

$

Income from VIE and its subsidiaries

 

$

 

$

6,508,327

 

$

 

$

 

$

(6,508,327

)

 

$

Net income

 

$

6,508,327

 

$

6,508,327

 

$

 

$

6,508,327

 

$

(13,016,654

)

 

$

6,508,327

Comprehensive income

 

$

6,206,854

 

$

6,508,327

 

$

 

$

6,206,854

 

$

(12,413,708

)

 

$

6,206,854

Condensed Consolidating Schedule — Balance Sheet

 

As of December 31, 2021

  

YanGuFang Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated Total

Cash

 

$

379,875

 

$

44,695

 

$

700

 

$

5,800,605

 

$

 

 

$

6,225,875

Total current assets

 

$

379,875

 

$

44,695

 

$

 

$

23,075,145

 

$

(1,567,436

)

 

$

21,932,979

Investments in subsidiaries
and VIEs

 

$

18,115,335

 

$

18,007,620

 

$

 

$

 

$

(36,122,955)

 

 

$

Total non-current assets

 

$

18,115,335

 

$

18,007,620

 

$

 

$

39,061,226

 

$

(36,015,250)

 

 

$

39,168,931

Total assets

 

$

18,495,210

 

$

18,052,315

 

$

700

 

$

62,136,371

 

$

(37,582,686)

 

 

$

61,101,910

Total liabilities

 

$

1,522,051

 

$

45,072

 

$

314

 

$

44,128,751

 

$

(1,567,437

)

 

$

44,128,751

Total shareholders’ equity

 

$

16,973,159

 

$

18,007,243

 

$

386

 

$

18,007,620

 

$

(36,015,249)

 

 

$

16,973,159

Total liabilities and shareholders’ equity

 

$

18,495,210

 

$

18,052,315

 

$

700

 

$

62,136,371

 

$

(37,582,686

)

 

$

61,101,910

 

As of June 30, 2021

  

YanGuFang Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated Total

Cash

 

$

7,617,208

 

$

109

 

$

3,098,341

 

$

1,941,213

 

$

 

 

$

12,656,871

Total current assets

 

$

7,617,208

 

$

109

 

$

3,098,341

 

$

15,699,927

 

$

(11,259,335

)

 

$

15,156,250

Investments in subsidiaries and VIEs

 

$

13,395,819

 

$

13,389,570

 

$

 

$

 

$

(26,785,389

)

 

$

Total non-current assets

 

$

13,395,819

 

$

13,389,570

 

$

 

$

32,416,669

 

$

(26,779,125

)

 

$

32,422,933

Total assets

 

$

21,013,027

 

$

13,389,679

 

$

3,098,341

 

$

48,116,596

 

$

(28,038,460

)

 

$

47,579,183

Total liabilities

 

$

8,160,870

 

$

155

 

$

3,098,310

 

$

34,727,026

 

$

(11,259,335

)

 

$

34,727,026

Total shareholders’ equity

 

$

12,852,157

 

$

13,389,524

 

$

31

 

$

13,389,570

 

$

(26,779,125

)

 

$

12,852,157

Total liabilities and shareholders’ equity

 

$

21,013,027

 

$

13,389,679

 

$

3,098,341

 

$

48,116,596

 

$

(38,038,460

)

 

$

47,579,183

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As of June 30, 2020

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated Total

Cash

 

$

 

$

 

$

 

$

1,588,833

 

$

 

 

$

1,588,833

Total current assets

 

$

 

$

 

$

 

$

20,646,565

 

$

 

 

$

20,646,565

Investments in subsidiaries
and VIEs

 

$

12,092,661

 

$

12,092,661

 

$

 

$

 

$

(24,185,322

)

 

$

Total non-current assets

 

$

 

$

12,092,661

 

$

 

$

16,446,524

 

$

 

 

$

16,446,524

Total assets

 

$

12,092,661

 

$

12,092,661

 

$

 

$

37,093,089

 

$

(24,185,322

)

 

$

37,093,089

Total liabilities

 

$

 

$

 

$

 

$

25,000,428

 

$

 

 

$

25,000,428

Total shareholders’ equity

 

$

12,092,661

 

$

12,092,661

 

$

 

$

12,092,661

 

$

(24,185,322

)

 

$

12,092,661

Total liabilities and shareholders’ equity

 

$

12,092,661

 

$

12,092,661

 

$

 

$

37,093,089

 

$

(24,185,322

)

 

$

37,093,089

Inter-company Balances

 

As of December 31, 2021

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated
Total

Due from other
subsidiaries

 

$

11,451,503

 

$

 

$

 

 

$

 

 

$

11,451,503

 

 

$

Due to YanGuFang Group

 

$

 

$

 

$

(11,451,503

)

 

$

 

 

$

(11,451,503

)

 

$

Due from VIEs

 

$

 

$

11,406,473

 

$

 

 

$

 

 

$

(11,406,473

)

 

$

Due to WOFE

 

$

 

$

 

$

 

 

$

(11,406,473

)

 

$

11,406,473

 

 

$

 

As of June 30, 2021

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated
Total

Due from other
subsidiaries

 

$

4,647,310

 

$

 

$

 

 

$

 

$

4,647,310

 

 

$

Due to YanGuFang Group

 

$

 

$

 

$

(4,647,310

)

 

$

 

$

(4,647,310

)

 

$

Due from VIEs

 

$

 

$

1,548,845

 

$

 

 

$

 

$

(1,548,845

)

 

$

Due to WOFE

 

$

 

$

 

$

 

 

$

(1,548,845)

 

$

1,548,845

 

 

$

 

As of June 30, 2020

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs

 


Eliminations

 

Consolidated
Total

(1)

 

$

 

$

 

$

 

$

 

$

 

$

____________

(1)      There was none inter-company balances among YanGuFang Group, WFOE and its wholly-owned subsidiary Yanna Technology, Subsidiaries and VIEs as of June 30, 2020.

8

Table of Contents

Condensed Consolidating Schedule — Statement of Cash Flows

 

For the Six Months Ended December 31, 2021

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated
Total

Net cash (used in) provided by operating activities

 

$

(487,934

)

 

$

(328

)

 

$

352

 

 

$

(2,342,194

)

 

$

 

 

$

(2,830,104

)

Net cash used in investing activities

 

$

(6,684,012

)

 

$

(9,749,850

)

 

$

(3,110,000

)

 

$

(4,951,001

)

 

$

19,543,862

 

 

$

(4,951,001

)

Net cash provided by (used in) financing activities

 

$

(100,456

)

 

$

9,794,365

 

 

$

 

 

$

11.065,791

 

 

$

(19,543,862

)

 

$

1,215,838

 

Inter-company cash transfers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transfer from YanGuFang Group to WOFE

 

$

(6,684,012

)

 

$

6,684,012

 

 

$

 

 

$

 

 

$

 

 

$

 

Transfer from Other Subsidiaries to WFOE

 

$

 

 

$

3,110,000

 

 

$

(3,110,000

)

 

$

 

 

$

 

 

$

 

Transfer from
WFOE to VIES

 

$

 

 

$

(9,749,850

)

 

$

 

 

$

9,749,850

 

 

$

 

 

$

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

For the Six Months Ended December 31, 2020

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated
Total

Net cash (used in) provided by operating activities

 

$

(15,854

)

 

$

 

 

$

 

 

$

7,641,437

 

 

$

12,204,567

 

 

$

19,830,150

 

Net cash used in investing activities

 

$

 

 

$

 

 

$

 

 

$

(4,964,910

)

 

$

 

 

$

(4,964,910)

 

Net cash provided by (used in) financing activities

 

$

12,204,567

 

 

$

 

 

$

 

 

$

(1,158,595

)

 

$

(12,204,567

)

 

$

(1,158,595)

 

Inter-company cash transfers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

____________

(2)      There was none inter-company cash transfers among YanGuFang Group, WFOE and its wholly-owned subsidiary Yanna Technology, Subsidiaries and VIEs for the six months ended December 31, 2020.

 

For the Fiscal Year Ended June 30, 2021

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated
Total

Net cash (used in) provided by operating activities

 

$

(178,071

)

 

$

106

 

 

$

(120

)

 

$

24,948,518

 

 

$

 

$

24,770,433

 

Net cash used in investing activities

 

$

 

 

$

 

 

$

 

 

$

(13,152,440

)

 

$

 

$

(13,152,440

)

Net cash provided by (used in) financing activities

 

$

8,160,870

 

 

$

 

 

$

2,808,877

 

 

$

(11,598,758

)

 

$

 

$

(629,011

)

Inter-company cash transfers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Transfer from YanGuFang Group to Other Subsidiaries

 

$

(4,530,302

)

 

$

 

 

$

4,530,302

 

 

$

 

 

$

 

$

 

Transfer from Other Subsidiaries to WFOE

 

$

 

 

$

1,510,000

 

 

$

(1,510,000

)

 

$

 

 

$

 

$

 

Transfer from WFOE to VIES

 

$

 

 

$

(1,509,849

)

 

$

 

 

$

1,509,849

 

 

$

 

$

 

9

Table of Contents

 

For the Fiscal Year Ended June 30, 2020

  

YanGuFang
Group

 

WFOE and Its Wholly-owned Subsidiary Yanna Technology

 


Subsidiaries**

 


VIEs*

 


Eliminations

 

Consolidated Total

Net cash provided by operating activities

 

$

 

$

 

$

 

$

1,367,171

 

 

$

 

$

1,367,171

 

Net cash used in investing activities

 

$

 

$

 

$

 

$

(5,904,284

)

 

$

 

$

(5,904,284

)

Net cash provided by financing activities

 

$

 

$

 

$

 

$

5,772,122

 

 

$

 

$

5,772,122

 

Inter-company cash transfers:

 

 

  

 

  

 

  

 

 

 

 

 

  

 

 

 

(2)

 

$

 

$

 

$

 

$

 

 

$

 

$

 

____________

(2)      There was none inter-company cash transfers among YanGuFang Group, WFOE and its wholly-owned subsidiary Yanna Technology, Subsidiaries and VIEs for the year ended June 30, 2020.

*        VIEs include YanGuFang E-commerce, YanGuFang Whole Grain, YanGuFang Contract Farming, and their subsidiaries YanGuFang I&E Trading and YanGuFang Hainan I&E Trading.

**      Subsidiaries herein solely include YanGuFang HK and YGF Oats.

Our Strengths

We believe that the following strengths contribute to our growth and differentiate us from our competitors:

        Our access to abundant and quality raw materials due to our close proximity to the major oat producing region.    Our production base is located at Wuchuan County, Hohhot City, Inner Mongolia, which is on the geographic coordinates of 41.0000° to 43.0000° N latitude, the world-recognized golden growing latitude of oats. In 2021, “Wuchuan Oats” was granted the label “National Intangible Cultural Heritage” by the Ministry of Agriculture and Rural Affairs of the People’s Republic of China. Wuchuan oats, as a result, are considered a special oat source in China due to its geographic location. Our access to the abundant and quality raw materials due to close proximity to this unique geographical location enables us to cooperate with more than half of the local oat farmers for high quality oats in a more cost effective way.

        Our scaled production capacities to build a diversified product portfolio.    As of the date of this prospectus, we have two production factories with a total of eight auto production lines in Wuchuan County, Inner Mongolia, five of which are currently in use, with the other three production lines estimated to be put into use by the end of 2022. Factory No. 1, located on our leased property covering approximately 2,232 square meters, have two production lines, with a production capacity of approximately 3,360 tons per year. Factory No. 2, located in YanGuFang Whole Grain Industrial-Tech Park covering approximately 34,856 square meters, have six production lines, three of which have been put into use with a production capacity of approximately 10,360 tons per year, and the other three are estimated to be put into use by the end of 2022, with an estimated production capacity of approximately 19,628 tons per year.

        Market-driven research and development capacities and technology innovations for launching new products and upgrading existing products.    We adhere to a market-oriented research and development (“R&D”) approach and after years of development, we have developed over 80 oat products for our oat and grain series and oat nutrient and health series, to meet the diversified demands of consumers. We actively cooperate with colleges, universities, nutritionists, food experts, and distributors in sorting out our R&D orientation based on the real market demand. Through our commitment to oats, as of the date of this prospectus, we have 11 registered patents and 18 pending patent applications in China, one pending patent application in the United States, and 46 computer software copyrights in China. We currently have a R&D team consisting of 27 people with years of experience in the food industry, and have collaborated with a number of colleges and universities in China and the United States, including but not limited to Jiangnan University, University of Shanghai for Science and Technology, and Cornell University, on the R&D of oat products and oat production equipment.

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Table of Contents

        Premium quality products.    Maintaining the highest industry standards for food safety, product quality and sustainability is one of our core values. Our products, including oat rice and oat flour, are ISO 9001: 2015 compliant with certification achieved in 2019, and oat rice and oat flour, and their production facilities, are also ISO 22000: 2018 compliant, with certification achieved in 2019. Oat germ groats are our sole green food products, with certification achieved in 2019. YanGuFang I&E Trading and YGF Oats are currently registered with the United States Food and Drug Administration (“FDA”), and our oat germ groats (oat germinated rice) and sprouted rolled oats are certified Kosher, with certification achieved in December 21, 2021.

        Massive sales and distribution network.    Our successful channel penetration through our massive sales and distribution network, including our online sales channels, such as our own APP, third-party e-commerce platforms and livestreaming, and offline direct sales team and distributors, has made our sales reach several provinces and major cities in China, which are Beijing, Shanghai, Jiangsu, Zhejiang, Fujian, Guangdong, Inner Mongolia, Anhui and Chongqing. As of March 31, 2022, we had our own sales team of 97 employees, one international distributor in Thailand, and 1,371 distributors (including 1,291 authorized distributors) in China. With established long-term operations, broad coverage of product portfolio and high standard quality control, we have maintained solid relationships with our distributors.

        Experienced management team.    We have an experienced and passionate management team that has helmed the acceleration of our growth and set our strategic direction, all underpinned by a unified purpose of providing nutritious and healthy oat products to our customers. Our company culture, strategic vision and operational execution are driven by our founder, Mr. Junguo He. Mr. He is a successful entrepreneur who has been engaged in the food industry for over 10 years, and has accumulated extensive experience.

Our Challenges

We believe that we are currently facing the following challenges to grow and expand our business:

        To date, limited access to capital has slowed down our pace to gain additional market share.    To increase our sales to more provinces and cities in China and expand our international presence, we would need a significant amount of capital to support our marketing initiatives, ramp up production capacities as well as continue to invest in our research and development efforts. To date, due to the comparatively complicated and time-consuming bank loan procedures, limited access to sufficient capital has to some extent restricted our business development and tempered our further expansion of market share. We need additional capital to expand our operations.

        Overseas expansion of our business is to some extent limited by the logistics costs.    Due to the impact of the COVID-19 pandemic, the rapid increase in logistics costs put some constraints on our overseas business development, which to some extent increased our operating expenses. Locating and securing our overseas partners for the expansion of our production and processing capacity overseas and adjusting our product portfolio face uncertainties.

        Customers’ food preference is ever changing and unpredictable.    Any shift in consumer preferences in the markets in which we operate could have a material adverse effect on our business. Our competitiveness therefore depends on our ability to predict and quickly adapt to consumer preferences, exploiting profitable opportunities for product development without alienating our existing consumer base or focusing excessive resources or attention on unprofitable or short-lived trends, which is challenging to our operations. We currently face potential competition from major healthy food companies domestically and internationally (i.e., The Quaker Oats Company, Calbee, Inc., and Guilin Seamild Foods Co and Wangbaobao), many of which have significantly greater financial, technical, marketing, sales, distribution, and other resources so as to make quicker response to the changes than us.

Our Growth Strategies

We intend to grow our business by pursuing the following key strategies:

        Upgrade and expand product offerings through technology innovation.    We will continually strive to improve upon and expand our products offerings through our research and development and technology innovations in order to deliver innovative, nutritious, sustainable and delicious products. We will continue bridging our R&D

11

Table of Contents

to the desired commercial outcome due to our knowledge of oats and production craftsmanship, allowing us to achieve our sustainability and nutritional goals. To this end, we plan to use a portion of the proceeds from this offering for research and development of new products and technologies and upgrades of existing products.

        Expand our own sales team and distribution network.    We intend to use a portion of the proceeds from this offering to expand our sales network through opening new offices and hiring new staff to penetrate new geographic markets in China, including but not limited to Sichuan, Hunan, Hubei and Jiangxi provinces, further increasing market share in existing markets and accessing a broader range of customers. In 2022, we also plan to extend our international presence to include North America, Southeast Asia and Japan and our sales in the United States are expected to commence in the second half of 2022.

        Enhance brand recognition and awareness.    We intend to use a portion of the proceeds from this offering to enhance our brand recognition and awareness, especially through more livestreaming by internet celebrities, which not only effectively increase our sales, but also is a very effective way to root our brand in the hearts of consumers. We also plan to build our We-Media network through publishing advertisements on multi-media platforms, such as TikTok, Kuaishou, Little Red Book, and WeChat, to reach a broader range of customers and advocate our product values.

        Uphold our commitment to product quality.    We intend to uphold our commitment to product quality to ensure consistently high standards throughout our operations. We intend to achieve greater traceability of our products and maintain the highest quality standards in all of our business units. To this end, we plan to continue to maintain and enhance our quality monitoring systems across the entire operation by cautiously selecting local oat farmers and suppliers and paying attention to client’s food preferences, closely monitoring quality, keeping records of production and operation, and complying with the international, national and local law and regulations on product quality, employees, and environment sustainability.

        Enhance our ability to attract, incentivize and retain talented professionals.    We believe our success greatly depends on our ability to attract, incentivize and retain talented professionals. With a view to maintaining and improving our competitive advantage in the market, we plan to implement a series of initiatives to retain and attract additional mid- to high-level personnel, including formulating a market-oriented employee compensation structure and implementing a standardized multi-level performance review mechanism.

Recent Regulatory Developments in China

Recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement.

Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “M&A Rules”) and the Anti-Monopoly Law of the People’s Republic of China promulgated by the SCNPC which became effective in 2008 (“Anti-Monopoly Law”), established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that the Ministry of Commerce of the People’s Republic of China (the “MOFCOM”) be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators, issued by the State Council in 2008, are triggered. Moreover, the Anti-Monopoly Law requires that transactions which involve the national security, the examination on the national security shall also be conducted according to the relevant provisions of the Measures for the Safety Examination of Foreign Investment. In addition, the PRC Measures for the Security Review of Foreign Investment which became effective in January 2021 require acquisitions by foreign investors of PRC companies engaged in military-related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition.

On July 6, 2021, the relevant PRC government authorities made public the Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law (the “Opinions”). 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

12

Table of Contents

to deal with the risks and incidents faced by China-based overseas-listed companies. Pursuant to the Opinions, Chinese regulators are required to accelerate rulemaking related to the overseas issuance and listing of securities, and update the existing laws and regulations related to data security, cross-border data flow, and management of confidential information. Numerous regulations, guidelines and other measures are expected to be adopted under the umbrella of or in addition to the Cyber Security Law of the PRC (the “Cyber Security Law”) and the Data Security Law. As of the date of this prospectus, no official guidance or related implementation rules have been issued yet and the interpretation of these opinions remains unclear at this stage. See “Risk Factors — Risks Related to Doing Business in China — The approval of the CSRC, the CAC, or other PRC regulatory agencies may be required in connection with this offering under a PRC regulation or any new laws, rules or regulations to be enacted, and if required, we cannot assure you that we will be able to obtain such approval.

In addition, on July 10, 2021, the CAC issued the Measures for Cybersecurity Review (Revision Draft for Comments) for public comments, which propose to authorize the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security, including listings in foreign countries by companies that possess the personal data of more than one million users. On December 28, 2021, the Measures for Cybersecurity Review (2021 version) which were promulgated and became effective on February 15, 2022, provide that any “online platform operators” controlling personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. The Measures for Cybersecurity Review (2021 version), further list the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The CAC has said that under the new rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.” The cybersecurity review will also look into the potential national security risks from overseas IPOs.

On December 24, 2021, the CSRC released the Administrative Provisions of the State Council Regarding the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comments) (the “Draft Administrative Provisions”) and the Measures for the Overseas Issuance of Securities and Listing Record-Filings by Domestic Enterprises (Draft for Comments) (the “Draft Filing Measures,” collectively with the Draft Administrative Provisions, the “Draft Rules Regarding Overseas Listing”), both of which had a comment period that expired on January 23, 2022. The Draft Rules Regarding Overseas Listing lay out the filing regulation arrangement for both direct and indirect overseas listing, and clarify the determination criteria for indirect overseas listing in overseas markets. Among other things, if a domestic enterprise intends to indirectly offer and list securities in an overseas market, the record-filing obligation is with a major operating entity incorporated in the PRC and such filing obligation shall be completed within three business days after the overseas listing application is submitted. The required filing materials for an initial public offering and listing shall include but not limited to: record-filing report and related undertakings; regulatory opinions, record-filing, approval and other documents issued by competent regulatory authorities of relevant industries (if applicable); security assessment opinion issued by relevant regulatory authorities (if applicable); PRC legal opinion; and prospectus.

The Draft Rules Regarding Overseas Listing, if enacted, may subject us to additional compliance requirement in the future, and we cannot assure you that we will be able to get the clearance of filing procedures under the Draft Rules Regarding Overseas List on a timely basis, or at all. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our ordinary shares to significantly decline in value or become worthless.

As advised by our PRC counsel, Beijing Sunland Law Firm, as of the date of this prospectus, except for those licenses and permissions held by our PRC subsidiary and the VIEs set forth in the table below under Regulatory Permissions, neither YanGuFang Group nor any of our subsidiaries and the VIEs is currently required to obtain

13

Table of Contents

regulatory approvals or permissions from the CSRC, the CAC, or any other relevant PRC regulatory authorities for the VIEs’ operations, our offering (including the sales of securities to foreign investors) and our listing in the U.S. under any existing PRC law, regulations or rules, nor we have received any inquiry, notice, warning, sanctions or regulatory objection to the VIEs’ operations, our offering and listing in the U.S. from the CSRC, the CAC, or other PRC regulatory authorities. We have been closely monitoring regulatory developments in China regarding any necessary approvals from the CSRC, the CAC or other PRC regulatory authorities required for the VIEs’ operations and overseas listings, including this offering. However, there remains significant uncertainty as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. The PRC government may take actions to exert more oversight and control over offerings by China-based issuers conducted overseas and/or foreign investment in such companies, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors outside China and cause the value of our securities to significantly decline or become worthless. If it is determined in the future that the approval or permissions of the CSRC, the CAC or any other regulatory authority is required for the VIEs’ operations and this offering and we do not receive or maintain the approvals or permissions, or we inadvertently conclude that such approvals or permissions are not required, or applicable laws, regulations, or interpretations change such that we are required to obtain approvals or permissions in the future, we may be subject to investigations by competent regulators, fines or penalties, ordered to suspend our relevant operations and rectify any non-compliance, limit our ability to pay dividends outside of China, delay or restrict the repatriation of the proceeds from this offering into China or take other actions prohibited from engaging in relevant business or conducting any offering, and these risks could result in a material adverse change in our operations, 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.

The CSRC, the CAC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of our ordinary shares. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. See “Risk Factors — Risks Related to Doing Business in China — The approval of the CSRC, the CAC, or other PRC regulatory agencies may be required in connection with this offering under a PRC regulation or any new laws, rules or regulations to be enacted, and if required, we cannot assure you that we will be able to obtain such approval” on page 42 and “Risk Factors — Risks Related to Doing Business in China — The PRC government exerts substantial influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations and this offering at any time, which could result in a material change in our operations and our ordinary shares could decline in value or become worthless” on page 31.

Regulatory Permissions

As advised by our PRC counsel, Beijing Sunland Law Firm, as of the date of this prospectus, other than those requisite for a domestic company in China to engage in the businesses similar to ours, we are not required to obtain any permission or approvals from the PRC authorities, including the CSRC, the CAC or any other governmental authority that is required to approve our operations. YanGuFang Group and its subsidiaries, and the VIEs have received from PRC authorities all requisite licenses, permissions or approvals needed to engage in the businesses currently conducted in China, and no permission or approval has been denied. Such licenses and permissions include but are not limited to business license, food operation license, food production license, export license. The following table provides details on the licenses and permissions held by our PRC subsidiary, the VIEs and their subsidiaries.

14

Table of Contents

Company

 

License/Permission

 

Issuing Authority

 

Validity

YanGuFang Whole Grain

 

Business License

 

Wuchuan County Administration for Market Regulation

 

Until January 28, 2035

Food Operation License

 

Wuchuan County Administration for Market Regulation

 

Until May 19, 2025

Export License

 

Saihan Customs, People’s Republic of China

 

Long Term

Food Production License

 

Hohhot Administrative Approval and Government Service Bureau

 

Until September 16, 2026

Pollutant Discharge Registration Form

 

Hohhot Environmental Protection Bureau

 

Until June 1, 2026

High-Tech Enterprise Certificate

 

Department of Science and Technology of Inner Mongolia Autonomous Region/Department of Finance of Inner Mongolia Autonomous Region/State Administration of Taxation Inner Mongolia Autonomous Region Taxation Bureau

 

Until December 4, 2023

Organic Food Certification

 

Beijing Zhongan Quality and Environmental Certification Center Co., Ltd.

 

Until September 28, 2022

People’s Republic of China Construction Permits for Construction Projects

 

Housing and Urban-Rural Development Bureau of Wuchuan County, Hohhot

 

Until December 31, 2099

YanGuFang E-Commerce

 

Business License

 

Shanghai Songjiang District Administration for Market Regulation

 

Until June 28, 2037

Food Operation License

 

Shanghai Songjiang District Administration for Market Regulation

 

Until April 14, 2025

Alcohol Commodities Retail License

 

Shanghai Songjiang District Administration for Market Regulation

 

Until April 20, 2025

Value-added Telecommunications Business Operating License (“VATS License”)

 

Shanghai Communications Administration

 

Until May 8, 2026

Domestic Non-special Use Cosmetics Filings

 

Shanghai Songjiang District Administration for Market Regulation

 

Long Term

YanGuFang E-Commerce (Inner Mongolia)

 

Business License

 

Wuchuan County Administration for Market Regulation

 

Long Term

YanGuFang Contract Farming

 

Business License

 

Wuchuan County Administration for Market Regulation

 

Long Term

YanGuFang I&E Trading

 

Business License

 

Wuchuan County Administration for Market Regulation

 

Long Term

Export License (for the record of the consignor and consignee of customs import and export goods)

 

Saihan Customs, People’s Republic of China

 

Long Term

YanGuFang Hainan I&E Trading

 

Business License

 

Hainan Provincial Administration for Market Regulation

 

Long Term

YanGuFang China

 

Business License

 

Hohhot Administration for Market Regulation

 

Until December 7, 2040

Yanna Technology

 

Business License

 

Pilot Free Trade Zone Administration for Market Regulation

 

Until February 24, 2051

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Dividend and Other Distributions and Cash Flows through Our Organization

YanGuFang Group is a holding company with no material operations of its own and does not generate any revenue. It currently conducts substantially all of its operations through its PRC subsidiary and the VIEs in the PRC. We are permitted under PRC laws and regulations to provide funding to our WFOE only through loans or capital contributions, and to the VIEs only through loans, and only if we satisfy the applicable government registration and approval requirements.

We are in the process of adopting our formal cash management policies which will dictate the purpose, amount and procedure of cash transfers among our holding company, subsidiaries and VIEs. Historically, one PRC operating entity provides financial support for other entities’ operations by inter-company loans and we have not experienced difficulties or limitations on our ability to transfer cash between subsidiaries and the VIEs. Prior to our reorganization for purpose of our initial public offering, cash transfers among our PRC operating entities and their subsidiaries were generally approved by the management of the company providing the funds. After our reorganization, cash transfers among our holding company, subsidiaries and VIEs of less than RMB5 million (US$0.78 million) must be reported to, reviewed and approved by the finance department of the company initiating such cash transfers; cash transfers equal to or in excess of RMB5 million (US$0.8 million) but less than RMB20 million (US$3.1 million) must be approved by the chief executeive officer and the chief financial officer of YanGuFang Group; cash transfers equal to or in excess of RMB20 million (US$3.1 million) must be approved by the board of directors of YanGuFang Group. Among YanGuFang Group, its subsidiaries, and the VIEs, cash is transferred from YanGuFang Group and YanGuFang HK as needed in the form of capital contributions or working capital loans, as the case may be, to the PRC subsidiary as we are permitted under PRC laws and regulations to provide funding to our PRC subsidiary only through loans or capital contributions, and to the VIEs only through loans, and only if we satisfy the applicable government registration and approval requirements. We believe that there is no restriction 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 transfer of funds involving money laundering and criminal activities. However, to the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets. As of the date of this prospectus, no transfers, dividends or other distributions have been made to date from our subsidiaries or the VIEs to our holding company nor have we or any of our subsidiaries and VIEs ever paid dividends or made distributions to U.S. investors to date. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, YanGuFang Group, through YanGuFang HK, made capital contributions to our PRC subsidiary of $9,794,012, $1,510,000 and nil, respectively. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, our PRC subsidiary provided working capital loans to the VIEs of $9,749,850, $1,509,849 and nil, respectively. See “Prospecuts Summary — Financial Information Related to the VIEs” on page 5. In the future, cash proceeds raised from overseas financing activities, including this offering, may be transferred by us based on current statutory limits to our PRC operating entities including the VIEs via capital contribution or shareholder loans, as the case may be. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation on loans to, and direct investment in, our PRC subsidiary by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business” on page 36 and “Risk Factors — Risks Related to Doing Business in China — To the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies” on page 46.

We intend to keep any future earnings to re-invest in and finance the expansion of our business, and we do not anticipate that any cash dividends will be paid or any assets will be transferred in the foreseeable future. As of the date of this prospectus, none of our subsidiaries or the VIEs have made any dividends or distributions to us and we have not made any dividends or distributions to our shareholders.

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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. 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 PRC subsidiary and the VIEs in PRC.

Current PRC regulations permit our indirect 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. Therefore, under our current corporate structure, we rely on dividend payments or other distributions from our PRC subsidiary to fund any cash and financing requirements we may have, including the funds necessary to pay dividends and other cash distributions to our shareholders or to service any debt we may incur. Our PRC subsidiary receives substantially all of its revenue from the VIEs in the form of services fees under the VIE Agreements. Our PRC subsidiary and VIEs in the PRC generate and retain cash generated from operating activities and re-invest it in our business. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to us.

Our PRC subsidiary is permitted to pay dividends only out of their retained earnings. However, our PRC subsidiary is required to set aside at least 10% of its after-tax profits each year, after making up for previous year’s accumulated losses, if any, to fund certain statutory reserves, until the aggregate amount of such funds reaches 50% of its registered capital. This portion of our PRC subsidiary’ net assets is prohibited from being distributed to their shareholders as dividends. In addition, our PRC subsidiary 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. See “Regulation — Regulations on Dividend Distributions”. However, our PRC subsidiary has not made any dividends or other distributions to our holding company or any U.S. investors as of the date of this prospectus. See also “Risk Factors — Risks Related to Doing Business in China — We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and the PRC subsidiary’s restrictions on paying dividends or making other payments to us could restrict our ability to satisfy our liquidity requirements and have a material and adverse effect on our ability to conduct our business.”

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 completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiaries 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 are unable to receive all of the revenues from our operations through the current VIE Agreements, we may be unable to pay cash dividends on our ordinary shares. See “Risk Factors — Risks Related to Doing Business in China — Restrictions on currency exchange may limit our ability to utilize our revenues effectively.”

Cash dividends, if any, on our ordinary shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10%. A 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises. Any gain realized on the transfer of ordinary shares by such investors is also subject to PRC tax at a current rate of 10% which in the case of dividends will be withheld at source if such gain is regarded as income derived from sources within the PRC.

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. However, the 5% withholding tax rate 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 entity 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

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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 dividends to be paid by our PRC subsidiary to its immediate holding company, YanGuFang HK. As of the date of this prospectus, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. YanGuFang HK intends to apply for the tax resident certificate when our WFOE plans to declare and pay dividends to YanGuFang HK.

 See “Risk Factors — Risks Related to Doing Business in China — Dividends payable to our foreign investors and gains on the sale of our ordinary shares by our foreign investors may be subject to PRC tax.”

Summary of Significant Risks Affecting Our Company

Our business is subject to multiple risks and uncertainties, as more fully described in “Risk Factors” and elsewhere in this prospectus. We urge you to read “Risk Factors” beginning on page 27 and this prospectus in full. Our significant risks may be summarized as follows:

Risks Related to Doing Business in China

We are subject to risks and uncertainties relating to doing business in China in general, including, but are not limited to, the following:

        The Holding Foreign Companies Accountable Act (the “HFCA Act”), together with recent joint statement by the SEC and PCAOB, Nasdaq rule changes, a determination by the PCAOB that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong 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 add uncertainties to our offering. Our auditor is currently not subject to the determinations announced by the PCAOB on December 16, 2021. However, trading in our ordinary shares may be prohibited under the HFCA Act if the PCAOB later determines that it cannot inspect or investigate completely our auditor, and as a result Nasdaq may determine to delist our ordinary shares. See “Risk Factors — Risks Related to Doing Business in China — The Holding Foreign Companies Accountable Act, or HFCA Act, together with recent joint statement by the SEC and PCAOB, Nasdaq rule changes, a determination by the PCAOB that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong 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 add uncertainties to our offering” beginning on page 27.

        Changes in the political and economic policies of the PRC government or in relations between China and the United States may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies. See “Risk Factors — Risks Related to Doing Business in China — Changes in the political and economic policies of the PRC government or in relations between China and the United States may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies” beginning on page 29.

        Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us. See “Risk Factors — Risks Related to Doing Business in China — Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us” beginning on page 29.

        The PRC government exerts substantial influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations and this offering at any time, which could result in a material change in our operations and our ordinary shares could decline in value or become worthless. See “Risk Factors — Risks Related to Doing Business in China — The PRC government exerts substantial influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations and this offering at any time, which could result in a material change in our operations and our ordinary shares could decline in value or become worthless” beginning on page 31.

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        We may be liable for improper use or appropriation of personal information provided by our customers. See “Risk Factors — Risks Related to Doing Business in China — We may be liable for improper use or appropriation of personal information provided by our customers” beginning on page 32.

        We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet retailers. See “Risk Factors — Risks Related to Doing Business in China — We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet retailers” beginning on page 34.

        Regulation and censorship of information disseminated over the internet in China may adversely affect our business, and we may be liable for content that is displayed on our website. See “Risk Factors — Risks Related to Doing Business in China — Regulation and censorship of information disseminated over the internet in China may adversely affect our business, and we may be liable for content that is displayed on our website” beginning on page 34.

        PRC regulation on loans to, and direct investment in, our PRC subsidiary by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation on loans to, and direct investment in, our PRC Subsidiary by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business” beginning on page 36.

        We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and the PRC subsidiary’s restrictions on paying dividends or making other payments to us could restrict our ability to satisfy our liquidity requirements and have a material and adverse effect on our ability to conduct our business. See “Risk Factors — Risks Related to Doing Business in China — We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and the PRC subsidiary’s restrictions on paying dividends or making other payments to us could restrict our ability to satisfy our liquidity requirements and have a material and adverse effect on our ability to conduct our business” beginning on page 40.

        The approval of the CSRC, the CAC, or other PRC regulatory agencies may be required in connection with this offering under a PRC regulation or any new laws, rules or regulations to be enacted, and if required, we cannot assure you that we will be able to obtain such approval. See “Risk Factors — Risks Related to Doing Business in China — The approval of the CSRC, the CAC, or other PRC regulatory agencies may be required in connection with this offering under a PRC regulation or any new laws, rules or regulations to be enacted, and if required, we cannot assure you that we will be able to obtain such approval” beginning on page 42.

        The CSRC has released for public consultation the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors and could cause the value of our ordinary shares to significantly decline or become worthless. See “Risk Factors — Risks Related to Doing Business in China — The CSRC has released for public consultation the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors and could cause the value of our ordinary shares to significantly decline or become worthless” beginning on page 44.

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Risks Related to Our Business and Industry

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

        Failure to maintain the quality and safety of our oat products could have a material and adverse effect on our reputation, financial condition and results of operations. See “Risk Factors — Risks Related to Our Business and Industry — Failure to maintain the quality and safety of our oat products could have a material and adverse effect on our reputation, financial condition and results of operations” beginning on page 48.

        We are heavily dependent on our subscription customers with whom we do not enter into long-term sales agreements. If we fail to acquire new customers or retain existing customers in a cost-effective manner, our business, financial condition and results of operations may be materially and adversely affected. See “Risk Factors — Risks Related to Our Business and Industry — We are heavily dependent on our subscription customers with whom we do not enter into long-term sales agreements. If we fail to acquire new customers or retain existing customers in a cost-effective manner, our business, financial condition and results of operations may be materially and adversely affected” beginning on page 49.

        We are heavily dependent on our major suppliers on the supply of certain products, the loss of which could adversely affect our business, financial condition and results of operations. See “Risk Factors — Risks Related to Our Business and Industry — We are heavily dependent on our major suppliers on the supply of certain products, the loss of which could adversely affect our business, financial condition and results of operations” beginning on page 50.

        We depend on the supply of raw materials and certain oat products from local farmers and third party suppliers, and any adverse changes in such supply or the costs of raw materials and certain oat products may adversely affect our operations. See “Risk Factors — Risks Related to Our Business and Industry — We depend on the supply of raw materials and certain oat products from local farmers and third party suppliers, and any adverse changes in such supply or the costs of raw materials and certain oat products may adversely affect our operations” beginning on page 50.

        Food safety and food-borne illness incidents or other safety concerns may materially adversely affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings. See “Risk Factors — Risks Related to Our Business and Industry — Food safety and food-borne illness incidents or other safety concerns may materially adversely affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings” beginning on page 52.

        We are subject to governmental regulations and other legal obligations related to privacy, information security, and data protection, and any security breaches, and our actual or perceived failure to comply with our legal obligations could harm our brand and business. See “Risk Factors — Risks Related to Our Business and Industry — We are subject to governmental regulations and other legal obligations related to privacy, information security, and data protection, and any security breaches, and our actual or perceived failure to comply with our legal obligations could harm our brand and business” beginning on page 56.

        We may be subject to liability if private information that we receive is not secure or if we violate privacy laws and regulations. See “Risk Factors — Risks Related to Our Business and Industry — We may be subject to liability if private information that we receive is not secure or if we violate privacy laws and regulations” beginning on page 57.

        Any significant cybersecurity incident or disruption of our information technology systems or those of third-party partners could materially damage customer relationships and subject us to significant reputational, financial, legal and operation consequences. See “Risk Factors — Risks Related to Our Business and Industry — Any significant cybersecurity incident or disruption of our information technology systems or those of third-party partners could materially damage customer relationships and subject us to significant reputational, financial, legal and operation consequences” beginning on page 59.

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        Our ability to protect the confidential information of our customers on our APP may be adversely affected by cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions. See “Risk Factors — Risks Related to Our Business and Industry — Our ability to protect the confidential information of our customers on our APP may be adversely affected by cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions” beginning on page 59.

        Infringement of our intellectual property right by any third party or loss of our intellectual property rights may materially and adversely affect our business, financial condition and results of operations. See “Risk Factors — Risks Related to Our Business and Industry — Infringement of our intellectual property right by any third party or loss of our intellectual property rights may materially and adversely affect our business, financial condition and results of operations” beginning on page 60.

        We have identified material weaknesses in our internal controls over financial reporting. If we do not adequately remediate these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain effective internal controls, we may not be able to accurately or timely report our financial condition or results of operations, or comply with the accounting and reporting requirements applicable to public companies, which may adversely affect investor confidence in us and the market price of our shares. See “Risk Factors — Risks Related to Our Business and Industry — We have identified a material weaknesses in our internal controls over financial reporting. If we do not adequately remediate this these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain effective internal controls, we may not be able to accurately or timely report our financial condition or results of operations, or comply with the accounting and reporting requirements applicable to public companies, which may adversely affect investor confidence in us and the market price of our shares” beginning on page 63.

        We are in the process of obtaining title certificate for our new production facility in Inner Mongolia, China. If we fail to obtain such certificate, our business may be materially and adversely affected. See “Risk Factors — Risks Related to Our Business and Industry — We are in the process of obtaining title certificate for our new production facility in Inner Mongolia, China. If we fail to obtain such certificate, our business may be materially and adversely affected” beginning on page 65.

        Failure to renew, or early termination of, our trademark license agreements may materially and adversely affect our business, financial conditions and results of operations. See “Risk Factors — Risks Related to Our Business and Industry — Failure to renew, or early termination of, the trademark license agreements with YanGuFang Agroeco Tech may materially and adversely affect our business, financial conditions and results of operations.” beginning on page 66.

        The ongoing COVID-19 pandemic has had an adverse impact on our business, results of operations and financial condition. Other epidemics, natural disasters, terrorist activities, political unrest, and other outbreaks could also disrupt our operations, which could materially and adversely affect our business, financial condition, and results of operations. See “Risk Factors — Risks Related to Our Business and Industry — The ongoing COVID-19 pandemic has had an adverse impact on our business, results of operations and financial condition. Other epidemics, natural disasters, terrorist activities, political unrest, and other outbreaks could also disrupt our operations, which could materially and adversely affect our business, financial condition, and results of operations” beginning on page 67.

Risks Related to Our Corporate Structure

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

        The VIE structure poses risks to investors. Investors will not and may never directly hold equity interests in the VIEs. The VIE structure may be less effective than direct ownership and the Company may incur substantial costs to enforce the terms of the VIE Agreement. If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, 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, which may therefore materially reduce the value of our ordinary shares or render it worthless if the determinations, changes, or interpretations result in our inability to assert

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contractual control over the assets of our PRC subsidiary or the VIEs that conduct substantially all of our operations. See “Risk Factors — Risks Related to Our Corporate Structure — The VIE structure poses risks to investors. Investors will not and may never directly hold equity interests in the VIEs. The VIE structure may be less effective than direct ownership and the Company may incur substantial costs to enforce the terms of the VIE Agreement. If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, 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, which may therefore materially reduce the value of our ordinary shares or render it worthless if the determinations, changes, or interpretations result in our inability to assert contractual control over the assets of our PRC subsidiary or the VIEs that conduct substantially all of our operations” beginning on page 69.

        Our current corporate structure and business operations and the market price of our ordinary shares may be affected by the newly enacted Foreign Investment Law which does not explicitly classify whether VIEs that are controlled through contractual arrangements would be deemed foreign-invested enterprises if they are ultimately “controlled” by foreign investors. See “Risk Factors — Risks Related to Our Corporate Structure — Our current corporate structure and business operations and the market price of our ordinary shares may be affected by the newly enacted Foreign Investment Law which does not explicitly classify whether VIEs that are controlled through contractual arrangements would be deemed foreign-invested enterprises if they are ultimately “controlled” by foreign investors” beginning on page 71.

        We conduct substantially all of our operations through the VIEs, which are established in the PRC, and we rely on the VIE Agreements with the VIEs and the VIE Shareholder to operate our business, which may not be as effective as direct ownership in providing operational control and we may incur substantial costs to enforce the terms of the VIE Agreements, which could result in a material change in our operations and a material change in the value of the securities we are registering for sale, and cause the value of such securities to significantly decline or become worthless. See “Risk Factors — Risks Related to Our Corporate Structure — We conduct substantially all of our operations through the VIEs, which are established in the PRC, and we rely on the VIE Agreements with the VIEs and the VIE Shareholder to operate our business, which may not be as effective as direct ownership in providing operational control and we may incur substantial costs to enforce the terms of the VIE Agreements, which could result in a material change in our operations and a material change in the value of the securities we are registering for sale, and cause the value of such securities to significantly decline or become worthless” beginning on page 72.

        Any failure by the VIEs or the VIE Shareholder to perform their respective contractual obligations would have a material adverse effect on our business and the market price of our ordinary shares. See “Risk Factors — Risks Related to Our Corporate Structure — Any failure by the VIEs or the VIE Shareholder to perform their respective contractual obligations would have a material adverse effect on our business and the market price of our ordinary shares” beginning on page 72.

        The VIE Shareholder and its shareholders may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition and the value of our ordinary shares. See “Risk Factors — Risks Related to Our Corporate Structure — The VIE Shareholder and its shareholders may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition and the value of our ordinary shares” beginning on page 73.

Risks Related to this Offering and Ownership of Ordinary Shares

Risks and uncertainties related to this offering and ownership of ordinary shares include, but are not limited to, the following:

        There is no active trading market for our ordinary shares and there can be no assurance any market will develop or that the trading price will not decline below the price paid by investors. See “Risk Factors — Risks Related to this Offering and Ownership of Ordinary Shares — There is no active trading market for our ordinary shares and there can be no assurance any market will develop or that the trading price will not decline below the price paid by investors” beginning on page 76.

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        Nasdaq may apply additional and more stringent criteria for our initial and continued listing because we plan to have a small public offering and insiders will hold a large portion of our listed securities. See “Risk Factors — Risks Related to this Offering and Ownership of Ordinary Shares — Nasdaq may apply additional and more stringent criteria for our initial and continued listing because we plan to have a small public offering and insiders will hold a large portion of our listed securities” beginning on page 76.

        The trading price of our ordinary shares may be volatile, which could result in substantial losses to investors. See “Risk Factors — Risks Related to this Offering and Ownership of Ordinary Shares — The trading price of our ordinary shares may be volatile, which could result in substantial losses to investors” beginning on page 77.

        Because the initial public offering price is substantially higher than the pro forma net tangible book value per share, you will experience immediate and substantial dilution. See “Risk Factors — Risks Related to this Offering and Ownership of Ordinary Shares — Because the initial public offering price is substantially higher than the pro forma net tangible book value per share, you will experience immediate and substantial dilution” beginning on page 78.

        Our Chief Executive Officer and Chairman of the board of directors, Mr. Junguo He, has a substantial influence over our company. His interests may not be aligned with the interests of our other shareholders, and he could prevent or cause a change of control or other transactions. See “Risk Factors — Risks Related to this Offering and Ownership of Ordinary Shares — Our Chief Executive Officer and Chairman of the board of directors, Mr. Junguo He, has a substantial influence over our company. His interests may not be aligned with the interests of our other shareholders, and he could prevent or cause a change of control or other transactions” beginning on page 80.

        Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions. See “Risk Factors — Risks Related to this Offering and Ownership of Ordinary Shares — Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions” beginning on page 83.

Implications of Being an Emerging Growth Company

We had less than $1.07 billion in revenue during our last fiscal year. As a result, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and may take advantage of reduced public reporting requirements. These provisions include, but are not limited to:

        being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in our filings with the SEC;

        not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

        reduced disclosure obligations regarding executive compensation in periodic reports, proxy statements and registration statements; and

        exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our ordinary shares pursuant to this offering. However, if certain events occur before the end of such five-year period, including if we become a “large accelerated filer,” if our annual gross revenues exceed $1.07 billion or if we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period.

Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. We have elected to take advantage of this extended transition period and acknowledge such election is irrevocable pursuant to Section 107 of the JOBS Act.

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Implications of Being a Foreign Private Issuer

Upon consummation of this offering, we will report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as a non-U.S. company with “foreign private issuer” status. Even after we no longer qualify as an emerging growth company, so long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act and the rules thereunder that are applicable to U.S. domestic public companies, including:

        the rules under the Exchange Act that require U.S. domestic public companies to issue financial statements prepared under U.S. GAAP;

        the sections of the Exchange Act that regulate the solicitation of proxies, consents or authorizations in respect of any securities registered under the Exchange Act;

        the sections of the Exchange Act that require insiders to file public reports of their share ownership and trading activities and that impose liability on insiders who profit from trades made in a short period of time; and

        the rules under the Exchange Act that require the filing with the SEC of quarterly reports on Form 10-Q, containing unaudited financial and other specified information, and current reports on Form 8-K, upon the occurrence of specified significant events.

We will file with the SEC, within four months after the end of each fiscal year (or such other reports required by the SEC), an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United States or (iii) our business is administered principally in the United States.

Both foreign private issuers and emerging growth companies are also exempt from certain of the more extensive SEC executive compensation disclosure rules. Therefore, if we no longer qualify as an emerging growth company but remain a foreign private issuer, we will continue to be exempt from such rules and will continue to be permitted to follow our home country practice as to the disclosure of such matters.

Corporate Information

Our principal executive offices are located at 3/F, Building 3, 33 Suhong Road, Minhang District, Shanghai, China, 201100, and our telephone number is +86 (21) 52966658. Our website is yangufang.com. Information contained on, or available through, our website does not constitute part of, and is not deemed incorporated by reference into, this prospectus. Our registered office in the Cayman Islands is located at the Office of Sertus Incorporations (Cayman) Limited, Sertus Chambers, Governors Square, Suite # 5-204, 23 Lime Tree Bay Avenue, P.O. Box 2547, Grand Cayman, KY1-1104, Cayman Islands, or such other place in the Cayman Islands as the directors may, from time to time decide. Our agent for service of process in the United States is Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, DE 19711.

Impact of COVID-19

In December 2019, coronavirus disease 2019 (COVID-19) was first reported to have surfaced in Wuhan, China. COVID-19 has spread rapidly to many parts of the PRC and other parts of the world in the first half of 2020, which has caused significant volatility in the PRC and international markets. The ongoing COVID-19 pandemic has adversely affected many aspects of our business, including the expansion of our customer base, the introduction of new product offerings and supply chain disruptions. We temporarily closed our offices and production facilities in January 2020, as required by relevant PRC local authorities. Our offices reopened in March 2020 upon approval from the local governments. Due to the extended lock-down and self-quarantine policies in China, we experienced a significant business disruption, including but not limited to supply chain disruptions, during the lock-down period from early February to late March 2020 and has since been picking up slowly after China reopened businesses nationwide. From

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July 2020, due to the effective containment of COVID-19 in China, we resumed our full operation. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, the COVID-19 pandemic did not have a material net impact on the Company’s financial positions and operating results, our revenue reached approximately $29.8 million for the fiscal year ended June 30, 2021, representing an increase of approximately $5.7 million or 23.9% from approximately $24.1 million for the fiscal year ended June 30, 2020. For the six months ended December 31, 2021, our revenue reached approximately $18.8 million, representing an increase of approximately $7.9 million or 72.5% from approximately $10.9 million for the six months ended December 31, 2020.

Measures taken by various governments to contain the virus have affected economic activity in all countries where the consumers of our products live. We have taken a number of measures to monitor and mitigate the effects of COVID-19, such as safety and health measures for our personnel, social distancing, and securing the supply of materials that are essential to our production process. We will continue to follow the various government policies and advice and, in parallel, we may take further actions that we determine are in the best interests of our employees, customers, and business relationships.

From 2020 to 2021, a COVID-19 vaccination program had been greatly promoted around the globe. However, several types of COVID-19 variants emerged in different parts of the world. The Company’s sales in China and Thailand continued to be affected by government actions relating to COVID-19 and COVID-19 variants.

In March 2022, a new COVID-19 subvariant (omicron) outbreak hit China, and spread faster and more easily than previous viruses. As a result, a new round of lockdown, quarantines or travel restrictions has been imposed to date upon different provinces or cities in China by the relevant local government authorities. We temporarily closed our Shanghai office and suspended our offline marketing activities since April 1, 2022 as required by the local authorities in Shanghai, and had our employees located in Shanghai work remotely. All marketing activities in Shanghai were accordingly changed to online meetings. Due to restrictions on logistics and supply chain disruptions in certain areas of China, we reduced our production output during the lockdown period in Shanghai, which to some extent adversely affected our results of operations for the same period. Starting from June 1, 2022, we resumed our production scale to the pre-lockdown level, reopened our Shanghai office and resumed our offline marketing activities. As of the date of this prospectus, all of our offices in China are fully open and operational. However, we expect that the lockdown in Shanghai from April to June 2022 will have an adverse impact on our results of operations as our logistics and supply chain, business development and offline marketing activities in Shanghai were restricted or suspended in the lockdown period. Our warehouses are currently located in Inner Mongolia and Shanghai, and we plan to open new warehouses in other regions of China in the second half of 2022 to expand our storage capacity as well as mitigate the adverse impact on our supply chain due to the concentrated warehouses in one or two regions. Notwithstanding the foregoing, we have not experienced inventory, raw material or labor shortages or reduced headcount of our employees during the recent lockdown period in Shanghai as our other offices and production facilities in China were operational during the lockdown period.

The extent of the impact of COVID-19 on the Company’s future financial results will be dependent on future developments such as the length and severity of the pandemic, the potential resurgence of the pandemic, future government actions in response to the pandemic and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. Given this uncertainty, the Company is currently unable to quantify the expected impact of the COVID-19 pandemic on its future operations, financial condition, liquidity and results of operations if the current situation continues. See “Risk Factors — Risks Related to Our Business and Industry — The ongoing COVID-19 pandemic has had an adverse impact on our business, results of operations and financial condition. Other epidemics, natural disasters, terrorist activities, political unrest, and other outbreaks could also disrupt our operations, which could materially and adversely affect our business, financial condition, and results of operations.”

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The Offering

Ordinary shares being offered by us:

 

[] ordinary shares on a firm commitment basis (or [] ordinary shares if the underwriters exercise their over-allotment option in full).

Ordinary shares being offered by the selling shareholders

 


3,000,000 ordinary shares which may be sold from time to time by the selling shareholders named in this prospectus.

Initial offering price:

 

We estimate the initial public offering price for the ordinary shares will be in the range of $[] to $[] per ordinary share.

Number of ordinary shares outstanding before the offering:

 


[] ordinary shares.

Number of ordinary shares outstanding after the offering:

 


[] ordinary shares, assuming full exercise of the underwriters’ over-allotment option, and [] ordinary shares, assuming no exercise of the underwriters’ over-allotment option.

Use of proceeds:

 

We intend to use the net proceeds of this offering for (i) the construction of additional production facilities, purchase of new equipment and upgrades of existing equipment; (ii) R&D on new products and technologies, upgrades of existing products and technologies, and new hires of R&D staff; (iii) global business expansion, primarily to North America, South East Asia and Japan; (iv) marketing and brands promotion; and (v) working capital and other general corporate purposes. For more information on the use of proceeds, see “Use of Proceeds” on page 86.

We will not receive any proceeds from the sale of any ordinary shares by the selling shareholders.

Lock-up agreements

 

All of our directors and officers and certain shareholders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our ordinary shares or securities convertible into or exercisable or exchangeable for our ordinary shares for a period of 180 days from the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting” for more information.

Proposed Nasdaq symbol:

 

We have applied to have our ordinary shares listed on the Nasdaq under the symbol “YGF.”

Transfer agent and registrar

 

VStock Transfer, LLC

Risk factors:

 

Investing in our ordinary shares involves a significant degree of risk. As an investor you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 27.

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RISK FACTORS

Investing in our ordinary shares is highly speculative and involves a significant degree of risk. You should carefully consider the following risks, as well as other information contained in this prospectus, before making an investment in our company. The risks discussed below could materially and adversely affect our business, prospects, financial condition, results of operations, cash flows, ability to pay dividends and the trading price of our ordinary shares. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, prospects, financial condition, results of operations, cash flows and ability to pay dividends, and you may lose all or part of your investment.

Risks Related to Doing Business in China

The Holding Foreign Companies Accountable Act (“HFCA Act”), together with recent joint statement by the SEC and PCAOB, Nasdaq rule changes, a determination by the PCAOB that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, 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 add uncertainties to our offering.

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the disclosure, financial reporting and other risks associated with investing in companies based in or have substantial operations in emerging markets including China as well as the limited remedies available to investors who might take legal action against such companies. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply 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, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors. These proposals were approved by the SEC on October 4, 2021. These developments add uncertainties to our offering, including the possibility that Nasdaq can stop trading in our securities if the PCAOB cannot inspect or fully investigate our auditor.

Furthermore, various equity-based research organizations have recently published reports on China-based companies after examining their corporate governance practices, related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges. Any similar scrutiny on us, regardless of its lack of merit, could cause the market price of our shares to fall, divert management resources and energy, cause us to incur expenses in defending ourselves against rumors, and increase the premiums we pay for director and officer insurance.

On May 20, 2020 and December 2, 2020, the United States Senate and the United States House of Representatives, respectively, passed S. 945, the HFCA Act, which was signed into law on December 18, 2020. The HFCA Act requires a foreign company to certify that it is not owned or manipulated 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 from trading on a national exchange. On June 22, 2021, the United States Senate passed the Accelerating Holding Foreign Companies Accountable Act, which has been introduced in the United States House of Representatives. This Act, if enacted, would decrease the number of non-inspection years from three years to two, thus reducing the time period before our ordinary shares may be prohibited from trading or delisted. On February 4, 2022, the United States House of Representatives passed a bill, which contained, among other things, an identical provision. If this provision is enacted into law, the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act will be reduced from three years to two. Although we believe that the HFCA Act and the related regulations do not currently affect us, we cannot assure you that there will not be any further implementations and interpretations of the HFCA Act or the related regulations, which might pose regulatory risks to and impose restrictions on us because of our primary operations in China. See “Risk Factors — Risks Related to Doing Business in China.”

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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 existing and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

On December 2, 2021, the SEC issued final rules under the HFCA Act, which became effective on January 10, 2022, amending the disclosure requirements in annual reports. These amendments apply to registrants that the SEC identifies as having filed an annual report issued by a registered public accounting firm that is located in a foreign jurisdiction that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The amendments require the submission of documentation to the Commission establishing that such a registrant is not owned or controlled by a governmental entity in that foreign jurisdiction and also require disclosure in a foreign issuer’s annual report regarding the audit arrangements of, and governmental influence on, such registrants. The Commission is to identify a reporting company that has retained a registered public accounting firm to issue an audit report where that registered public accounting firm has a branch or office that:

        Is located in a foreign jurisdiction; and

        The PCAOB has determined that it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction.

Once identified, Section 104(i)(2)(B) of the Sarbanes-Oxley Act requires these issuers, which the SEC refers to as “Commission-Identified Issuers,” to submit in connection with their annual report documentation to the Commission establishing that they are not owned or controlled by a governmental entity in that foreign jurisdiction and to name any director who is affiliated with the Chinese Communist Party or whether the company’s articles include any charter of the Chinese Communist Party.

On December 16, 2021, the PCAOB determined that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, 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. Our auditor, Friedman LLP, an independent registered public accounting firm headquartered in the United States with no branches or offices outside the United States, was not included in the determinations made by the PCAOB on December 16, 2021. Our auditor is currently subject to PCAOB inspections and has been inspected by the PCAOB on a regular basis, with the last inspection in June 2018.

In the event the PCAOB expands the category of firms which it cannot inspect in future and include our auditor Friedman LLP in the list, we must change our independent auditor in sufficient time so as to meet the requirements of SEC and Nasdaq. If we fail to change auditors to meet the SEC and Nasdaq requirements, we will be delisted from the Nasdaq, and our ordinary shares are unable to be listed on another securities exchange or traded on an over-the-counter market in the United States, your ability to sell or purchase our ordinary shares when you wish to do so will be impaired, and the risk and uncertainty associated with a potential delisting would have a negative impact on the market for and the price of our ordinary shares. We cannot assure you that, because our books and records are located in China, we will in the future be able to become an issuer that is not a Commission-Identified Issuer, in which event our ordinary shares may not be tradable in any United States stock exchange or market and it may be necessary for us to list on a foreign exchange in order that our ordinary shares can be traded. It is possible that, in the event trading in our stock in the United States is no longer possible, you may lose the entire value of your ordinary shares.

Further, new laws and regulations or changes in laws and regulations in both the United States and China could affect our ability to list our shares on Nasdaq, which could materially impair the market for and market price of our ordinary shares.

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Changes in the political and economic policies of the PRC government or in relations between China and the United States may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

Substantially all of our operations are conducted in the PRC and substantially all of our revenues is sourced from the PRC. Accordingly, our financial condition and results of operations are affected to a significant extent by economic, political and legal developments in the PRC or changes in government relations between China and the United States or other governments. There is significant uncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations and tariffs.

The PRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular industries or companies.

While the PRC economy has experienced significant growth in the past four decades, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our financial condition and results of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. In addition, the PRC government has implemented in the past certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity.

In July 2021, the PRC government provided new guidance on China-based companies raising capital outside of China, including through VIE Agreements. In light of such developments, the SEC has imposed enhanced disclosure requirements on China-based companies seeking to register securities with the SEC. As substantially all of our operations are based in China, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising or other activities by China based companies could adversely affect our business and results of operations. If the business environment in China deteriorates from the perspective of domestic or international investment, or if relations between China and the United States or other governments deteriorate, the PRC government may intervene with our operations and our business in China and United States, as well as the market price of our ordinary shares, may also be adversely affected.

Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.

Our PRC subsidiary and the VIEs are subject to various PRC laws, rules and regulations generally applicable to companies in China. 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 overall effect of legislation over the past four decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in China.

As relevant laws and regulations are relatively new and the PRC legal system continues to rapidly evolve with little advance notice, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until

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sometime after the violation. Such uncertainties, including uncertainty 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, impede our ability to continue our operations and reduce the value of your investment in YanGuFang Group.

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 was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. On July 10, 2021, the CAC issued a revised draft of the Measures for Cybersecurity Review for public comments, which required that, among others, in addition to “operator of critical information infrastructure”, any “data processor” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities. On November 14, 2021, the CAC released the Network Internet Data Protection Draft Regulations (draft for comments), which reiterates that data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. If a data processor that processes personal data of more than one million users intends to list overseas, it shall apply for a cybersecurity review. In addition, data processors that process important data or are listed overseas shall carry out an annual data security assessment on their own or by engaging a data security services institution, and the data security assessment report for the prior year should be submitted to the local cyberspace affairs administration department before January 31 of each year. We do not believe, based upon the opinion of our PRC counsel, that we are subject to the cybersecurity review as we, as a data processor, possess personal information of less than one million users. We cannot assure you, however, that regulators in China will not take a contrary view or will not subsequently require us to undergo the cybersecurity review and subject us to penalties for non-compliance. On December 28, 2021, the Measures for Cybersecurity Review (2021 version) was promulgated and became effective on February 15, 2022, which iterates that any “online platform operators” controlling personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. The Measures for Cybersecurity Review (2021 version), further specify the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The CAC has said that under the new rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.” The cybersecurity review will also look into the potential national security risks from overseas IPOs. As of March 31, 2022, we had approximately 362,738 APP users. We believe, based upon the advice of our PRC counsel, that one of the VIEs, YanGuFang E-Commerce, is deemed a “personal information processor” under the Personal Information Protection Law (“PIPL”) because it is engaged in data activities as defined under the PIPL, which includes, without limitation, collection, storage, use, processing, transmission, provision, publication and deletion of data. However, neither YanGuFang Group, nor our other subsidiaries, i.e., YanGuFang HK, WFOE, and the other two VIEs, YanGuFang Contract Farming and YanGuFang Whole Grain, is deemed a “personal information processor” under the PIPL as they are not involved in data activities regulated by PIPL. Neither the Company and its subsidiaries, nor each of the VIEs, is an operator of any “critical information infrastructure” as defined under the PRC Cybersecurity Law and the Security Protection Measures on Critical Information Infrastructure promulgated by the State Council on July 30, 2021, which became effective on September 1, 2021,because neither of them is engaged in the important network facilities and information systems in important industries and fields. Additionally, neither the Company and any of its subsidiaries nor each of the VIEs is an “online platform operators” controlling personal information of more than one million users under the Cybersecurity Review Measures because the online platform operated by the Company, primarily through YanGuFang E-Commerce, does not hold the personal information of more than one million users. Therefore, we are not subject to the Measures for Cybersecurity Review and are not required to pass the security evaluation organized by the CAC and the compliance with such regulation will not materially impact our business operations. We cannot assure you, however, that regulators in China will not take a contrary view or will not subsequently require us to undergo the cybersecurity review and subject us to fines or penalties for non-compliance. As of the date of this prospectus, one

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of the VIEs, YanGuFang E-Commerce, is in full compliance with the regulations or policies that have been issued by the CAC to date, with YanGuFang Group and its subsidiaries, and the other two VIEs not subject to the regulations or policies that have been issued by the CAC.

On December 24, 2021, the CSRC released the Draft Administrative Provisions and the Draft Filing Measures, both of which had a comment period that expired on January 23, 2022, and if enacted, may subject us to additional compliance requirement in the future. See “Risks Related to Doing Business in China — The CSRC has released for public consultation the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors and could cause the value of our ordinary shares to significantly decline or become worthless.” Thus, it is still uncertain how PRC governmental authorities will regulate overseas listing in general and whether we are required to obtain any specific regulatory approvals or to fulfill any record-filing requirements. Furthermore, if we do not receive any required approvals or record-filing or if we incorrectly conclude that approvals or record-filing are not required or if the CSRC or other regulatory agencies promulgate new rules, explanations or interpretations requiring that we obtain their prior approvals or ex-post record-filing for this offering and any follow-on offering, we may be unable to obtain such approvals and record-filing which could significantly limit or completely hinder our ability to offer or continue to offer securities to our investors.

Furthermore, the PRC government authorities may strengthen oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers like us. Such actions taken by the PRC government authorities may intervene or influence our operations at any time, which are beyond our control. Therefore, any such action may adversely affect our operations and significantly limit or hinder our ability to offer or continue to offer securities to you and reduce the value of such securities.

There are risks arising from the legal systems in China, including the risks and uncertainties regarding the interpretation, application and enforcement of current and future PRC laws and regulations. The rules and regulations in China can change quickly with little advance notice and uncertainties in the interpretation and enforcement of PRC laws, rules and regulations could limit the legal protections available to you and us. The PRC government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations, financial performance and/or the value of the ordinary shares we are registering for sale, or impair our ability to raise money.

The PRC government exerts substantial influence over the manner in which we conduct our business activities. The PRC government may also intervene or influence our operations and this offering at any time, which could result in a material change in our operations and our ordinary shares could decline in value or become worthless.

We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges nor to enter into the execution of VIE Agreements, however, if any of the VIEs or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on any U.S. exchange, continue to offer securities to investors, or materially affect the interest of the investors and cause significantly depreciation of our price of ordinary shares.

The PRC government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in our operations in China.

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For example, the Chinese cybersecurity regulator announced on July 2, 2021, that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that the company’s app be removed from smartphone app stores. Similarly, our business segments may be subject to various government and regulatory interference in the regions in which we operate. We could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. We 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 or enter into VIE arrangements in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although we are currently not required to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on the U.S. exchanges and or enter into VIE arrangements, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry. Recent statements by the PRC government indicating an intent, and the PRC government may take actions to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or become worthless.

We may be liable for improper use or appropriation of personal information provided by our customers.

Our business involves collecting and retaining certain internal and customer data. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customers, employees and company data is critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.

The PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen’s personal information obtained in performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the SCNPC issued the Cyber Security Law, which became effective on June 1, 2017. Pursuant to the Cyber Security Law, network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations.

The Civil Code of the PRC (issued by the PRC National People’s Congress on May 28, 2020 and effective from January 1, 2021) provides legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the CAC, the Ministry of Industry and Information Technology (“MIIT”), and the Ministry of Public Security, have been increasingly focused on regulation in data security and data protection.

The PRC regulatory requirements regarding cybersecurity are evolving. For instance, various regulatory bodies in China, including the CAC, the Ministry of Public Security and the State Administration for Market Regulation (the “SAMR”), have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. In April 2020, the PRC government promulgated Cybersecurity Review Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security.

Further, the Measures for Cybersecurity Review (2021 version) issued by the CAC on November 16, 2021, which became effective on February 15, 2022, includes the following key changes:

        companies who are engaged in data processing are also subject to the regulatory scope;

        the CSRC is included as one of the regulatory authorities for purposes of jointly establishing the state cybersecurity review working mechanism;

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        the operators of critical information infrastructure and online platform operators holding more than one million users/users’ (which is to be further specified) individual information and seeking a listing outside China shall file for cybersecurity review with the Cybersecurity Review Office; and

        the risks of core data, material data or large amounts of personal information being stolen, leaked, destroyed, damaged, illegally used or transmitted to overseas parties and the risks of critical information infrastructure, core data, material data or large amounts of personal information being influenced, controlled or used maliciously shall be collectively taken into consideration during the cybersecurity review process.

On July 7, 2022, the CAC published the Outbound Data Transfer Security Assessment Measures (the “Outbound Data Transfer Security Assessment Measures”), which will become effective on September 1, 2022 and specify the circumstances in which data handlers providing data outbound shall apply for outbound data transfer security assessment with the Cyberspace Administration, including, among others, the data handler provide important information outbound. As of the date of this prospectus, we had disclosed certain information of our shareholders, directors, managerial officers, customers and employees to the counsel and Underwriters for the purpose of due diligence, while the counsel and Underwriters are professional parties which have entered into legally binding non-disclosure agreements with us. If the Outbound Data Transfer Security Assessment Measures are fully implemented as-is, the above circumstance remains to be clarified. It does not clarify the number of outbound data transfer in such circumstance, which leaves more uncertainties in its application and enforcement and if we are deemed to be a data handler providing important data outbound, we could be subject to the outbound data security assessment with national Cyberspace Administration as mentioned above.

On November 14, 2021, the CAC published the Network Internet Data Protection Draft Regulations (draft for comments), which reiterates that data handlers that process the personal information of more than one million users listing in a foreign country should apply for a cybersecurity review. Currently, the Measures for Cybersecurity Review (2021 version) were recently adopted and the Network Internet Data Protection Draft Regulations (draft for comments) has been released for public comment, and their implementation provisions and anticipated adoption or effective date remains substantially uncertain and may be subject to change. If the CSRC or other regulatory agencies promulgate new rules or explanations requiring that we obtain their approvals for this offering and any subsequent offering, we may become subject to enhanced cybersecurity review. Certain internet platforms in China have been reportedly subject to heightened regulatory scrutiny in relation to cybersecurity matters. As of the date of this prospectus, we have not been informed by any PRC governmental authority of any requirement that we file for a cybersecurity review. However, if we are deemed to be a critical information infrastructure operator or a company that is engaged in data processing and holds personal information of more than one million users, we could be subject to PRC cybersecurity review.

As there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, we could be subject to cybersecurity review, and if so, we may not be able to pass such review in relation to this offering. In addition, we could become subject to enhanced cybersecurity review or investigations launched by PRC regulators in the future. Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension of business, website closure, removal of our app from the relevant app stores, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results of operations. As of the date of this prospectus, we have not been involved in any investigations on cybersecurity review initiated by the Cyber Administration of China or related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect. We believe that we are in compliance with the aforementioned regulations and policies that have been issued by the Cyber Administration of China.

On June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.

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As of the date of this prospectus, we have not been involved in any investigations on cybersecurity or data security initiated by related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect. However, as uncertainties remain regarding the interpretation and implementation of these laws and regulations, we cannot assure you that we will comply with such regulations in all respects and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities. We may also become subject to fines and/or other sanctions which may have material adverse effect on our business, operations and financial condition.

We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet retailers.

The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. Issues, risks and uncertainties relating to PRC government regulation of the Internet industry include, but are not limited to, the following:

        The online commerce industry in China is still in an early stage of development and the PRC laws applicable to the industry are still evolving. Due to the lack of clarity under the existing PRC regulatory regime, we may be required to comply with additional legal and licensing requirements. On May 8, 2021, YanGuFang E-Commerce received a value-added telecommunications business operating license (“VATS License”) for online data processing and transaction processing business (operating e-commerce only) and information services business (internet information services only). It is uncertain if the other VIEs or our PRC subsidiary are required to obtain a separate VATS License. Although we believe that the other VIEs and our PRC subsidiary are not required to obtain such separate license which is in line with the current market practice, there can be no assurance that we will not be required to apply for an operating license in the future.

        The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council announced the establishment of a new department, the State Internet Information Office (with the involvement of the State Council Information Office, the MIIT, and the Ministry of Public Security). The primary role of this new agency is to facilitate the policy-making and legislative development in this field to direct and coordinate with the relevant departments in connection with online content administration and to deal with cross-ministry regulatory matters in relation to the Internet industry.

        New laws and regulations may be promulgated that will regulate internet activities, including online retail. If these new laws and regulations are promulgated, additional licenses may be required for our operations. If our operations do not comply with these new regulations at the time they become effective, or if we fail to obtain any licenses required under these new laws and regulations, we could be subject to penalties.

The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the Internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including our business. We cannot assure you that we have obtained all the permits or licenses required for conducting our business in China or will be able to maintain our existing licenses or obtain new ones.

Regulation and censorship of information disseminated over the internet in China may adversely affect our business, and we may be liable for content that is displayed on our website.

China has enacted laws and regulations governing internet access and the distribution of products, services, news, information, audio-video programs and other content through the internet. In the past, the PRC government has prohibited the distribution of information through the internet that it deems to be in violation of PRC laws and regulations. If any of our internet information was deemed by the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations. We may also be subject to potential liability for

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any unlawful actions of our customers or users of our website or APP, or for content we distribute that is deemed inappropriate. It may be difficult to determine the type of content that may result in liability to us, and if we are found to be liable, we may be prevented from operating our website in China.

The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may increase our labor costs, impose limitations on our labor practices and adversely affect our business and our results of operations.

The PRC Labor Law and the Labor Contract Law of the People’s Republic of China (the “Labor Contract Law”) require that employers must execute written employment contracts with full-time employees. All employers must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor Law and the Labor Contract Law may result in the imposition of fines, compensations and other administrative sanctions, and serious violations may constitute criminal offenses.

The Labor Contract Law became effective and was implemented on January 1, 2008, which was amended on December 28, 2012. It has reinforced the protection of employees who, under the PRC Labor Contract Law, have the right, among others, to enter into written labor contracts, to enter into labor contracts with no fixed terms under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts.

In addition, the Labor Contract Law introduces specific provisions related to fixed-term employment contracts, part-time employment, probation, consultation with labor unions and employee assemblies, employment without a written contract, dismissal of employees, severance, and collective bargaining, which together represent enhanced enforcement of labor laws and regulations. For example, according to the PRC Labor Contract Law, an employer is obliged to sign an unfixed-term labor contract with any employee who has worked for the employer for 10 consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unfixed term, with certain exceptions. The employer must pay economic compensation to an employee where a labor contract is terminated or expires in accordance with the PRC Labor Contract Law, except for certain situations which are specifically regulated. In addition, the government has issued various labor-related regulations to further protect the rights of employees. According to such laws and regulations, employees are entitled to annual leave ranging from five to 15 days and are able to be compensated for any untaken annual leave days in the amount of three times their daily salary, subject to certain exceptions. In the event that we decide to change our employment or labor practices, the Labor Contract Law and other labor-related regulation may also limit our ability to effect those changes in a manner that we believe to be cost-effective. In addition, due to the uncertainties as to the interpretation and implementation of these laws and regulations, our employment practices may not be at all times deemed in compliance with the laws and regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigations, our business and financial conditions may be adversely affected.

PRC regulations relating to foreign exchange registration of overseas investment by PRC residents may subject our PRC resident beneficial owners of our PRC subsidiary to liability or penalties, limit our ability to inject capital into the subsidiary, limit PRC subsidiary’s ability to increase its registered capital or distribute profits to us, or may otherwise adversely affect us.

On July 4, 2014, the State Administration of Foreign Exchange of the People’s Republic of China, or SAFE, promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the former Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles (generally known as SAFE Circular 75) promulgated by SAFE on October 21, 2005. On February 13, 2015, SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment (“SAFE Circular 13”), which took effect on June 1, 2015. This SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their direct establishment or indirect control of an offshore entity established for the purpose of overseas investment or financing with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests. Qualified local banks will directly examine and accept foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, under Circular 37 from June 1, 2015.

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These circulars further require amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease of capital contributed by PRC residents, share transfer or exchange, merger, division or other material events. In the event that a PRC resident holding interests in a special purpose vehicle fails to complete the required SAFE registration, the PRC subsidiary of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, it is unclear how this regulation, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant PRC government authorities, and we cannot predict how these regulations will affect our business operations or future strategy. Failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls. This may have a material adverse effect on our business, financial condition and results of operations.

According to SAFE Circular 37 and SAFE Circular 13, our shareholders or beneficial owners who are PRC residents are subject to Circular 37 or other foreign exchange administrative regulations in respect of their investment in our company. To the best of our knowledge, substantially all of our PRC resident shareholders who directly or indirectly hold shares in our Cayman Islands holding company and who are known to us have completed the application for foreign exchange registrations for their foreign investment in our company in accordance with SAFE Circular 37 and SAFE Circular 13. We have taken steps to notify significant beneficial owners of ordinary shares whom we know are PRC residents of their filing obligations. However, we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make such registrations, and we may not always be able to compel them to comply with all relevant foreign exchange regulations. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents will at all times comply with, or in the future make or obtain any applicable registrations or approvals required by all relevant foreign exchange regulations. The failure or inability of such individuals to comply with the registration procedures set forth in these regulations may subject us to fines or legal sanctions, restrictions on our cross-border investment activities or our PRC subsidiary’s ability to distribute dividends to, or obtain foreign-exchange-dominated loans from, our company, or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation have been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future strategy. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

PRC regulation on loans to, and direct investment in, our PRC subsidiary by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

YanGuFang Group is an exempted company incorporated in the Cayman Islands with limited liability structured as a holding company conducting its operations in China through its PRC subsidiary and the VIEs. As permitted under PRC laws and regulations, in utilizing the proceeds of this offering, we may make loans to our PRC subsidiary subject to the approval from governmental authorities and limitation of amount, or we may make additional capital contributions to our PRC subsidiary. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, YanGuFang Group, through YanGuFang HK, made capital contributions to WFOE of $9,794,012, $1,510,000 and nil, respectively. For the six months ended December 31, 2021 and the years ended June 30, 2021 and 2020, WFOE provided working capital loans to the VIEs of $9,749,850, $1,509,849 and nil, respectively. Furthermore, loans by us to our PRC subsidiary to finance its activities cannot exceed the statutory limits and are subject to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information System and registration with other governmental authorities in China.

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The SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises (“SAFE Circular 19”), effective on June 1, 2015, 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, the Notice from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration of Foreign Exchange Businesses, and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign Exchange Businesses. According to SAFE Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of bank loans that have been transferred to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether the SAFE will permit such capital to be used for equity investments in the PRC in actual practice. The SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account (“SAFE Circular 16”), effective on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to grant loans to non-associated enterprises. Violations of SAFE Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from this offering, to our PRC subsidiary, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC.

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

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

Under the PRC Enterprise Income Tax Law (“EIT Law”), that became effective in January 2008 and was amended in February 2017 and December 2018, as well as its implementing rules, 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 addition, a circular, known as SAT Circular 82, issued in April 2009 by the State Administration of Taxation (the “SAT”), 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 a bulletin, known as SAT Bulletin 45, which took effect in September 2011, 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

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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.

We do not believe that we, as an exempted company incorporated in the Cayman Islands with limited liability meet all of the conditions above thus we do not believe that we are a PRC resident enterprise, though all members of our management team as well as the management team of our offshore holding company are located in China. However, if the PRC tax authorities determine that we are a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we will be subject to the uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”

Finally, since there remain uncertainties regarding the interpretation and implementation of the EIT Law and its implementation rules, it is uncertain whether, if we are regarded as a PRC resident enterprise, any dividends payable by us to our investors and gains on the sale of our shares would become subject to PRC withholding tax, at a rate of 10% in the case of non-PRC enterprises (subject to the provisions of any applicable tax treaty). It is unclear whether non-PRC enterprise shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ordinary shares.

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

Under the EIT Law and its implementation rules, we, as a non-resident enterprise, that is, an enterprise lawfully incorporated pursuant to the laws of a foreign country (region) that has an office or premises established in China with no actual management functions performed in China, or an enterprise that has income derived from or accruing in China although it does not have an office or premises in China, will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement between Hong Kong and China, such rate may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. YanGuFang China is 100% owned by YanGuFang HK. Accordingly, YanGuFang HK may qualify for a 5% tax rate in respect of distributions from YanGuFang China when it becomes operational and is not obligated to pay more than 50% of the income in twelve months to residents in third country or region. Under the Notice of the State Administration of Taxation on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the taxpayer needs to satisfy certain conditions to utilize the benefits under a tax treaty. These conditions include: (1) the taxpayer must be the beneficial owner of the relevant dividends, and (2) the corporate shareholder to receive dividends from the PRC subsidiary must have continuously met the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, under Announcement of the State Administration of Taxation on Issues Relating to “Beneficial Owner” in Tax Treaties, which took effect on April 1, 2018, a “Beneficial Owner” shall mean a person who has ownership and control over the income and the rights and property from which the income is derived. To determine the “beneficial owner” status of a resident of the treaty counterparty who needs to take advantage of the tax treaty benefits, a comprehensive analysis shall be carried out, taking into account actual conditions of the specific case.

Entitlement to a lower tax rate on dividends according to tax treaties or arrangements between the PRC central government and governments of other countries or regions is subject to Announcement of State Taxation Administration on Promulgation of the Administrative Measures on Non-resident Taxpayers Enjoying Treaty Benefits (“Circular 35”). Circular 35 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. As a result, we cannot assure you that we will be entitled to any preferential withholding tax rate under tax treaties for dividends received from WFOE.

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Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (“SAT Circular 698”) issued by the SAT on December 10, 2009, where a foreign investor transfers the equity interests of a resident enterprise indirectly via disposition of the equity interests of an overseas holding company, or an “indirect transfer,” and such overseas holding company is located in a tax jurisdiction that (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor shall report the indirect transfer to the competent tax authority. The PRC tax authority will examine the true nature of the indirect transfer, and if the tax authority considers that the foreign investor has adopted an “abusive arrangement” in order to avoid PRC tax, it may disregard the existence of the overseas holding company and re-characterize the indirect transfer

On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises (“SAT Bulletin 7”), to supersede existing provisions in relation to the “indirect transfer” as set forth in SAT Circular 698, while the other provisions of SAT Circular 698 remain in force. Pursuant to SAT Bulletin 7, where a non-resident enterprise indirectly transfers properties such as equity in PRC resident enterprises without any justifiable business purposes and aiming to avoid the payment of enterprise income tax, such indirect transfer must be reclassified as a direct transfer of equity in PRC resident enterprises. To assess whether an indirect transfer of PRC taxable properties has reasonable commercial purposes, all arrangements related to the indirect transfer must be considered comprehensively and factors set forth in SAT Bulletin 7 must be comprehensively analyzed in light of the actual circumstances. SAT Bulletin 7 also provides that, where a non-PRC resident enterprise transfers its equity interests in a resident enterprise to its related parties at a price lower than the fair market value, the competent tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-resident Enterprises as Source (“SAT Bulletin 37”), which repealed the entire SAT Circular 698 and the provision in relation to the time limit for the withholding agent to declare to the competent tax authority for payment of such tax of SAT Bulletin 7. Pursuant to SAT Bulletin 37, the income from a property transfer, as stipulated in the second item under Article 19 of the EIT Law, shall include the income derived from transferring such equity investment assets as stock equity. The balance of deducting the equity’s net value from the total income from equity transfer shall be taxable income from equity transfer. Where a withholding agent enters into a business contract, involving the income specified in the third paragraph of Article 3 in the EIT Law, with a non-resident enterprise, the tax-excluding income of the non-resident enterprise will be treated as the tax-including income, based on which the tax payment will be calculated and remitted, if it is agreed in the contract that the withholding agent shall assume the tax payable.

It is possible that we or our non-PRC resident investors may become at risk of being taxed under SAT Bulletin 7 and SAT Bulletin 37 and may be required to expend valuable resources to comply with SAT Bulletin 7 and SAT Bulletin 37 or to establish that we or our non-PRC resident investors should not be taxed under SAT Bulletin 7 and SAT Bulletin 37, which may have an adverse effect on our financial condition and results of operations or such non-PRC resident investors’ investment in us.

Dividends payable to our foreign investors and gains on the sale of our ordinary shares by our foreign investors may be subject to PRC tax.

Under the EIT Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the PRC. Any gain realized on the transfer of ordinary shares by such investors is also subject to PRC tax at a current rate of 10% which in the case of dividends will be withheld at source if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends paid on our ordinary shares, and any gain realized from the transfer of our ordinary shares, may be treated as income derived from sources within the PRC and may as a result be subject to PRC taxation. See “Regulation — Regulations Relating to Taxation.” Furthermore, if we are deemed a PRC resident enterprise, dividends payable to individual investors who are non-PRC residents and

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any gain realized on the transfer of ordinary shares by such investors may be subject to PRC tax at a current rate of 20%. Any PRC tax liability may be reduced under applicable tax treaties. However, it is unclear whether holders of our ordinary shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas if we are considered a PRC resident enterprise. If dividends payable to our non-PRC investors, or gains from the transfer of our ordinary shares by such investors are subject to PRC tax, the value of your investment in our ordinary shares may decline significantly.

We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and the PRC subsidiary’s restrictions on paying dividends or making other payments to us could restrict our ability to satisfy our liquidity requirements and have a material and adverse effect on our ability to conduct our business.

YanGufang Group is an exempted company incorporated in the Cayman Islands with limited liability structured as a holding company. We may need dividends and other distributions on equity from our PRC subsidiary to satisfy our liquidity requirements, including the funds necessary to pay dividends and other cash distributions to shareholders and service, any debt YanGuFang Group may incur. Our PRC subsidiary receives substantially all of its revenue from the VIEs in the form of services fees under the VIE Agreements. Our PRC subsidiary and VIEs in the PRC generate and retain cash generated from operating activities and re-invest it in our business. Current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiary is required to set aside at least 10% of its accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. Our PRC subsidiary may also allocate a portion of its after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. Furthermore, if our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiary to distribute dividends or to make payments to us may restrict our ability to satisfy our liquidity requirements.

In addition, the EIT Law, and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

In response to the persistent capital outflow in China and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China (“PBOC”) and SAFE promulgated a series of capital control measures in early 2017, including stricter vetting procedures for domestic companies to remit foreign currency for overseas investments, dividends payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by SAFE for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC subsidiary to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Failure to obtain or maintain any of the preferential tax treatments or imposition of any additional taxes and surcharges could adversely affect our financial condition and results of operations.

Under the EIT Law and its implementation rules, the statutory enterprise income tax rate is 25%, but certain “software enterprise” and “high and new technology enterprises” are qualified for a preferential enterprise income tax rates subject to certain qualification criteria. A “high and new technology enterprise,” which is reassessed every three years, is entitled to favorable income tax rate of 15%. In December 2020, YanGuFang Whole Grain obtained qualification as a “high and new technology enterprise” and is entitled to enjoy a preferential income tax rate of 15% for the calendar years from 2020 to 2023. However, if it fails to maintain its qualified status, experiences any increase in the enterprise income tax rate, or faces any discontinuation, retroactive or future reduction or refund of any of the preferential tax treatments currently enjoyed, our business, financial condition and results of operations could be materially and adversely affected.

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Further, in the ordinary course of our business, we are subject to complex income tax and other tax regulations, and significant judgment is required in the determination of a provision for income taxes. Although we believe our tax provisions are reasonable, if the PRC tax authorities successfully challenge our position and we are required to pay tax, interest and penalties in excess of our tax provisions, our financial condition and results of operations would be materially and adversely affected.

Fluctuations in exchange rates could result in foreign currency exchange losses to us and may reduce the value of, and amount in U.S. Dollars of dividends payable on, our shares in foreign currency terms and could impact our gross profit and gross margin.

The value of the RMB and the Hong Kong dollar against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. In August 2015, the PBOC, changed the way it calculates the mid-point price of RMB against the U.S. dollar, requiring the market-makers who submit for reference rates to consider the previous day’s closing spot rate, foreign-exchange demand and supply as well as changes in major currency rates. In 2018, the value of the RMB appreciated by approximately 5.5% against the U.S. dollar; and in 2019, the RMB appreciated by approximately 1.9% against the U.S. dollar. It is difficult to predict how market forces or PRC or U.S. government policy, including any interest rate increases by the Federal Reserve, may impact the exchange rate between the RMB and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, including from the U.S. government, which has threatened to label China as a “currency manipulator,” which could result in greater fluctuation of the RMB against the U.S. dollar. However, the PRC government may still at its discretion restrict access to foreign currencies for current account transactions in the future. Therefore, it is difficult to predict how market forces or government policies may impact the exchange rate between the RMB and the U.S. dollar or other currencies in the future. In addition, the PBOC regularly intervenes in the foreign exchange market to limit fluctuations in RMB exchange rates and achieve policy goals. If the exchange rate between RMB and U.S. dollar fluctuates in unanticipated manners, our results of operations and financial condition, and the value of, and dividends payable on, our shares in foreign currency terms may be adversely affected. We may not be able to pay dividends in foreign currencies to our shareholders. Appreciation of RMB to U.S. dollar will result in foreign currency translation gain, while depreciation of RMB to U.S. dollar will result in foreign currency translation loss. As a result of the appreciation of the RMB to the U.S. dollar from 6.4566 as of June 30, 2021 to 6.3726 as of December 31, 2021, we had a foreign currency translation gain of approximately $0.2 million for the six months ended December 31, 2021. As a result of the appreciation of the RMB to the U.S. dollar from 7.0651 as of June 30, 2020 to 6.4566 as of June 30, 2021, we had a foreign currency translation gain of approximately $0.8 million for the fiscal year ended June 30, 2021, as compared with a foreign currency translation loss of approximately $0.3 million for the fiscal year ended June 30, 2020. Therefore, the appreciation of average RMB to the U.S. dollar was a significant factor in the increase in comprehensive income for the fiscal years ended June 30, 2021 and 2020 and the six months ended December 31, 2021.

Restrictions on currency exchange may limit our ability to utilize our revenues effectively.

All of our revenues are denominated in Renminbi. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans we may secure from our onshore subsidiaries. Currently, our WFOE may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, without the approval of SAFE by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. Since we expect a significant portion of our future revenue will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in Renminbi to fund our business activities outside of the PRC or pay dividends in foreign currencies to our shareholders. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our subsidiaries.

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It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within China.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and 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 investigation or evidence collection activities within the territory of the PRC without first receiving approval from the CSRC. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

The approval of the CSRC, the CAC, or other PRC regulatory agencies may be required in connection with this offering under a PRC regulation or any new laws, rules or regulations to be enacted, and if required, we cannot assure you that we will be able to obtain such approval.

The M&A Rules adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. In September 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by a special purpose vehicle seeking CSRC approval of its overseas listings. However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles. Currently, there is no consensus among leading PRC law firms regarding the scope and applicability of the CSRC approval requirement.

Our PRC counsel, Beijing Sunland Law Firm, has advised us based on their understanding of the current PRC law, rules and regulations that the CSRC’s approval under the M&A Rules is not required for this offering (including the offering of ordinary shares to U.S. investors) and the listing and trading of our ordinary shares on Nasdaq in the context of this offering, given that:

        the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are subject to this regulation; and

        YanGuFang China was not established by a merger with or an acquisition of any PRC domestic companies as defined under the M&A Rules.

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

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 was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters.

On July 10, 2021, the CAC issued a revised draft of the Measures for Cybersecurity Review for public comments, which required that, among others, in addition to “operators of critical information infrastructure,” any “data processor” controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review, and further specifies the factors to be considered when assessing the national security risks of the relevant activities. On November 14, 2021, the CAC released the Network

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Internet Data Protection Draft Regulations (draft for comments) and accepted public comments until December 13, 2021. The Network Internet Data Protection Draft Regulations provide that data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. If a data processor that processes personal data of more than one million users intends to list overseas, it shall apply for a cybersecurity review. In addition, data processors that process important data or are listed overseas shall carry out an annual data security assessment on their own or by engaging a data security services institution, and the data security assessment report for the prior year should be submitted to the local cyberspace affairs administration department before January 31 of each year. We do not believe, based upon the opinion of our PRC counsel, that we are subject to the cybersecurity review as we, as a data processor, possess personal information of less than one million users. We cannot assure you, however, that regulators in China will not take a contrary view or will not subsequently require us to undergo the cybersecurity review and subject us to penalties for non-compliance.

On December 28, 2021, the Measures for Cybersecurity Review (2021 version) was promulgated and became effective on February 15, 2022, which iterates that any “online platform operators” controlling personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. The Measures for Cybersecurity Review (2021 version) further specifies the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The CAC has said that under the new rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.” The cybersecurity review will also look into the potential national security risks from overseas IPOs. As of March 31, 2022, we had approximately 362,738 APP users. We believe, based upon the advice of our PRC counsel, one of the VIEs, YanGuFang E-Commerce, is deemed a “personal information processor” under the PIPL because it is engaged in data activities as defined under the PIPL, which includes, without limitation, collection, storage, use, processing, transmission, provision, publication and deletion of data. However, neither YanGuFang Group, nor our other subsidiaries, i.e., YanGuFang HK, WFOE, and the other two VIEs, YanGuFang Contract Farming and YanGuFang Whole Grain, is deemed a “personal information processor” under the PIPL as they are not involved in data activities regulated by PIPL. Neither YanGuFang Group and its subsidiaries, nor each of the VIEs, is an operator of any “critical information infrastructure” as defined under the PRC Cybersecurity Law and the Security Protection Measures on Critical Information Infrastructure because neither of them is engaged in the important network facilities and information systems in important industries and fields such as public telecommunications, information services, energy, transportation, water conservancy, finance, public services, e-government and national defense science, technology and industry, as well as other important network facilities and information systems which, in case of destruction, loss of function or leak of data, may result in serious damage to national security, the national economy and the people’s livelihood and public interests. Additionally, neither YanGuFang Group and any of its subsidiaries nor each of the VIEs is an “online platform operators” controlling personal information of more than one million users under the Cybersecurity Review Measures because the online platform operated by the Company, primarily through YanGuFang E-Commerce, does not hold the personal information of more than one million users. Therefore, we are currently not subject to the Measures for Cybersecurity Review and are not required to pass the security evaluation organized by the CAC and the compliance with such regulation will not materially impact our business operations and our offering. As of the date of this prospectus, YanGuFang E-Commerce is in full compliance with the regulations or policies that have been issued by the CAC to date. We cannot assure you, however, that regulators in China will not take a contrary view or will not subsequently require us to undergo the cybersecurity review and subject us to fines or penalties for non-compliance. Additionally, the Measures for Cybersecurity Review were recently adopted and the Network Data Protection Draft Regulations (draft for comments) are in the process of being formulated and the Opinions remain unclear on how it will be interpreted, amended and implemented by the relevant PRC governmental authorities.

On December 24, 2021, the CSRC released the Draft Administrative Provisions and the Draft Filing Measures, both of which had a comment period that expired on January 23, 2022, and if enacted, may subject us to additional compliance requirement in the future. See “Risk Factors — The CSRC has released for public consultation the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors and could cause the value of our ordinary

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shares to significantly decline or become worthless.” Thus, it is still uncertain how PRC governmental authorities will regulate overseas listing in general and whether we are required to obtain any specific regulatory approvals or to fulfill any record-filing requirements. Furthermore, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their prior approvals or ex-post record-filing for this offering and any follow-on offering, we may be unable to obtain such approvals or record-filing which could significantly limit or completely hinder our ability to offer or continue to offer securities to our investors. For instance, in the event that the CSRC approval or any regulatory approval or record-filing is required for this offering, or if the CSRC or any other PRC government authorities promulgates any new laws, rules or regulations or any interpretation or implements rules before our listing that would require us to obtain the CSRC or any other governmental approval or record-filing for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek CSRC approval or record-filing for this offering. These sanctions may include fines and penalties on our operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiary, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before the settlement and delivery of the ordinary shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the ordinary shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur. Any uncertainties or negative publicity regarding such approval or record-filing requirements could have a material adverse effect on our ability to complete this offering or any follow-on offering of our securities or the market for and market price of our ordinary shares.

The CSRC has released for public consultation the draft rules for China-based companies seeking to conduct initial public offerings in foreign markets. While such rules have not yet gone into effect, any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares to investors and could cause the value of our ordinary shares to significantly decline or become worthless.

On December 24, 2021, the CSRC released the Draft Administrative Provisions and the Draft Filing Measures, both of which had a comment period that expired on January 23, 2022. The Draft Rules Regarding Overseas Listing lay out the filing regulation arrangement for both direct and indirect overseas listing, and clarify the determination criteria for indirect overseas listing in overseas markets.

The Draft Rules Regarding Overseas Listing stipulate that a China-based company (the “issuer”), shall fulfill the filing procedures within three business days after the issuer makes an application for initial public offering and listing in an overseas market. The required filing materials for an initial public offering and listing should include at least the following: record-filing report and related undertakings; regulatory opinions, record-filing, approval and other documents issued by competent regulatory authorities of relevant industries (if applicable); and security assessment opinion issued by relevant regulatory authorities (if applicable); PRC legal opinion; and prospectus.

In addition, an overseas offering and listing is prohibited under any of the following circumstances: (1) if the intended securities offering and listing is specifically prohibited by national laws and regulations and relevant provisions; (2) if the intended securities offering and listing may constitute a threat to or endangers national security as reviewed and determined by competent authorities under the State Council in accordance with law; (3) if there are material ownership disputes over the equity, major assets, and core technology, etc. of the issuer; (4) if, in the past three years, the domestic enterprise or its controlling shareholders or actual 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; (5) if, in past three years, directors, supervisors, or senior executives 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; (6) other circumstances as prescribed by the State Council. The Administration Provisions defines the legal liabilities of breaches such as failure in fulfilling filing obligations or fraudulent filing conducts, imposing a fine between RMB 1 million and RMB 10 million, and in cases of severe violations, a parallel order to suspend relevant business or halt operation for rectification, revoke relevant business permits or operational license.

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The Draft Rules Regarding Overseas Listing, if enacted, may subject us to additional compliance requirement in the future, and we cannot assure you that we will be able to get the clearance of filing procedures under the Draft Rules Regarding Overseas List on a timely basis, or at all. Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers or any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our ordinary shares, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our ordinary shares to significantly decline in value or become worthless.

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

The M&A Rules discussed in the preceding risk factor and related regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand, (iv) or in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated domestic companies. Mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to the MOFCOM when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings issued by the State Council in August 2008 is triggered.

In addition, the security review rules issued by the MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOFCOM, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. Furthermore, according to the security review, foreign investments that would result in acquiring the actual control of assets in certain key sectors, such as critical agricultural products, energy and resources, equipment manufacturing, infrastructure, transport, cultural products and services, information technology, Internet products and services, financial services and technology sectors, are required to obtain approval from designated governmental authorities in advance.

In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions, if required, could be time-consuming, and any required approval processes, including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, the MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected. Furthermore, according to the M&A Rules, if a PRC entity or individual plans to merge or acquire its related PRC entity through an overseas company legitimately incorporated or controlled by such entity or individual, such a merger and acquisition will be subject to examination and approval by the MOFCOM. There is a possibility that the PRC regulators may promulgate new rules or explanations requiring that we obtain the approval of the MOFCOM or other PRC governmental authorities for our completed or ongoing mergers and acquisitions. There is no assurance that, if we plan to make an acquisition, we can obtain such approval from the MOFCOM or any other relevant PRC governmental authorities for our mergers and acquisitions, and if we fail to obtain those approvals, we may be required to suspend our acquisition and be subject to penalties. Any uncertainties regarding such approval requirements could have a material adverse effect on our business, results of operations and corporate structure.

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To the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

YanGuFang Group is an offshore holding company with no material operations of its own, and conducts substantially all of its operations through its PRC subsidiary and the VIEs. As of the date of this prospectus, substantially all of our cash and assets are located in the PRC. As a holding company, YanGuFang Group may rely on dividends and other distributions on equity paid by its PRC subsidiary for its cash and financing requirements, and its PRC subsidiary receives substantially all of its revenue from the VIEs in the form of services fees under the VIE agreements. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to us. We are in the process of adopting our formal cash management policies which will dictate the purpose, amount and procedure of cash transfers among our holding company, subsidiaries and VIEs. Historically, one PRC operating entity provides financial support for other entities’ operations by inter-company loans and we have not experienced difficulties or limitations on our ability to transfer cash between subsidiaries and the VIEs. Prior to our reorganization for purpose of our initial public offering, cash transfers among our PRC operating entities and their subsidiaries were generally approved by the management of the company providing the funds. After our reorganization, cash transfers among our holding company, subsidiaries and VIEs of less than RMB5 million (US$0.78 million) must be reported to, reviewed and approved by the finance department of the company initiating such cash transfers; cash transfers equal to or in excess of RMB5 million (US$0.8 million) but less than RMB20 million (US$3.1 million) must be approved by the chief executive officer and the chief financial officer of YanGuFang Group; cash transfers equal to or in excess of RMB20 million (US$3.1 million) must be approved by the board of directors of YanGuFang Group. Among YanGuFang Group, its subsidiaries, and the VIEs, cash is transferred from YanGuFang Group and YanGuFang HK as needed in the form of capital contributions or working capital loans, as the case may be, to the PRC subsidiary as we are permitted under PRC laws and regulations to provide funding to our PRC subsidiary only through loans or capital contributions, and to the VIEs only through loans, and only if we satisfy the applicable government registration and approval requirements. We believe that there is no restriction 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 transfer of funds involving money laundering and criminal activities. However, to the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets. As of the date of this prospectus, no transfers, dividends or other distributions have been made to date from our subsidiaries or the VIEs to our holding company nor have we or any of our subsidiaries and VIEs ever paid dividends or made distributions to U.S. investors to date. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, YanGuFang Group, through YanGuFang HK, made capital contributions to our PRC subsidiary of $9,794,012, $1,510,000 and nil, respectively. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, our PRC subsidiary provided working capital loans to the VIEs of $9,749,850, $1,509,849 and nil, respectively.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to transfer cash out of China, and pay dividends in foreign currencies to our shareholders. Therefore, to the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

Notwithstanding the foregoing, there can be no assurance that the PRC government will not intervene or impose restrictions in future on our ability to transfer or distribute cash within our PRC subsidiary and the VIEs or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China and may adversely affect our business, financial condition and results of operations.

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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 the prospectus based on foreign laws.

YanGuFang Group is an exempted company incorporated under the laws of the Cayman Islands. We conduct substantially all of our production and sales in China through the VIEs, and substantially all of our assets are located in China. In addition, our executive officers and certain directors are PRC nationals and reside within China for a significant portion of the time. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom, Japan and many other jurisdictions. As a result, it may not be possible for investors to serve process upon us or those persons in China, or to enforce against us or them in China, any judgments obtained from non-PRC jurisdictions. As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. It may also be difficult for you to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who do not reside in the United States or have substantial assets located in the United States. In addition, 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.

Shareholder claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in 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 local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the United States has not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the PRC. Accordingly, without the consent of the competent PRC securities regulators or other relevant authorities, no entity or individual may provide any documents and materials relating to securities business activities to foreign entities or government agencies.

The tension in international trade and rising political tension, particularly between U.S. and China, may adversely impact our business, financial condition, and results of operations.

Although cross-border business may not be an area of our focus, as we plan to expand our business internationally in the future, any unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our products and services, impact our competitive position, or prevent us from being able to conduct business in certain countries. If any new tariffs, legislation, or regulations are implemented, or if existing trade agreements are renegotiated, such changes could adversely affect our business, financial condition, and results of operations. Recently, there have been heightened tensions in international economic relations, such as the one between the United States and China. The U.S. government has recently imposed, and has recently proposed to impose additional, new, or higher tariffs on certain products imported from China to penalize China for what it characterizes as unfair trade practices. China has responded by imposing, and proposing to impose additional, new, or higher tariffs on certain products imported from the United States. Following mutual retaliatory actions for months, on January 15, 2020, the United States and China entered into the Economic and Trade Agreement Between the United States of America and the People’s Republic of China as a phase one trade deal, effective on February 14, 2020.

Although the direct impact of the current international trade tension, and any escalation of such tension, on the healthy food industry in China is uncertain, the negative impact on general, economic, political and social conditions may adversely impact our business, financial condition and results of operations.

In addition, political tensions between the United States and China have escalated due to, among other things, trade disputes, the COVID-19 outbreak, sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the central government of the PRC and the executive orders issued by U.S. President Donald J. Trump in August 2020 that prohibit certain transactions with certain Chinese companies and their applications. Rising political tensions could reduce levels of trades, investments, technological exchanges and other economic activities between the two major economies, which would have a material adverse effect on global economic conditions and the stability of global financial markets. Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations.

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Risks Related to Our Business and Industry

Our operating history may not be indicative of our future growth or financial results and we may not be able to sustain our historical growth rates.

Our operating history may not be indicative of our future growth or financial results. There is no assurance that we will be able to grow our revenues in future periods. Our growth rates may decline for any number of possible reasons, and some of them are beyond our control, including decreasing customer demand, increasing competition, declining growth of the healthy food industry in general, shortage of raw materials, price increase of raw materials, or changes in government policies or general economic conditions. We will continue to expand our sales network and product offerings to bring greater convenience to our customers and to increase our customer base and volume of sales. However, the execution of our expansion plan is subject to uncertainty and the sales may not grow at the rate we expect for the reasons stated above. If our growth rates decline, investors’ perceptions of our business and prospects may be adversely affected and the market price of our ordinary shares could decline.

Sales of our products are subject to changing consumer preferences. If we do not correctly anticipate such changes, our sales and profitability may decline.

There are a number of trends in consumer preferences which have an impact on us and the healthy food industry as a whole. These include, among others, preferences for convenient, natural, nutritional, better value, healthy and sustainable products. Concerns as to the health impacts and nutritional value of certain foods may increasingly result in food producers being encouraged or required to produce products with reduced levels of salt, sugar and fat and to eliminate trans-fatty acids and certain other ingredients. Consumer preferences are also shaped by concerns over the environmental impact of products. The success of our business depends on both the continued appeal of our products and, given the varied backgrounds and tastes of our customer base, our ability to offer a sufficient range of products to satisfy a broad spectrum of preferences. Any shift in consumer preferences in the markets in which we operate could have a material adverse effect on our business. Consumer tastes are also susceptible to change. Our competitiveness therefore depends on our ability to predict and quickly adapt to consumer trends, exploiting profitable opportunities for product development without alienating our existing consumer base or focusing excessive resources or attention on unprofitable or short-lived trends. If we are unable to respond on a timely and appropriate basis to changes in demand or consumer preferences, our sales volumes and margins could be adversely affected.

Our future results and competitive position are dependent on the successful development of new product offerings and improvement of existing product offerings, which are subject to a number of difficulties and uncertainties.

Our future results and ability to maintain or improve our competitive position depend on our capacity to anticipate changes in our key markets and to identify, develop, produce, market and sell new or improved products in these changing markets successfully. We have to introduce new products and re-launch and extend existing product lines on a timely basis in order to counteract obsolescence and decreases in sales of existing products as well as to increase overall sales of our products. The launch and success of new or modified products are inherently uncertain, especially as to the products’ appeal to consumers, and there can be no assurance as to our continuing ability to develop and launch successful new products or variations of existing products. The failure to launch a product successfully can affect consumer perception of our other products. Market factors and the need to develop and provide modified or alternative products may also increase costs. In addition, launching new or modified products can result in cannibalization of sales of our existing products if consumers purchase the new product in place of our existing products. If we are unsuccessful in developing new products in response to changing consumer demands or preferences in an efficient and economical manner, or if our competitors respond more effectively than we do, demand for our products may decrease, which could materially and adversely affect our business, financial condition and results of operations.

Failure to maintain the quality and safety of our oat products could have a material and adverse effect on our reputation, financial condition and results of operations.

The quality and safety of our oat products are our core values and critical to our success. We pay close attention to quality control, monitoring each step in the process from procurement to production and from warehouse to delivery. Yet, maintaining consistent product quality depends significantly on the effectiveness of our quality control system, which in

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turn depends on a number of factors, including but not limited to the design of our quality control system and procedures, and effective employee training to ensure that our employees adhere to and implement our quality control policies and procedures and the effectiveness of monitoring any potential violation of our quality control policies and procedures.

We have developed a rigorous quality control system that enables us to monitor each stage of the production and post-production process. However, despite our quality control system, we cannot eliminate the risks of errors, defects or failures. We may fail to detect or cure defects as a result of a number of factors, many of which are outside our control, including:

        technical or mechanical malfunctions in the production process;

        human error or malfeasance by our quality control personnel;

        tampering by third parties; and

        defective raw materials or equipment.

In addition, the quality of the products or services provided by our suppliers or business partners is subject to factors beyond our control, including the effectiveness and the efficiency of their quality control system, among others. There can be no assurance that our suppliers or business partners may always be able to adopt appropriate quality control systems and meet our stringent quality control requirements in respect of the products or services they provide. Any failure of our suppliers or business partners to provide satisfactory products or services could harm our reputation and adversely impact our operations. In addition, we may be unable to receive sufficient compensation from suppliers and business partners for the losses caused by them.

We are heavily dependent on our subscription customers with whom we do not enter into long-term sales agreements. If we fail to acquire new customers or retain existing customers in a cost-effective manner, our business, financial condition and results of operations may be materially and adversely affected.

We do not have long-term sales agreements with our subscription customers, but each of our subscription customer enters into a purchase agreement with us for purchase of certain oat products. As of March 31, 2022, we have a total of 11,480 subscription customers from nine provincial-level administrative regions of China, including Beijing, Shanghai, Jiangsu, Zhejiang, Fujian, Guangdong, Anhui, Inner Mongolia and Chongqing. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, our sales to subscription customers accounted for 82.7%, 84.7% and 86.0%, respectively, of our total revenues.

Although we do not have long-term agreements with our subscription customers, we maintain close and stable relationships with such customers and the repurchase rate of such customers is approximately 57.6% for the fiscal year ended June 30, 2021. However, there is no assurance that our subscription customers will continue to purchase from us. If a significant portion of subscription customers reduces, delays or cancels their purchases or repurchases with us for any reason, or the financial condition of our customers deteriorates, our business could be seriously harmed.

Our ability to cost-effectively attract new customers and retain existing customers, especially subscription customers, is crucial to driving net revenues growth and achieving profitability. We have invested significantly in branding, sales and marketing to acquire and retain customers since our inception. For example, we attend domestic and international expos and exhibitions in marketing our products and attracting new customers. We also expect to continue to invest significantly to acquire new customers and retain existing ones, especially our subscription customers. However, there can be no assurance that new customers will stay with us, or the net revenues from new customers we acquire will ultimately exceed the cost of acquiring those customers. In addition, if our existing customers, especially our existing subscription customers no longer find our products appealing, or if our competitors offer more attractive products, prices, discounts or better customer services, our existing customers may lose interest in us, decrease their purchases or even stop purchasing from us. If we are unable to retain our existing customers, especially our subscription customers or to acquire new customers in a cost-effective manner, our revenues may decrease and our results of operations will be adversely affected.

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We are heavily dependent on our major suppliers on the supply of certain products, the loss of which could adversely affect our business, financial condition and results of operations.

We are heavily dependent on our major suppliers. For the six months ended December 31, 2021 and 2020, one supplier accounted for approximately 15.7% and 51.4%, respectively, of total purchases. For the fiscal year ended June 30, 2021, two major suppliers accounted for approximately 40.8% and 16.8%, respectively, of our total purchases. For the fiscal year ended June 30, 2020, one major supplier accounted for approximately 95.3% of our total purchases.

We have purchased, and expect to continue to purchase certain products from our major suppliers under our purchase agreements with them. Pursuant to our agreement with one major supplier, we distribute the products of such supplier at designated areas with the designated price for a term of five years, with an automatic renewal unless either party propose in writing to terminate the agreement. We also have a customary purchase agreement with another major supplier for a term of one year, which may be terminated or rescinded earlier by either party under certain circumstances, including, but not limited to, mutual agreements to terminate, bankruptcy or liquidation of either party or other circumstances resulting in inability of either party to perform the agreement, the product quality issues, or occurrence of force majeure. In the event that we are unable to purchase products upon early termination or expiration of our agreement with our major suppliers, our business would be harmed.

The unavailability of certain products, delays in the delivery of certain products or the delivery of products that does not meet our specifications could impair our ability to meet customers’ orders. We are also subject to credit risk with respect to our suppliers. If any such suppliers become insolvent, an appointed trustee could potentially ignore the service contracts we have in place with such party, resulting in increased charges or the termination of the supply contracts. We may not be able to replace a supplier within a reasonable period of time, on as favorable terms or without disruption to our operations. Any adverse changes to our relationships with suppliers could have a material adverse effect on our image, brand and reputation, as well as on our business, financial condition and results of operations.

We depend on the supply of raw materials and certain oat products from local farmers and third party suppliers, and any adverse changes in such supply or the costs of raw materials and certain oat products may adversely affect our operations.

Our main raw materials are oats. As of March 31, 2022, we collaborated with more than half of the local oat farmers in Wuchuan County, Inner Mongolia, for purchase of raw materials. We have oat purchase agreements in place with each of such local farmers for purchase of the oats they grow within a certain period (normally less than one year) at certain designated prices. Notwithstanding the foregoing, there is no assurance that the local farmers will sell the oats to us at the designated prices as stipulated in the oat purchase agreements. If the then current market price for oats goes up at time of delivery, we may need to purchase the oats at a comparatively higher price from those local farmers; similarly, if the then current market price for oats goes down at time of delivery, we are still obligated to purchase the oats from them at the designated prices, which may materially and adversely affect our business, financial condition and results of operations.

We normally have purchase agreements of one to five year terms with each of the third party suppliers and believe they provide a stable and additional source of oat and oat product supply for our business operations. However, there is no assurance that they will deliver the required oats to us in line with our quality requirements at a timely manner.

If any of our local oat farmers or suppliers, especially major suppliers cease to supply raw materials and certain oat products to us and if we need alternative sources for any other reason, those raw materials and certain oat products may not be immediately available to us. If alternative suppliers are not immediately available, we will have to identify and qualify alternative suppliers, and production and sales of our products may be delayed. We may not be able to find an adequate alternative supplier in a reasonable time period or on commercially acceptable terms, if at all. An inability to obtain our key source supplies for the production of our products might require us to delay shipments of products, harm customer relationships or force us to curtail or cease operations, which could adversely affect our business, financial condition and results of operations.

A significant interruption in the operations of our suppliers and other business partners could potentially disrupt our operations.

We have limited control over the operations of our suppliers and other business partners and any significant interruption in their operations may have an adverse impact on our operations. For example, a significant interruption in the operations of our supplier’s production facilities could cause delay or termination of shipment of the raw

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materials or certain products to us, which may cause delay or termination of shipment of ordered products to our customers, resulting in damage to our customer relationships if we could not solve the impact of the interruptions of operations of our suppliers, our business operations and financial results may be materially and adversely affected.

Although we believe that we could establish alternate sources from other suppliers, any delay in locating and establishing relationships with other sources could result in shortages or back orders. There can be no assurance that such replacement suppliers will provide the raw materials or products that are needed by us in the quantities that we request or at the prices that we are willing to pay. Any shortage in quantities or increase in prices could adversely affect our financial conditions and results of operations.

All of our Self-Produced Products (as defined below) are produced at our production facilities in Inner Mongolia, and any damage or disruption at these facilities may harm our business.

Our own production facilities are located in Inner Mongolia, China. A natural disaster, fire, power interruption, work stoppage, labor matters (including illness or absenteeism in workforce) or other calamity at any one of these facilities and any combination thereof would significantly disrupt our ability to deliver our products and operate our business. In the future, we may also experience plant shutdowns or periods of reduced production because of regulatory issues, equipment failure, employee-related incidents that result in harm or death, delays in raw material deliveries or as a result of the COVID-19 pandemic or related response measures. Any such disruption or unanticipated event may cause significant interruptions or delays in our business and the reduction or loss of inventory may render us unable to fulfill customer orders in a timely manner, or at all, and may result in lawsuits. We had a temporary closure of all offices and production facilities in China from January to March, 2020 in response to the COVID-19 pandemic. We also have experienced delays in the construction of our new facilities on Parcel 1 located in Inner Mongolia, China as a result of COVID-19. In addition, during the recent lockdown of Shanghai between late March and June 2022, we temporarily closed our Shanghai office from April 1, 2022 to June 1, 2022 but did not close our production facilities in Inner Mongolia, China. Due to the restrictions on logistics and supply chain disruptions in certain areas of China, we reduced our production output during the lockdown period in Shanghai, which to some extent adversely affected our results of operations for the same period. Starting from June 1, 2022, we resumed our production scale to the pre-lockdown level.

If any material amount of our machinery or inventory were damaged, we would be unable to meet our contractual obligations and cannot predict when, if at all, we could replace or repair such machinery, which could materially adversely affect our business, financial condition and results of operations.

Our inability to pass on price increases for food products to our customers could adversely affect our results of operations.

Our ability to pass through increases in the prices of food products depends, among others, on prevailing competitive conditions and pricing methods in the markets in which we operate, and we may not be able to pass through such price increases to our customers. Even if we are able to pass through increases in prices, competition from other similar products may lead to a decline in orders for our products or even obsolescence. Our inability to pass through price increases in food products and preserve our profit margins in the future while remaining competitive could materially adversely affect our business, financial condition and results of operations.

Our brand and reputation may be diminished due to real or perceived quality or food safety issues with our products, which could have an adverse effect on our business, reputation, financial condition and results of operations.

We believe our consumers rely on us to provide them with high-quality products. Therefore, any real or perceived quality or food safety concerns or failures to comply with applicable food regulations and requirements, whether or not ultimately based on fact and whether or not involving us (such as incidents involving our competitors), could cause negative publicity and reduced confidence in our company, brand or products, which could in turn harm our reputation and sales, and could materially adversely affect our business, financial condition and results of operations. Negative publicity includes but is not limited to negative online reviews on social media and crowd-sourced review platforms, industry findings or media reports related to the quality, functionality and health concerns of oat products, whether or not accurate, and whether or not concerning our products, can adversely affect our business, results of operations and reputation. Although we believe we have a rigorous quality control process, there can be no assurance that our products will always comply with the standards set for our products.

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In addition, we are subject to a series of complex and changing food labeling and food safety regulations. These regulations could impact the way consumers view our products, such as new labeling regulations that would require us to list our certain ingredients by specific names that could confuse our consumers into thinking we may use different types of ingredients than they originally thought or that the quality of our ingredients is different to what they anticipated. Further, new labeling and food safety laws could make it more difficult for us to realize our goals of achieving a more integrated supply chain due to the differences in regulations around the world. For example, as we continue to increase our production capacity, there is a risk that we may have to produce our products in facilities with certain allergens present, and while we take precautions to ensure that there is no cross-contamination, there can be no assurance that these precautions would be enough to protect our products from cross-contamination, and using such facilities could harm our reputation, as some of our consumers may view this as acting against our mission to provide products free of allergens.

Additionally, we have no control over our products once purchased by consumers. Accordingly, consumers may store our products improperly or for long periods of time, which may adversely affect the quality and safety of our products. While we have procedures in place to handle consumer questions and complaints, there can be no assurance that our responses will be satisfactory to consumers, which could harm our reputation. If consumers do not perceive our products to be safe or of high quality as a result of such actions outside our control or if they believe that we did not respond to a complaint in a satisfactory manner, then the value of our brand would be diminished, and our reputation, business, financial condition and results of operations would be adversely affected.

Any loss of confidence on the part of consumers in the ingredients used in our products or in the safety and quality of our products would be difficult and costly to overcome. Any such adverse effect could be exacerbated by our position in the market as a purveyor of high-quality products and may significantly reduce our brand value. Issues regarding the safety of any of our products, regardless of the cause, may adversely affect our business, financial condition and results of operations.

Food safety and food-borne illness incidents or other safety concerns may materially adversely affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings.

Selling food for human consumption involves inherent legal and other risks, and there is increasing governmental scrutiny of and public awareness regarding food safety. Unexpected side effects, illness, injury or death related to allergens, food-borne illnesses or other food safety incidents caused by products we sell or involving our suppliers or third party producers could result in the discontinuance of sales of these products or our relationships with such suppliers and third party producers, or otherwise result in increased operating costs, regulatory enforcement actions or harm to our reputation. Shipment of adulterated or misbranded products, even if inadvertent, can result in criminal or civil liability. Such incidents could also expose us to product liability, negligence or other lawsuits, including consumer class action lawsuits. Any claims brought against us may exceed or be outside the scope of our existing or future insurance policy coverage or limits. Any judgment against us that is more than our policy limits or not covered by our policies would have to be paid from our cash reserves, which would reduce our capital resources.

The occurrence of food-borne illnesses or other food safety incidents could also adversely affect the price and availability of affected ingredients and raw materials, resulting in higher costs, disruptions in supply and a reduction in our sales. For example, our outsourcing products may be done in facilities in the presence of multiple allergens, requiring additional efforts for us to confirm that there are no allergens contained in our products produced in such facilities. Additional testing to confirm the presence of allergens increases our costs, as well as the risks to our reputation and brand should we inadvertently fail to detect any allergens. Furthermore, any instances of food contamination or regulatory noncompliance, whether or not caused by our actions, could compel us, our suppliers, our third party producers, our distributor customers or our other customers, depending on the circumstances, to conduct a recall in accordance with the laws and regulations in the jurisdictions in which we operate our business. Food recalls could result in significant losses due to their associated costs, the destruction of product inventory, lost sales due to the unavailability of the product for a period of time and potential loss of existing distributors or customers and a potential negative impact on our ability to attract new customers and maintain our current customer base due to negative consumer experiences or because of an adverse impact on our brand and reputation.

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In addition, food companies have been subject to targeted, large-scale tampering as well as to opportunistic, individual product tampering, and we, like any food company, could be a target for product tampering. Forms of tampering could include the introduction of foreign material, chemical contaminants and pathological organisms into consumer products as well as product substitution. Food business operators must at all stages of production, sales and distribution within the businesses under their control ensure that foods satisfy the requirements of food related laws and regulations, in particular as to food safety. If we do not adequately address the possibility, or any actual instance, of product tampering, we could face possible seizure or recall of our products and the imposition of civil or criminal sanctions, which could materially adversely affect our business, financial condition and results of operations.

We face intense competition in the healthy food industry in general. If we fail to compete effectively, we may lose market share and customers, and our business, financial condition and results of operations may be materially and adversely affected.

We operate in a highly competitive market. In our market, competition is based on, among other things, brand equity and consumer relationships, consumer trends, product experience (including taste, functionality and texture), nutritional profile and dietary attributes, sustainability of our supply chain (including raw material), quality and type of ingredients, distribution and product availability, pricing pressure and competitiveness and product packaging.

The business of selling healthy food products is highly sensitive to the introduction of new products and upgrading of existing products, which may rapidly capture a significant share of the market. These market segments include numerous manufacturers, distributors, marketers, and retailers that actively compete for the business of consumers in various countries. In addition, we anticipate that we will be subject to increasing competition in the future from competitors that utilize electronic commerce. Currently we compete with famous international brands, such as The Quaker Oats Company and Calbee, Inc., and nation-wide brands in China, such as Guilin Seamild Foods Co and Wangbaobao. Many of them may have substantially greater financial, technical, geographical advantage, marketing and other resources than us and whose oats products are well accepted in the marketplace today. They may use their resources and scale to respond to competitive pressures and changes in consumer preferences by introducing new products based on their new technologies and innovations, reducing prices or increasing promotional activities, among other things. Competitive pressures or other factors could cause us to lose market share, which may require us to lower prices, increase marketing and advertising expenditures, or increase the use of discounting or promotional campaigns, each of which could adversely affect our margins and could adversely affect our business, financial condition and results of operations.

Our future growth depends in part on new products and new technology innovation, and failure to invent and innovate new product offerings and new technologies could adversely impact our business, financial condition and results of operations.

To remain competitive, we must continue to stay abreast of the constantly evolving industry trends and to enhance and improve upon our new products and new technologies accordingly. Our future growth depends in part on maintaining our current products in new and existing markets, as well as our ability to develop new products and technologies to serve such markets. To the extent that competitors develop competitive products and technologies, or new products or technologies that achieve higher customer satisfaction, our business prospects could be adversely impacted. Our competitors are continuously searching for more cost-effective products and substitutes, and our existing and prospective customers may choose products offered at a comparatively lower price than that of our products. In addition, regulatory approvals for new products or technologies may be required, these approvals may not be obtained in a timely or cost effective manner, adversely impacting our business prospects.

There can be no assurance that we will be able to produce new products or invent and innovate new technologies effectively so as to meet customer’s requirements. If we are unable to adapt in a cost-effective and timely manner in response to changing market conditions or customer preferences, either for technical, legal, financial or other reasons, our business, financial condition and results of operations may be materially and adversely affected.

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We may encounter difficulties expanding into new businesses or industries, which may affect adversely our results of operations and financial condition.

We may encounter difficulties and face risks in connection with our expansion into new businesses or industries. We cannot assure you that our expansion into new businesses will be successful, as we may have limited experience in such industries. We cannot assure you that we will be able to generate sufficient profits to justify the costs of expanding into new businesses or industries. Any new business in which we invest or which we intend to develop may require our additional capital investment, R&D efforts, as well as our management’s attention. If such new business does not progress as planned, our results of operations and financial condition may be affected adversely.

We may not successfully ramp up operations at any of our new facilities, or these facilities may not operate in accordance with our expectations.

We recently commenced production operations through our new production lines at our new production facility (Factory No.2) in Inner Mongolia, China in December 2021, and we expect more production lines at this new production facility to commerce production by the end of 2022 and plan to open more new facilities in future to further increase our production capacity. Any substantial delay in bringing any of our new facilities up to full production on the projected schedule would put pressure on the rest of our business operations to meet demand and production schedules and may hinder our ability to produce all of the products needed to meet orders and/or achieve our expected financial performance. Adding new production lines and opening new facilities have required, and will continue to require, additional capital expenditures and the efforts and attention of our management and other personnel, which has and will continue to divert resources from our existing business or operations. Even if our new production lines and new facilities are brought up to full production according to our projected schedule, they may not provide us with all of the operational and financial benefits we expect to receive.

Our production facilities and equipment we use to produce our products is costly to replace or repair and may require substantial lead-time to do so. If they are malfunctioned or require repair or placement, we may need to suspend the use of one or more production lines or equipment and may not be able to find suitable alternatives to replace the output from such production lines and equipment on a timely basis and at a reasonable cost. If we are not able to successfully ramp up operations at any of our new facilities and increase production, our business, financial condition and results of operations could be adversely affected.

Our business and the industry in which we operate are subject to inherent risks and uncertainties, including, among others, developments in regulatory landscape and market acceptance of our healthy food products.

Our business and the industry in which we operate are subject to inherent risks and uncertainties, including, among others, developments in regulatory landscape and market acceptance of healthy food products. Our business and the healthy food industry are subject to inherent risks, challenges and uncertainties, including but not limited to the following:

        the regulatory landscape in the jurisdictions to which we market our products are constantly evolving, and there may be additional requirements with respect to oat products that may increase our cost of compliance;

        we may face unforeseen capital requirements caused by the changing industry requirements or consumer tastes and demands; demands for our oat products may decline significantly due to the decrease in market acceptance for our products or oat products generally;

        we may not be able to establish or maintain business relationships with customers or compete with other more established competitors as, for an evolving industry, customers generally prefer to choose more established brands as opposed to those that are less established;

        we may not be able to adjust our procurement and/or production in time to meet the changes in market demands; and

        future changes in our industry may not be consistent with our prediction. Therefore, our industrial prospects, R&D focus and business plans may not be effective in helping sustain our competitive position in the healthy food industry.

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If we fail to cope with the challenges and compete with other industry players in such uncertain and evolving healthy food industry, our future prospects, business, financial conditions and results of operations may be materially and adversely affected.

We are subject to risks relating to the production and warehousing of our products. If any of these risks materializes, our business, financial condition and results of operations could be materially and adversely affected.

We operate our production and warehouse facilities on our leased and owned premises. Natural disasters or other unanticipated catastrophic events, including power interruptions, water shortage, storms, fires, typhoons, earthquakes, cybersecurity attacks, terrorist attacks and wars, as well as changes in governmental planning for the land underlying the production and warehousing facilities, could destroy any inventory located in these facilities and significantly impair our business operations. Furthermore, the leases for the production and warehousing facilities that we use could be challenged by third parties or government authorities, which may cause interruptions to our business operations. We cannot assure you that our use of such leased properties will not be challenged. In the event that our use of leased properties is successfully challenged, we may be subject to fines and forced to relocate the affected operations. We can provide no assurance that we will be able to find suitable replacement sites on terms acceptable to us on a timely basis, or at all, or that we will not be subject to material liability resulting from third parties’ challenges on our use of such properties.

Misconducts, including illegal, fraudulent or collusive activities, by our employees, distributors, retailers, suppliers and farmers, may harm our brand and reputation and adversely affect our business and results of operations.

Misconduct, including illegal, fraudulent or collusive activities, unauthorized business conducts and behaviors, or misuse of corporate authorization by our employees, contractors, distributors, retailers, suppliers and farmers and other business partners could subject us to liability and negative publicity. Our employees, distributors, retailers, suppliers and farmers may conduct fraudulent activities or violations of local laws and regulations, such as accepting payments from or making payments to other distribution channel participants or other third parties in order to bypass our internal system and to complete shadow transactions and/or transactions outside our official or authorized distribution channels, disclosing customers’ information to competitors or other third parties for personal gains, or applying for fake reimbursement. They may conduct activities in violation of unfair competition law, which may expose us to unfair competition allegations and risks. We cannot assure you that such incidents will not occur in the future. It is not always possible to identify and deter such misconduct, and the precautions we take to detect and prevent these activities may not be effective. Such misconduct could damage our brand and reputation, which could adversely affect our business and results of operations.

We may be subject to legal or other proceedings in the ordinary course of our business. If the outcome of these proceedings are adverse to us, they could have a material adverse effect on our business, financial condition and results of operations.

During the ordinary course of our business operations, we may be involved in legal disputes or regulatory and other proceedings relating to, including but not limited to, contractual disputes, product liability claims and employees’ claims. Especially, for contractual disputes, we cannot assure you that the venue and governing law agreed in relevant contracts are always favorable to us. Any such legal disputes or proceedings may subject us to substantial liabilities and may have a material and adverse effect on our reputation, business, financial condition and results of operations. Among those proceedings, some of them may be relating to our products or services or complaints from third parties.

If we become involved in material or protracted legal proceedings or other legal disputes in the future, we may incur substantial legal expenses and our management may need to devote significant time and attention to handle such proceedings and disputes, thereby diverting their attention from our business operations. In addition, the outcome of such proceedings or disputes may be uncertain and could result in settlement or outcomes which may adversely affect our business, financial condition and results of operations.

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If we fail to fully comply with PRC Advertising Law and related regulations, rules and measures applicable to advertising, our business and results of operations may be adversely affected.

PRC advertising laws, rules and regulations require advertisers, advertising operators and advertising distributors to ensure that the content of the advertisements they prepare or distribute is fair and accurate and is in full compliance with applicable laws. Violation of these laws, rules or regulations may result in penalties, including fines, confiscation of advertising fees and orders to cease dissemination of the advertisements, and potentially unfair competition liability. In circumstances involving serious violations, the PRC government may suspend or revoke a violator’s business license.

We are subject to governmental regulations and other legal obligations related to privacy, information security, and data protection, and any security breaches, and our actual or perceived failure to comply with our legal obligations could harm our brand and business.

We generate, collect, store and process a large amount of personal, transactional, statistical and behavioral data, including certain personal and other sensitive data from our customers. We face risks inherent in handling large volumes of data and in securing and protecting such data. In particular, we face a number of data-related challenges related to our business operations, including: (i) protecting the data in and hosted on our system and cloud servers, including against attacks on our system and cloud servers by external parties or fraudulent behavior by our employees; (ii) addressing concerns related to privacy and sharing, safety, security and other factors; and (iii) complying with applicable laws, rules and regulations relating to the collection, use, disclosure or security of personal information, including any requests from regulatory and government authorities relating to such data.

Although we have taken steps to protect such data, our security measures could be breached. As of the date of this prospectus, we have not experienced any material breach of our cybersecurity system or measures. As techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or other unauthorized access to our system and cloud servers could cause confidential information to be accessed, stolen and used for illegal or unauthorized purposes. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with customers, distributors, retailers, manufacturers or suppliers could be severely damaged, we could incur significant liability, and our business and operations could be adversely affected.

In addition, PRC government authorities have enacted a series of laws and regulations in regard of the protection of personal information, under which telecommunication business operators, internet service providers and other value chain operators are required to comply with the principles of legality, justification and necessity, to clearly indicate the purposes, methods and scope of any information collection and usage, to obtain the consent of customers, and to keep collected personal information confidential, as well as to establish customer information protection system with appropriate remedial measures. However, there is uncertainty as to the interpretation and application of such laws which may be interpreted and applied in a manner inconsistent with our current policies and practices or require changes to the features of our system. We cannot assure you that our existing information protection system and technical measures will be considered sufficient under applicable laws and regulations. If we are unable to address any information protection concerns, or to comply with the then applicable laws and regulations, we may incur additional costs and liability and our reputation, business and operations might be adversely affected.

We obtain consent from our subscription customers, APP users and third party e-commerce platform users to use their information within the scope of authorization, and we have taken technical measures to ensure the security of such information and prevent the information from being divulged, damaged or lost. However, since the Cyber Security Law and relevant regulations, rules and measures are relatively new, there are uncertainties as to the interpretation and application of these laws and regulations, and it is possible that our data protection practices are or will be inconsistent with regulatory requirements. Any violation of the provisions and requirements under the Cyber Security Law and other relevant regulations, rules and measures may subject us to warnings, fines, confiscation of illegal gains, revocation of licenses, suspension of business, shutting down of websites or even criminal liabilities. Complying with such requirements could cause us to incur substantial expenses or to alter or change our practice in a manner that could harm our business. Any systems failure or security breach or lapse that results in the unauthorized release of our customer data could harm our reputation and brand and, consequently, our business, in addition to exposing us to potential legal liability.

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We may be subject to liability if private information that we receive is not secure or if we violate privacy laws and regulations.

We are or may become subject to a variety of laws and regulations in China, the United States and other jurisdictions where we operate our business regarding privacy, data security, cybersecurity and data protection. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. In particular, there are numerous laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal information and other customer data in different jurisdictions. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions.

In November 2016, the SCNPC passed China’s first Cyber Security Law, which became effective in June 2017. The Cyber Security Law is the first PRC law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny. The legal consequences of violation of the Cyber Security Law include penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the websites, and revocation of business license or relevant permits. In April 2020, the CAC and certain other PRC regulatory authorities promulgated the Cybersecurity Review Measures, which became effective in June 2020. Pursuant to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security. On July 10, 2021, the CAC issued a revised draft of the Measures for Cybersecurity Review for public comments, which required that, in addition to “operator of critical information infrastructure” any “data processor” carrying out data processing activities that affect or may affect national security should also be subject to cybersecurity review, and further specifies the factors to be considered when assessing the national security risks of the relevant activities.

On November 14, 2021, the CAC released the Regulations on the Network Internet Data Protection Draft Regulations (draft for comments) and accepted public comments until December 13, 2021. The Network Internet Data Protection Draft Regulations provide that data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. If a data processor that processes personal data of more than one million users intends to list overseas, it shall apply for a cybersecurity review. In addition, data processors that process important data or are listed overseas shall carry out an annual data security assessment on their own or by engaging a data security services institution, and the data security assessment report for the prior year should be submitted to the local cyberspace affairs administration department before January 31 of each year. We do not believe, based upon the opinion of our PRC counsel, that we are subject to the cybersecurity review as we, as a data processor, possess personal information of less than one million users. We cannot assure you, however, that regulators in China will not take a contrary view or will not subsequently require us to undergo the cybersecurity review and subject us to penalties for non-compliance.

On December 28, 2021, the Measures for Cybersecurity Review (2021 version) was promulgated and became effective on February 15, 2022, which iterates that any “online platform operators” controlling personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review. The Measures for Cybersecurity Review (2021 version), further elaborates the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The CAC has said that under the new rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.” The cybersecurity review will also look into the potential national security risks from overseas IPOs.

As of March 31, 2022, we had approximately 362,738 APP users. We believe, based upon the advice of our PRC counsel, one of the VIEs, YanGuFang E-Commerce, is deemed a “personal information processor” under the Personal Information Protection Law (“PIPL”) because it is engaged in data activities as defined under the PIPL, which includes, without limitation, collection, storage, use, processing, transmission, provision, publication and deletion of data. However, neither YanGuFang Group, nor our other subsidiaries, i.e., YanGuFang HK, WFOE, and the other two VIEs, YanGuFang Contract Farming and YanGuFang Whole Grain, is deemed a “personal information processor” under

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the PIPL as they are not involved in data activities regulated by PIPL. Neither the Company and its subsidiaries, nor each of the VIEs, is an operator of any “critical information infrastructure” as defined under the PRC Cybersecurity Law and the Security Protection Measures on Critical Information Infrastructure because neither of them is engaged in the important network facilities and information systems in important industries and fields. Additionally, neither the Company and any of its subsidiaries nor each of the VIEs is an “online platform operators” controlling personal information of more than one million users under the Cybersecurity Review Measures because the online platform operated by the Company, primarily through YanGuFang E-Commerce, does not hold the personal information of more than one million users. Therefore, we are not subject to the Measures for Cybersecurity Review and are not required to pass the security evaluation organized by the CAC and the compliance with such regulation will not materially impact our business operations. As of the date of this prospectus, YanGuFang E-Commerce is in full compliance with the regulations or policies that have been issued by the CAC to date. We cannot assure you, however, that regulators in China will not take a contrary view or will not subsequently require us to undergo the cybersecurity review and subject us to fines or penalties for non-compliance.

On July 7, 2022, the CAC published the Outbound Data Transfer Security Assessment Measures, which will become effective on September 1, 2022 and specify the circumstances in which data handlers providing data outbound shall apply for outbound data transfer security assessment with the Cyberspace Administration, including, among others, the data handler provide important information outbound. On November 14, 2021, the CAC published the Network Internet Data Protection Draft Regulations (draft for comments), which reiterates that data handlers that process the personal information of more than one million users listing in a foreign country should apply for a cybersecurity review. The Measures for Cybersecurity Review (2021 version) and the Outbound Data Transfer Security Assessment Measures were newly adopted and the Network Internet Data Protection Draft Regulations (draft for comments) are in the process of being formulated. We do not know what regulations will be adopted or how such regulations will affect us and our proposed listing on Nasdaq. In the event that the CAC determines that we are subject to these regulations, we may not be able to list on Nasdaq, or may be required to delist from Nasdaq after listing on Nasdaq and we may be subject to fines and penalties. On June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which became effective on September 1, 2021. The Data Security Law also sets forth the data security protection obligations for entities and individuals handling personal data, including that no entity or individual may acquire such data by stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits. The costs of compliance with, and other burdens imposed by, Cyber Security Law and any other cybersecurity and related laws may limit the use and adoption of our products and services and could have an adverse impact on our business. Further, if the enacted version of the Measures for Cybersecurity Review, the Outbound Data Transfer Security Assessment Measures and/or the Network Internet Data Protection Draft Regulations (draft for comments) mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.

The European Union Parliament approved a new data protection regulation, known as the General Data Protection Regulation (“GDPR”), which came into effect in May 2018. The GDPR includes operational requirements for companies that receive or process personal data of residents of the European Economic Area. The GDPR imposes significant penalties for non-compliance. Although we do not conduct any business in the European Economic Area, in the event that residents of the European Economic Area access our website and input protected information, we may become subject to provisions of the GDPR.

In February 2022, the Russian Federation commenced a military invasion of Ukraine, and as a result, the United States, the European Union, the United Kingdom and other jurisdictions have imposed sanctions on certain Russian and Ukrainian persons and entities, including certain Russian banks, energy companies and defense companies, and have imposed restrictions on exports of various items to Russian and certain regions of Ukraine (including the self-proclaimed Donetsk People’s Republic and Luhansk People’s Republic and Crimea). Moreover, on February 22, 2022, the Office of Foreign Assets Control of the United States issued sanctions aimed at limiting Russia’s ability to raise funds through sovereign debt. These geopolitical issues have resulted in increasing global tensions and create uncertainty for global commerce. Any or all of these factors could negatively affect demand for our products and our business, financial condition and result of operations even though we do not conduct any business in Russia or Ukraine.

We are also subject to laws restricting disclosure of information relating to our employees. We strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy, data security, cybersecurity and data protection. However, given that the scope, interpretation, and application of these laws and

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regulations are often uncertain and may be conflicting, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us or our third-party service-providers to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our business and operating results. Although we maintain cybersecurity insurance, we cannot assure you that this insurance will cover or satisfy any claim made against us or adequately cover any defense costs we may incur.

Any significant cybersecurity incident or disruption of our information technology systems or those of third-party partners could materially damage user relationships and subject us to significant reputational, financial, legal and operation consequences.

We depend on our information technology systems, as well as those of third parties (such as third party e-commerce platforms, including Tmall, JD, and Pinduoduo), to host product information, manage and sell our products, store data and process transactions. Any cybersecurity incident or material disruption or slowdown of our systems or those of third parties whom we depend upon could cause outages or delays in our services, particularly in the form of interruption of services delivered by our APP or Alibaba cloud services we use, which could harm our brand and adversely affect our operating results. Our failure to implement adequate cybersecurity protections could subject us to claims for any breach of security, particularly if it results in disclosure of information relating to our customers. If changes in technology cause our information technology systems, or those of third parties whom we depend upon, to become obsolete, or if our or their information systems are inadequate to handle our growth, we could lose customers, and our business and operating results could be adversely affected.

Our ability to protect the confidential information of our customers may be adversely affected by cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions.

We collect, store, and process certain personal and other sensitive data from our customers, which makes us an attractive target and potentially vulnerable to cyberattacks, computer viruses, physical or electronic break-ins or similar disruptions. While we have taken steps to mitigate the cyberattack risks and protect the confidential information that we have access to, including but not limited to installation and periodical updates of antivirus software and backup of information on our computer systems, our security measures could be breached. Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any cybersecurity incident, accidental or willful security breaches or other unauthorized access to our systems could cause confidential information to be stolen and used for criminal purposes. Cybersecurity incidents, security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our technology infrastructure are exposed and exploited, our relationships with our customers could be severely damaged, we could incur significant liability, and our business and operations could be adversely affected.

Meanwhile, if we fail to protect confidential information, we may be involved in various claims and litigations raised for privacy or other damages. Such claims and litigations will take a lot of time and resources to defend and we cannot assure you these claims or litigations will result in a favorable outcome. In February 2022, the Russian Federation commenced a military invasion of Ukraine, and Russian actions with respect to Ukraine have resulted in certain broad sanctions being imposed by the United States, the European Union, the United Kingdom and other international authorities. We cannot predict the impact of Russian actions in Ukraine or the reaction to such actions by the United States, the European Union, the United Kingdom or other international authorities. We cannot predict the impact of Russian actions in Ukraine or the reaction to such actions by the United States, the European Union, the United Kingdom or other international authorities. In connection with the aforesaid military invasion, cybersecurity experts anticipate a meaningful increase in cyberattack and cybercrime activity in connection with the Russian invasion of Ukraine around the globe. However, as of the date of this prospectus, there is no new or heightened risk of potential cyberattacks on the Company by state actors or others since Russia’s invasion of Ukraine.

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Failure to maintain or improve our technology infrastructure could harm our business and prospects.

We are constantly upgrading our APP to provide increased scale and improved performance. To adapt to new product offerings and upgrade our technology infrastructure requires significant investment of time and resources, including adding new hardware, updating system and related software and recruiting and training new engineering personnel. Maintaining and improving our technology infrastructure also requires significant levels of investment. Adverse consequences could include unanticipated system disruptions, slower response times, impaired quality of our customers’ experiences and delays in reporting accurate operating and financial information. In addition, much of the system and related software we use are internally developed and proprietary technology. If we experience problems with the functionality and effectiveness of our system, related software or our APP itself, or are unable to maintain and constantly improve our technology infrastructure to handle our business needs, our business, financial condition, results of operation and prospects, as well as our reputation, could be materially and adversely affected.

The successful operation of our business depends upon the performance and reliability of the internet infrastructure in China.

Our 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 MIIT. In addition, the national networks in China are connected to the internet through state-owned international gateways, which are the only channels through which a domestic Chinese user can connect to the internet outside of China. We may not have access to alternative networks in the event of disruptions, failures or other problems with China’s internet infrastructure. In addition, the internet infrastructure in China may not support the demands associated with continued growth in Internet usage.

The failure of telecommunications network operators to provide us with the requisite bandwidth could also interfere with the speed and availability of our APP and our website. We have no control over the costs of the services provided by the national telecommunications operators. If the prices that we pay for telecommunications and internet services rise significantly, our gross margins could be adversely affected. In addition, if internet access fees or other charges to internet users increase, our user traffic may decrease, which in turn may significantly decrease our revenues.

Part of our services could be disrupted by network interruptions.

Part of our services depends on the efficient and uninterrupted operation of our computer and communications systems. Substantially all of our computer hardware and our cloud computing services is currently located in China. Although we have prepared for contingencies through redundancy measures and disaster recovery plans, such preparation may not be sufficient and we do not carry business interruption insurance. Despite any precautions we may take, the occurrence of a natural disaster, such as an earthquake, flood or fire, or other unanticipated problems at our facilities in China, including power outages, telecommunications delays or failures, break-ins to our systems or computer viruses, could result in delays or interruptions to our APP and website, loss of our and customers’ data and business interruption for us and our customers. Any of these events could damage our reputation, significantly disrupt our operations and subject us to liability, which could materially and adversely affect our business, financial condition and results of operations.

Infringement of our intellectual property right by any third party or loss of our intellectual property rights may materially and adversely affect our business, financial condition and results of operations.

We rely on a combination of trademark, patent, copyright and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our intellectual property rights. We also have confidentiality arrangements with our employees and any third parties who may access our proprietary information, and we rigorously control access to our proprietary technology and information.

Intellectual property protection may not be sufficient in China or other countries. Confidentiality agreements may be breached by counterparties, we may not be able to enforce these agreements and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China or elsewhere. Policing any unauthorized use of our intellectual property is difficult, time-consuming, and costly, and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. Furthermore, we may be subject to the

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risks of losing our intellectual property rights or the intellectual property rights licensed from other third-parties due to several reasons. Certain intellectual property rights, such as patents, are subject to a limited period of time. Upon the expiry of such period of time, others may freely use such intellectual properties without any license or charges, which may impose competitive harm to us and in turn adversely affect our business and prospects. The intellectual property rights that we currently have may also be revoked, invalidated or deprived by regulatory authorities as a result of intellectual property claims or challenges successfully raised by third parties. We may also rely on certain intellectual property rights licensed from other third parties. There can be no guarantee that we will be able to maintain such licenses at all times or renew such licenses upon expiry. Moreover, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in maintaining, protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to intellectual property infringement claims from third parties, which may be expensive to defend with no assurance of success and may disrupt our business and operations.

We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate patents, copyrights or other intellectual property rights held by third parties. We may, and from time to time in the future be, subject to legal proceedings and claims relating to the intellectual property rights of others. There could also be existing patents or other intellectual property of which we are not aware that we may infringe. While we do not know of any intellectual property rights on which our products or our business infringe, we cannot assure you that holders of patents or other intellectual property rights purportedly relating to some aspect of our technology or business, would not seek to enforce such patents against us or that they will not be successful in any such enforcement action. We have patents and filed patent applications in a number of jurisdictions, including the United States and China. If an action is commenced in China, the application and interpretation of China’s patent laws and the procedures and standards for granting patents in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis or be consistent with a decision in the United States. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or damages or be forced to develop alternatives of our own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our business and operations to defend against these third-party infringement claims, regardless of their merits.

As the VIEs’ patents may expire and may not be extended, its patent applications may not be granted and their patent rights may be contested, circumvented, invalidated or limited in scope, the VIEs’ patent rights may not protect us effectively.

As of the date of this prospectus, the VIEs own 11 registered patents and have 18 pending patent applications in China, and one pending patent application in the United States relating to various aspects of our operations. The rights granted under any issued patents, however, may not provide us with proprietary protection or competitive advantages. The claims under any patents that issue from the VIEs’ patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to ours. It is also possible that the intellectual property rights of others will bar us from licensing. Numerous patents owned by others exist in the fields in which we have developed and are developing our technology. These patents and patent applications might have priority over the VIEs’ patent applications and could subject the VIEs’ patent applications to invalidation or unenforceability. Finally, in addition to those who may claim priority, any of our existing patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable. Any failure in extending our existing patents, or if our patent rights were to be contested, circumvented, invalidated or limited in scope could materially and adversely affect our business, financial condition and results of operations.

If we are unable to manage our growth or execute our strategies effectively, our business and prospects may be materially and adversely affected.

To accommodate our growth, we anticipate that we will need to implement a variety of new and upgraded operational and financial systems, procedures and controls, including the improvement of our accounting and other internal management systems. We will also need to continue to expand, train, manage and motivate our workforce and manage our relationships with customers, third-party suppliers, farmers and distributors. All of these endeavors

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involve risks, and will require substantial management effort and significant additional expenditures. We may not be able to manage our growth or execute our strategies effectively, and any failure to do so may have a material adverse effect on our business and prospects.

The wide variety of payment methods that we accept subjects us to third-party payment processing-related risks.

We accept payments from customers in China through a variety of methods, including bank transfers, online payments and, debit cards and credit cards issued by banks in China. We may be subject to fraud and other illegal activities in connection with the payment methods we accept. In addition, we are subject to rules, regulations and requirements, regulatory or otherwise, governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept online payments, debit card or credit card payments from our customers, process electronic funds transfers or facilitate other types of online payments, and our business, financial condition and results of operations could be materially and adversely affected. Further, to the extent that payment is made to us in China, we will have to comply with PRC banking regulations as to making payments in China.

Our success depends on our ability to retain our core management team and other key personnel.

Our performance depends on the continued service and performance of our directors and senior management as they are expected to play an important role in guiding the implementation of our business strategies and future plans. The loss of the services of one or more of our core management team members could impede implementation of our business plan and result in reduced profitability. For example, our Chief Executive Officer, Mr. Junguo He, is a successful entrepreneur who has been engaged in the healthy food industry for over 10 years and has accumulated extensive experience. Our Chief Technical Officer, Mr. Zhu Sun, is committed to the R&D on oat products and related equipment and has led our R&D team to obtain multiple patents on oat production equipment and production lines. If any of our core management team members were to terminate his or her employment with us, there can be no assurance that we would be able to find suitable replacements in a timely manner, at acceptable cost or at all. The loss of services of core management team members or the inability to identify, hire, train and retain other qualified and managerial personnel in the future may materially and adversely affect our business, financial condition, results of operations and prospects.

Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees needed to support our business.

As we continue to experience growth, we believe our success depends on the efforts and talents of our employees, including management team, sales team and R&D personnel. Our future success depends on our continued ability to attract, develop, motivate and retain highly qualified and skilled employees. Competition for highly skilled personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we do and may be able to offer more attractive terms of employment.

In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve customers could diminish, resulting in a material adverse effect on our business.

Our business, financial condition and results of operations may be adversely affected by an economic downturn.

Because our sales may depend on customers’ levels of disposable income, perceived job prospects and willingness to spend, our business and prospects may be affected by global economic conditions. The global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and is continuously facing new challenges, including the escalation of the European sovereign debt crisis since 2011 and the slowdown of the Chinese economy in 2012. Economic conditions in the markets in which our products are sold are sensitive to both global economic conditions, and the particular changes in each country’s economic and political policies and its expected or perceived overall economic growth rate. A decline in the economic prospects in the mechanics and other industries could alter current

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or prospective customers’ spending priorities. Therefore, a slowdown in China’s economy or the global economy may lead to a reduction in demand for our products, which could materially and adversely affect our financial condition and results of operations.

We have identified material weaknesses in our internal controls over financial reporting. If we do not adequately remediate these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain effective internal controls, we may not be able to accurately or timely report our financial condition or results of operations, or comply with the accounting and reporting requirements applicable to public companies, which may adversely affect investor confidence in us and the market price of our shares.

Prior to this offering, we were a private company and were never required to evaluate our internal control within a specified period, and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner. Our management has not completed assessment of the effectiveness of our internal control over U.S. GAAP financial reporting, and our independent registered public accounting firm has not conducted an audit of the effectiveness of our internal control over financial reporting. However, in the course of preparing and auditing our consolidated financial statements for the fiscal years ended June 30, 2021 and 2020 and preparing and reviewing our unaudited condensed consolidated financial statements for the six months ended December 31, 2021 and 2020 included in this prospectus, we and our independent registered public accounting firm respectively identified nine material weaknesses in our internal control over financial reporting as of December 31, 2021. In accordance with reporting requirements set forth by the SEC, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim consolidated financial statements may not be prevented or detected on a timely basis.

The material weaknesses identified included (1) we do not have a sufficient number of personnel with an appropriate level of U.S. GAAP knowledge and experience and ongoing training in the application of U.S. GAAP commensurate with our financial reporting requirements; (2) we do not have specific internal audit department or internal audit staff in place and internal control activities are not updated to reflect the current processes and control activities; (3) we lack proper procedure developed for IT Governance, Policies, and Cybersecurity Training entity level controls; (4) we lack proper procedure developed for IT related risk and vulnerability assessment; (5) we lack proper procedure developed in selection and management/monitoring on critical vendors and the resulting deficiencies of data center security management; (6) we lack proper procedures developed in relation of system change management and system development managements; (7) we lack proper procedure developed in breakout incident monitoring and management from backup and restore issues; (8) we lack proper policies and procedures developed related to IT security risk identification and assessment, and controls in the area of new account authorization, treatment of departing staff account, audit trail record control; (9) we lack proper procedure developed in segregation of duties (SOD) related to the system. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control under the Sarbanes-Oxley Act for purposes of identifying and reporting any material weakness in our internal control over financial reporting. We are required to do so only after we become a public company and we are exempt from the auditor attestation requirements as long as we are an emerging growth company. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of the effectiveness of our internal control over financial reporting, additional material weaknesses may have been identified.

Following the identification of the material weaknesses and control deficiencies, we have taken some remedial measures including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen our financial reporting function and to set up a financial and system control framework; (ii) establishing internal audit function by engaging an external consulting firm to assist us with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control; (iii) establishing an internal audit team with respect to the risk control and audit of financial and business procedures; and (iv) improving the policies and procedures related to our IT system development and management. We will continue to take additional measures to remediate the material weakness, including (i) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel; and (ii) appointing independent directors, establishing an audit committee, and strengthening corporate governance, which will be completed at the time of effectiveness of our registration statement for our initial public offering. However, the implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting. Our failure to correct the material weaknesses or our failure to discover and address any other material weaknesses or control deficiencies could result in inaccuracies in our financial statements and could also

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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.

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

We may incur liabilities that are not covered by insurance.

The insurance industry in China is still at an early stage of development, and insurance companies in China currently offer limited business-related insurance products. While we seek to maintain appropriate levels of insurance, not all claims are insurable and we may experience major incidents of a nature that are not covered by insurance.

We provide social security insurance including pension, medical insurance, unemployment insurance, maternity insurance, on-the-job injury insurance and housing fund plans through a PRC government-mandated benefit contribution plan for our employees. We do not carry any key-man life insurance, business liability and professional liability insurance. Even if we purchase these kinds of insurance, the insurance may not fully protect us from the financial impact of defending against product liability or professional liability claims. We have not purchased any property insurance or business interruption insurance. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical. We consider our insurance coverage to be sufficient for our business operations in China. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our business and results of operations could be materially and adversely affected.

Failure to comply with PRC labor laws and make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties.

Companies operating in China are required to participate in various government-sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where our employees are based. The requirements of employee benefit plans have not been implemented consistently by the local governments

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in China given the different levels of economic development in different locations. If we are determined by local authorities to fail to make adequate contributions to any employee benefits as required by relevant PRC regulations, we may face late fees or fines in relation to the underpaid employee benefits.

If we are not able to control our labor costs in an effective way, our business, results of operations and financial condition may be adversely affected.

Our labor costs are primarily incurred in China. The economy of China has been experiencing significant growth, leading to inflation and increased labor costs, particularly in the large cities, such as Shanghai. In addition, we are required by PRC laws and regulations to pay 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 our employees. We expect that our labor costs in China, including wages and employee benefits, will continue to grow as our business grows in scale. Significant additional government-imposed increases in the cities of China where we have operations may affect our profitability and results of operations.

We may need additional capital but may not be able to obtain it on favorable terms or at all.

We may require additional cash resources due to future growth and development of our business, including any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to issue additional equity or debt securities or obtain new or expanded credit facilities. Our ability to obtain external financing in the future is subject to a variety of uncertainties, including our future financial condition, results of operations, cash flows, share price performance, liquidity of international capital and lending markets and PRC governmental regulations over foreign investment in the PRC. In addition, incurring indebtedness would subject us to increased debt service obligations and could result in operating and financing covenants that would restrict our operations. There can be no assurance that financing will be available in a timely manner or in amounts or on terms acceptable to us, or at all. Any failure to raise needed funds on terms favorable to us, or at all, could severely restrict our liquidity as well as have a material adverse effect on our business, financial condition and results of operations. Moreover, any issuance of equity or equity-linked securities could result in significant dilution to our existing shareholders.

We are subject to risks relating to our leased properties.

We lease real properties for our production facilities and offices in China, and some lease agreements for these leased properties have not been registered with the PRC governmental authorities as required by PRC law. Although the failure to do so does not in itself invalidate the leases, we may be ordered by the PRC government authorities to rectify such noncompliance and, if such noncompliance is not rectified within a given period of time, we may be subject to fines imposed by PRC government authorities ranging from RMB1,000 and RMB10,000 for each lease agreement that has not been registered with the relevant PRC governmental authorities.

The ownership certificates or other similar proof of our leased properties have not been provided to us by the relevant lessors. Therefore, we cannot assure you that such lessors are entitled to lease the relevant real properties to us. If the lessors are not entitled to lease the real properties to us and the owners of such real properties decline to ratify the lease agreements between us and the respective lessors, we may not be able to enforce our rights to lease such properties under the respective lease agreements against the owners. As of the date of this prospectus, we are not aware of any claim or challenge brought by any third parties concerning the use of our leased properties without obtaining proper ownership proof. If our lease agreements are claimed as null and void by third parties who are the real owners of such leased real properties, we could be required to vacate the properties, in the event of which we could only initiate the claim against the lessors under relevant lease agreements for indemnities for their breach of the relevant leasing agreements. We cannot assure you that suitable alternative locations are readily available on commercially reasonable terms, or at all, and if we are unable to relocate our officers in a timely manner, our operations may be interrupted.

We are in the process of obtaining title certificate for our new production facility in Inner Mongolia, China. If we fail to obtain such certificate, our business may be materially and adversely affected.

We have completed the initial construction of our new production facility (Factory No.2) in Inner Mongolia, China and started production on such facilities. As of the date of this prospectus, we are still in the process of obtaining certain building title certificate for such facility and we expect to receive the title certificate in the second half of 2022. While we consider such certificate as requiring procedural, rather than substantive, approvals

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by government agencies, there is no guarantee that we will obtain it. The failure to obtain such certificate could result in us having to vacate the premises and our production activities on such premises may be interrupted or suspended. If we are forced to move, we may not be able to find alternative facilities at all or at reasonable cost, and our production activities may be disrupted. We might suffer losses as a result of business interruptions and our operations and financial results may be materially and adversely affected.

Failure to obtain VATS License timely may subject us to penalties, which may materially and adversely affect our business, financial conditions and results of operations.

We operate our e-commerce business through the VIE, YanGuFang E-Commerce since January 2018 and received a VATS License to provide online data processing and transaction processing business (operating e-commerce only) and information services business (internet information services only) issued by the Shanghai Communications Administration on May 8, 2021. Prior to that, YanGuFang E-Commerce had no VATS License, as a result, YanGuFang E-Commerce or we may be subject to suspension of business, shutting down of websites, confiscation of illegal income and/or fines imposed by the relevant government authorities for the incompliance period.

Failure to make online food operation filing with the relevant government authorities may subject us to penalties, which may materially and adversely affect our business, financial conditions and results of operations.

Our online food transactions have been conducted through the VIE YanGuFang E-Commerce since January 2018 until present. However, the online food operation filing was not completed until September 8, 2021. YanGuFang E-Commerce may be subject to fines imposed by the relevant government authorities for the incompliance period, which may materially and adversely affect our business, financial conditions and results of operations.

Failure to renew, or early termination of, the trademark license agreements with YanGuFang Agroeco Tech may materially and adversely affect our business, financial conditions and results of operations.

Pursuant to a series of trademark license agreements and supplemental agreements (collectively, the “Trademark License Agreements”), among YanGuFang Agroeco Tech, YanGuFang Group, WFOE, Yanna Technology, the VIEs and their respective subsidiary and branch (collectively, the “Licensees”), the Licensees are granted a non-exclusive and non-transferable license to use the registered trademarks,,, and (“Wei Lai Zhi Xuan”) of YanGuFang Agroeco Tech without any license fee. Pursuant to the Trademark License Agreements, the license to use the above-mentioned trademarks is valid until December 31, 2030 and may be terminated immediately if the Licensees and YanGuFang Agroeco Tech do not extend the term of the Trademark License Agreements upon expiration in writing. There is no assurance that the Licensees will be able to renew, if at all or in a timely manner, any of the Trademark License Agreements upon its expiration. Failure to renew, or early termination of, any of our Trademark License Agreements may materially and adversely affect our business, financial conditions and results of operations.

If relations between the United States and China worsen, our business and operating results may be adversely impacted.

The U.S. government has previously made statements and taken certain actions that may lead to significant changes to U.S. and international trade policies, including recently-imposed tariffs affecting certain products manufactured in China. It is unknown whether and to what extent new tariffs (or other new laws or regulations will be adopted, or the effect that any such actions would have on us or our industry and customers. After we commence the sales of our products in the United States in the future, any unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our products, impact the competitive position of our products or prevent us from being able to sell products in the United States. If any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government takes retaliatory trade actions due to the recent U.S.-China trade tension, such changes could have an adverse effect on our business, financial condition, results of operations.

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The ongoing COVID-19 pandemic has had an adverse impact on our business, results of operations and financial condition. Other epidemics, natural disasters, terrorist activities, political unrest, and other outbreaks could also disrupt our operations, which could materially and adversely affect our business, financial condition, and results of operations.

We are vulnerable to health epidemics and natural disasters. Our business has been and likely will be continuously adversely affected by the outbreak of the coronavirus around the world. The World Health Organization labeled the coronavirus a pandemic on March 11, 2020, after the disease spread globally. Given the high public health risks associated with the disease, governments around the globe have imposed various degrees of travel and gathering restrictions, temporary closure of businesses and other quarantine measures.

The ongoing COVID-19 pandemic has adversely affected many aspects of our business, including the expansion of our customer base and the introduction of new product offerings. We temporarily closed our offices and production facilities in January 2020, as required by relevant PRC local authorities. Our offices reopened in March 2020 upon approval from the local governments. Due to the extended lock-down and self-quarantine policies in China, we experienced a significant business disruption during the lock-down period from early February to late March 2020 and has since been picking up slowly after China reopened businesses nationwide. From July 2020, due to the effective control of COVID-19 in China, we resumed full operation. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, the COVID-19 pandemic did not have a material impact on our financial positions and operating results. Our revenue reached approximately $29.8 million for the fiscal year ended June 30, 2021, representing an increase of approximately $5.7 million, or 23.9%, from approximately $24.1 million for the fiscal year ended June 30, 2020. For the six months ended December 31, 2021, our revenue reached approximately $18.8 million, representing an increase of approximately $7.9 million or 72.5% from approximately $10.9 million for the six months ended December 31, 2020.

In March 2022, a new COVID-19 subvariant (omicron) outbreak hit China, and spread faster and more easily than previous variants of the virus. As a result, a new round of lockdown, quarantines or travel restrictions has been imposed to date upon different provinces or cities in China by the relevant local government authorities. We temporarily closed our Shanghai office and suspended our offline marketing activities since April 1, 2022 as required by the local authorities in Shanghai, and had our employees located in Shanghai work remotely. All marketing activities in Shanghai were accordingly changed to online meetings. Due to the restrictions on logistics and supply chain disruptions in certain areas of China, we reduced our production output during the lockdown period in Shanghai, which to some extent adversely affected our results of operations for the same period. Starting from June 1, 2022, we resumed our production scale to the pre-lockdown level, reopened our Shanghai office and resumed our offline marketing activities. As of the date of this prospectus, all of our offices in China are fully open and operational. However, we expect that the lockdown in Shanghai from April to June 2022 will have an adverse impact on our results of operations as our logistics or supply chain, business development and offline marketing activities in Shanghai were restricted or suspended in the lockdown period. Our warehouses are currently located in Inner Mongolia and Shanghai, and we plan to open new warehouses in other regions of China in the second half of 2022 to enlarge our storage capacity as well as mitigate the adverse impact on our supply chain due to the concentrated warehouses in one or two regions. We do not expect our mitigation efforts introduce new material risks, including those related to product quality, reliability, or regulatory approval of products. Notwithstanding the foregoing, we have not experienced inventory, raw material or labor shortages or reduced headcount of our employees during the lockdown period in Shanghai due to the normal operation of our other offices and production facilities in China.

The duration and intensity of disruptions resulting from the COVID-19 pandemic is still uncertain. The degree to which the pandemic ultimately impacts our business and results of operations will depend on future developments beyond our control, including the severity of the pandemic, the extent of actions to contain or treat the virus, how quickly and to what extent normal economic and operating conditions can resume, and the severity and duration of the Chinese economic downturn that results from the pandemic.

COVID-19 has had a global economic impact on the financial markets. The global spread of COVID-19 pandemic may result in global economic distress, and the extent to which it may affect our results of operations is highly uncertain and cannot be predicted. We cannot assure you that the COVID-19 pandemic can be eliminated or contained in the near future, or at all, or a similar outbreak will not occur again. If the COVID-19 pandemic and the resulting disruption to our business were to extend over a prolonged period, it could materially and adversely affect our business, financial condition, and results of operations.

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Other global pandemics, epidemics in China or elsewhere in the world, or fear of spread of contagious diseases, such as Ebola virus disease (EVD), coronavirus disease 2019 (COVID-19), Middle East respiratory syndrome (MERS), severe acute respiratory syndrome (SARS), H1N1 flu, H7N9 flu, and avian flu, as well as hurricanes, earthquakes, tsunamis, or other natural disasters could disrupt our business operations, reduce or restrict our supply of products and services, incur significant costs to protect our employees and facilities, or result in regional or global economic distress, which may materially and adversely affect our business, financial condition, and results of operations. Actual or threatened war, terrorist activities, political unrest, civil strife, and other geopolitical uncertainty could have a similar adverse effect on our business, financial condition, and results of operations. Any one or more of these events may impede our operating efforts and adversely affect our sales results, or even for a prolonged period of time, which could materially and adversely affect our business, financial condition, and results of operations.

We are also vulnerable to natural disasters and other calamities. We cannot assure you that we are adequately protected from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks, or similar events. Any of the foregoing events may give rise to interruptions, damage to our property, delays in production, breakdowns, system failures, technology platform failures, or internet failures, which could cause the loss or corruption of data or malfunctions of our internet system as well as adversely affect our business, financial condition, and results of operations.

The war in Ukraine could materially and adversely affect our business and results of operations.

The recent outbreak of war in Ukraine has already affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. Russia’s recent military interventions in Ukraine have led to, and may continue to lead to, additional sanctions being levied by the United States, European Union and other countries against Russia. Russia’s military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect the global markets, our customers or suppliers’ businesses and potentially our business.

As we started to supply our products to customers in Thailand in 2020 and expect to start online sales of our products in the United States in the second half of 2022, our performance is affected by global economic conditions as well as geopolitical issues and other conditions with international reach. Macroeconomic weakness and uncertainty make it more difficult for us to manage our operations and accurately forecast financial results. As a result of the recent movement of Russian military units into provinces in Ukraine, the United States, the European Union, the United Kingdom and other jurisdictions have imposed sanctions on certain Russian and Ukrainian persons and entities, including certain Russian banks, energy companies and defense companies, and have imposed restrictions on exports of various items to Russian and certain regions of Ukraine (including the self-proclaimed Donetsk People’s Republic and Luhansk People’s Republic and Crimea). Moreover, on February 22, 2022, the Office of Foreign Assets Control of the United States issued sanctions aimed at limiting Russia’s ability to raise funds through sovereign debt. These geopolitical issues have resulted in increasing global tensions and create uncertainty for global commerce. Any or all of these factors could negatively affect demand for our products and our business, financial condition and result of operations. In addition, new requirements or restrictions could come into effect which might increase the scrutiny on our business or result in one or more of our business activities being deemed to have violated sanctions. Our business and reputation could be adversely affected if the authorities of United States, the European Union, the United Nations, or other jurisdictions were to determine that any of our activities constitutes a violation of the sanctions they impose or provides a basis for a sanction designation of us.

However, as of the date of this prospectus, the Company, its subsidiaries and the VIEs do not have any business, operation or assets in Russian or Ukraine, nor do they have any direct or indirect business or contracts with any Russian or Ukraine entity as a supplier or customer. Additionally, we do not have any knowledge as to whether our customers or suppliers have any business, operation or assets in Russian or Ukraine, or have any direct or indirect business or contracts with any Russian or Ukraine entity as a supplier or customer. Consequently, we do not expect that Russia’s invasion of Ukraine will have any material impact on our business operations, including but not limited to our product and service pricing, supply and export, consumer demand, raw material procurement and the supply chain. Additionally, we believe the cybersecurity risks in the supply chain are not material to our business, and there is no new or heightened risk of potential cyberattacks on the Company by state actors or others since Russia’s invasion of Ukraine.

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The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military actions or resulting sanctions may magnify the impact of other risks described in this section. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly developing and beyond their control. Prolonged unrest, intensified military activities or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business, financial condition, results of operations and prospects.

We may be subject to supply chain disruptions, which could have a material adverse effect on our business, financial condition and results of operations

We have experienced some disruption to our supply chain during the PRC government mandated lockdown due to the COVID-19 pandemic, including but not limited to suppliers increasing purchase price for raw materials, and logistics restrictions or suspensions in certain areas of China. While all our major suppliers are currently fully operational, any future disruption in their operations would impact our ability to produce and deliver our products to customers. In addition, reductions in commercial airline and cargo flights, disruptions to ports and other shipping infrastructure resulting from the COVID-19 pandemic are resulting in increased transport times to deliver our products to customers. This may limit our ability to fulfill orders and we may be unable to satisfy all of the demand for our products in a timely manner, which may adversely affect our relationships with our customers. As a result, the supply chain disruptions may materially affect our outlook or business goals.

The recent lockdown in Shanghai from April to June 2022 due to a new COVID-19 subvariant (omicron) outbreak in China is expected to have an adverse impact on our results of operations, capital resources, sales and profits as our logistics and supply chain, business development and offline marketing activities in Shanghai were restricted or suspended in the lockdown period.

Although we have long term and stable cooperation with our suppliers and local oat farmers in Inner Mongolia, we will continue to work with our existing suppliers and local farmers, and identify and secure new suppliers and farmers, to expand our supply base. Our warehouses are currently located in both Inner Mongolia and Shanghai, and we plan to open new warehouses in other regions of China in the second half of 2022 to expand our storage capacity as well as mitigate the adverse impact on our supply chain due to the concentrated warehouses in one or two regions. We do not expect our mitigation efforts introduce new material risks, including those related to product quality, reliability, or regulatory approval of products.

Risks Related to Our Corporate Structure

The VIE structure poses risks to investors. Investors will not and may never directly hold equity interests in the VIEs. The VIE structure may be less effective than direct ownership and the Company may incur substantial costs to enforce the terms of the VIE Agreement. If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, 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, which may therefore materially reduce the value of our ordinary shares or render it worthless if the determinations, changes, or interpretations result in our inability to assert contractual control over the assets of our PRC subsidiary or the VIEs that conduct substantially all of our operations.

YanGuFang Group is a holding company incorporated in the Cayman Islands. As a holding company with no material operations of our own, YanGuFang Group conducts substantially all of its operations through our PRC subsidiary and the VIEs in the PRC. We receive the economic benefits of the VIEs’ business operations through certain contractual arrangements; however, our rights under the VIE Agreements do not provide us with an equity interest in the VIE and are not the same as actual ownership. Our ordinary shares offered in this offering are shares of our offshore holding company instead of shares of the VIEs in China. For a description of the VIE contractual arrangements, see “Corporate Structure — Contractual Arrangements with the VIEs.”

Because YanGuFang Group is an exempted company incorporated in the Cayman Islands with limited liability, it is classified as a foreign enterprise under PRC laws and regulations, and our wholly foreign-owned enterprise in the PRC is a foreign-invested enterprise. Our PRC subsidiary has entered into the VIE Agreements with the VIEs

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and the VIE Shareholder, which were designed to enable us to (i) exercise control over the VIEs, and (ii) receive substantially all of the economic benefits of the VIEs. As a result of these contractual arrangements, we are deemed the primary beneficiary of the VIEs, for accounting purpose and hence consolidate their financial results as the VIEs under U.S. GAAP. For a description of these contractual arrangements, see “Corporate Structure — Contractual Arrangements with the VIEs.” However, our rights under the VIE Agreements do not provide us with an equity interest in the VIEs and the VIE structure may be less effective than direct ownership in providing us with control over the VIEs. If any of the VIEs or the VIE Shareholder fails to perform their respective obligations under the VIE Agreements, our recourse to the assets held by the VIEs is indirect and we may have to incur substantial costs to enforce the terms of the arrangements and expend significant resources to enforce such arrangements in reliance on legal remedies under PRC law. All of these VIE Agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these agreements would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal system could limit our ability to enforce these VIE Agreements. In the event that we are unable to enforce the VIE Agreements, or if we suffer significant time delays or other obstacles in the process of enforcing the VIE Agreements, it would be very difficult to exert effective control over the VIEs as the direct ownership may afford, and our ability to conduct our business and our financial condition and results of operations may be materially and adversely affected. In addition, there are still uncertainties regarding the status of the rights of the Cayman Islands holding company with respect to the VIE Agreements with the VIEs and the VIE Shareholder, and the challenges we may face enforcing the VIE Agreements due to legal uncertainties and jurisdictional limits as the VIE Agreements have not been tested in a court of law. The PRC regulatory authorities could disallow the VIE structure, which would likely result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or become worthless.

As of the date of this prospectus, we believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations. Our PRC legal counsel, based on its understanding of the relevant laws and regulations, is of the opinion that each of the agreements among our wholly-owned PRC subsidiary, the VIEs and the VIE Shareholder is valid, binding and enforceable in accordance with its terms. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Thus, the PRC governmental authorities may take a view contrary to the opinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structure will be adopted or if adopted, what they would provide. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations.

If our corporate structure and contractual arrangements are deemed by the relevant regulators that have competent authority, to be illegal, either in whole or in part, or if the PRC regulations change or are interpreted differently in the future, the ordinary shares we are registering may decline in value or become worthless if the determinations, changes, or interpretations result in our inability to assert contractual control over the assets of our PRC subsidiary or the VIEs that conduct substantially all of our operations, and we may have to modify such VIE structure to comply with regulatory requirements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” However, there can be no assurance that we can achieve this without material disruption to our business. Further, if our corporate structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

        revoking our business and operating licenses;

        levying fines on us;

        confiscating any of our income that they deem to be obtained through illegal operations;

        shutting down our services;

        discontinuing or restricting our operations in China;

        imposing conditions or requirements with which we may not be able to comply;

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        requiring us to change our corporate structure and contractual arrangements;

        restricting or prohibiting our use of the proceeds from overseas offering to finance the VIE’s business and operations; and

        taking other regulatory or enforcement actions that could be harmful to our business.

Furthermore, new PRC laws, rules and regulations may be introduced to impose additional requirements that may be applicable to our corporate structure and contractual arrangements. Occurrence of any of these events could materially and adversely affect our business, financial condition and results of operations and the market price of our ordinary shares. In addition, if the imposition of any of these penalties or requirement to restructure our corporate structure causes us to lose the rights to direct the activities of the VIEs or our right to receive their economic benefits, we would no longer be able to consolidate the financial results of such VIEs in our consolidated financial statements, which may cause the value of our securities to significantly decline or even become worthless. However, we do not believe that such actions would result in the liquidation or dissolution of our company, our wholly-owned subsidiary in China or the VIEs. See “Corporate Structure — Contractual Arrangements with the VIEs” and Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our current corporate structure and business operations and the market price of our ordinary shares may be affected by the newly enacted Foreign Investment Law which does not explicitly classify whether VIEs that are controlled through contractual arrangements would be deemed foreign-invested enterprises if they are ultimately “controlled” by foreign investors.

The VIE structure has been adopted by many Chinese-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. On March 15, 2019, the National People’s Congress, China’s national legislative body (the “NPC”) approved the Foreign Investment Law, which took effect on January 1, 2020. On December 26, 2019, the PRC State Council approved the Implementation Rules of the Foreign Investment Law, which came into effect on January 1, 2020. Since they are relatively new, uncertainties exist in relation to their interpretation. The Foreign Investment Law does not explicitly classify whether variable interest entities that are controlled through contractual arrangements would be deemed as foreign-invested enterprises if they are ultimately “controlled” by foreign investors. However, it has a catch-all provision under definition of “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws, administrative regulations or the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions of the State Council to provide for contractual arrangements being viewed as a form of foreign investment. Therefore, there can be no assurance that our control over the VIEs through contractual arrangements will not be deemed as foreign investment in the future.

According to the Foreign Investment Law, the State Council shall promulgate or approve a list of special administrative measures for market access of foreign investments (the “Negative List”). The Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries specified as either “restricted” or “prohibited” from foreign investment in the Negative List. The Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require market entry clearance and other approvals from relevant PRC government authorities. Pursuant to the Negative List, the e-commerce business falls within the “restricted” category. However, since the Negative List has been adjusted and updated almost on an annual basis in the recent years, we cannot assure you that our e-commerce business will continuously be beyond the “prohibited” category. If our control over the VIEs through contractual arrangements are deemed as foreign investment in the future, and any business of the VIEs is “restricted” or “prohibited” from foreign investment under the “Negative List” effective at the time, we may be deemed to be in violation of the Foreign Investment Law, the contractual arrangements that allow us to have control over the VIEs may be deemed as invalid and illegal, and we may be required to unwind such contractual arrangements and/or restructure our business operations, any of which may have a material adverse effect on our business operation and the market price of our ordinary shares.

Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure and business operations and the market price of our ordinary shares.

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We conduct substantially all of our operations through the VIEs, which are established in the PRC, and we rely on the VIE Agreements with the VIEs and the VIE Shareholder to operate our business, which may not be as effective as direct ownership in providing operational control and we may incur substantial costs to enforce the terms of the VIE Agreements, which could result in a material change in our operations and a material change in the value of the securities we are registering for sale, and cause the value of such securities to significantly decline or become worthless.

We rely on the VIE Agreements with the VIEs and the VIE Shareholder. For a description of these VIE Agreements, see “Corporate Structure — Contractual Arrangements with the VIEs.” Substantially all of our revenue is generated by, and substantially all of our consolidated assets are owned by, the VIEs, whose financial statements are consolidated with ours. These VIE Agreements do not give us an equity interest in the VIEs and may not be as effective as direct ownership in providing us with control over the VIEs. If the VIEs or the VIE Shareholder fail to perform their respective obligations under these VIE Agreements, our recourse to the assets held by the VIEs is indirect and we may have to incur substantial costs and expend significant resources to enforce the terms of the VIE Agreements in reliance on legal remedies under PRC law. These remedies may not always be effective, particularly in light of uncertainties in the PRC legal system. Furthermore, in connection with litigation, arbitration or other judicial or dispute resolution proceedings, assets under the name of any of record holder of equity interest in the VIEs, including such equity interest, may be put under court custody. As a consequence, we cannot be certain that the equity interest will be disposed pursuant to the VIE Agreements or ownership by the record holder of the equity interest.

All of these VIE Agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these agreements would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal system could limit our ability to enforce these VIE Agreements. In the event that we are unable to enforce these VIE Agreements, or if we suffer significant time delays or other obstacles in the process of enforcing these VIE Agreements, it would be very difficult to exert effective control over the VIEs, and our ability to conduct our business and our financial condition and results of operations may be materially and adversely affected. There are also uncertainties regarding the status of the rights of the Cayman Islands holding company with respect to its VIE Agreements with the VIEs and the VIE Shareholder, and the challenges we may face enforcing these VIE Agreements due to legal uncertainties and jurisdictional limits. See “Risk Factors — Risks Related to Doing Business in China — Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Any failure by the VIEs or the VIE Shareholder to perform their respective contractual obligations would have a material adverse effect on our business and the market price of our ordinary shares.

Our wholly foreign-owned enterprise in the PRC, has entered into the VIE Agreements with the VIEs and the VIE Shareholder. For a description of these contractual arrangements, see “Corporate Structure — Contractual Arrangements with the VIEs.” If the VIEs or the VIE Shareholder fail to perform their respective obligations under these contractual arrangements, we may incur substantial costs and expend additional resources seeking to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the VIE Shareholder were to refuse to transfer its equity interests in the VIEs to our WFOE or its designee when our WFOE exercises the purchase option pursuant to these contractual arrangements, or if the VIE Shareholder were otherwise to act in bad faith toward YanGuFang Group or our WFOE, then our WFOE may have to take legal actions to compel them to perform their contractual obligations.

All of the VIE Agreements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures, but an arbitration proceeding is not as formal as a court proceeding and the arbitrator may apply PRC law in a manner different from a court. The legal system in the PRC is not as developed as in some other jurisdictions, such as the U.S., and the arbitrator may render a decision which is in conflict with our understanding of the laws of the PRC and we may have little if any recourse. As a result, uncertainties in the PRC legal system and the arbitration procedure could limit the ability of our WFOE to enforce these contractual arrangements. Meanwhile, there are very few precedents and formal guidelines as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC laws. There remain significant uncertainties

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regarding the ultimate outcome of such arbitration should it become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event that our WFOE is unable to enforce these contractual arrangements, or if our WFOE suffers significant delay or other obstacles in the process of enforcing these contractual arrangements, YanGuFang Group may not be able to exert effective control over the VIEs, in which event we may lose the value of the VIE Agreements and the relevant rights and licenses held by the VIEs which YanGuFang Group requires in order to operate its business, and its ability to conduct its business may be negatively affected. Any delay in effecting enforcement of our WFOE’s rights under the VIE Agreements could materially and adversely affect our consolidated financial condition, the results of our operations, our prospects, our ability to continue in business and the market for and market price of our ordinary shares. If our WFOE is not able to enforce its rights, we may not be able to include the VIEs’ financial statements with YanGuFang Group’s, which could cause our ordinary shares to lose most, if not all, of their value. See “Risk Factors — Risks Related to Doing Business in China — Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The arbitration provisions under the VIE Agreements have no effect on the rights of our shareholders to pursue claims against us under the United States federal securities laws, although any such actions would have no effect on our WFOE’s ability to enforce its rights under the VIE Agreements.

The VIE Shareholder and its shareholders may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition and the value of our ordinary shares.

The interests of VIE Shareholder and its shareholders may differ from the interests of our company as a whole, as what is in the best interests of the VIEs, including matters such as whether to distribute dividends or to make other distributions to fund our offshore requirement to the extent that such funding is permitted under PRC laws, may not be in our best interests. There can be no assurance that when conflicts of interest arise, VIE Shareholder and its shareholders will act in our best interests of or that any conflicts of interest will be resolved in our favor. In addition, the VIE Shareholder may breach or cause the VIEs and their subsidiaries to breach or refuse to renew the existing contractual arrangements with us.

Currently, we do not have arrangements to address potential conflicts of interest that our Chief Executive Officer Mr. Junguo He, who is a 51.75% shareholder of the VIE Shareholder, may encounter as shareholder of the VIE Shareholder, on one hand, and as our Chief Executive Officer and principal shareholder, on the other hand. Our WFOE, however, could, at all times, exercise its option under the Exclusive Option Agreements to cause the VIE Shareholder to transfer all of its equity ownership in the VIEs to a PRC entity or individual designated by our WFOE as permitted by the then applicable PRC laws. In addition, if such conflicts of interest arise, our WFOE could also, in the capacity of attorney-in-fact of the VIE Shareholder as provided under the power of attorney, directly appoint new directors of the VIEs. We rely on the VIE Shareholder and its shareholders to comply with PRC laws and regulations, which protect contracts and provide that directors and executive officers owe a duty of loyalty to our company and require them to avoid conflicts of interest and not to take advantage of their positions for personal gains, and the laws of the Cayman Islands, which provide that directors have a duty of care and a duty to act honestly in good faith with a view to our best interests. However, the legal frameworks of both China and the Cayman Islands do not provide guidelines on resolving conflicts with other corporate governance regimes. If our WFOE cannot resolve any conflicts of interest or disputes between our WFOE and the VIE Shareholder, YanGuFang Group would have to rely on the arbitration provisions of the VIE Agreements, which, as discussed in the previous risk factor, could result in the disruption of our business and subject us to substantial uncertainty as to the outcome of any such. As a result, in the event that the VIE Shareholder does not comply with their obligations under the VIE Agreements, our WFOE may not be able to enforce its rights, in which event we may not be able to include the VIEs’ financial statements with YanGuFang Group’s, which could cause our ordinary shares to lose most, if not all, of their value. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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YanGuFang Group is a Cayman Island exempted company, and will rely on dividends paid by its PRC subsidiary for its cash needs and financing. Any limitation on the ability of its PRC subsidiary to make dividend payments to YanGuFang Group, or any tax implications of making dividend payments to YanGuFang Group, could limit our ability to pay our parent company expenses or pay dividends to holders of our ordinary shares.

YanGuFang Group is a holding company and conducts substantially all of its business through its PRC subsidiary and the VIEs. We may rely on dividends to be paid by our WFOE to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. Our PRC subsidiary receives substantially all of its revenue from the VIEs in the form of services fees under the VIE Agreements. Our PRC subsidiary and VIEs in the PRC generate and retain cash generated from operating activities and re-invest it in our business. If our WFOE incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Under PRC laws and regulations, our WFOE may pay dividends only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, our WFOE is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital.

Our WFOE generates primarily all of its revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our WFOE to use its Renminbi revenues to pay dividends to us. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by the SAFE for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our WFOE to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Contractual arrangements in relation to the VIEs may be subject to scrutiny by the PRC tax authorities who may determine that the VIEs owe additional taxes, which could negatively affect our financial condition and the value of your investment.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. The EIT Law requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with the arm’s length principles. We may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among our wholly-owned PRC subsidiary, the VIEs and the VIE Shareholder were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, regulations and rules, and adjust their income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by our wholly-owned PRC subsidiary or the VIEs for PRC tax purposes, which could in turn increase their tax liabilities without reducing their tax expenses. Furthermore, the PRC tax authorities may impose late payment fees and other penalties on our PRC subsidiary and the VIEs for adjusted but unpaid taxes according to applicable regulations. Our financial position could be materially and adversely affected if the tax liabilities of our PRC subsidiary and the VIEs increase, or if they are required to pay late payment fees and other penalties.

We may lose the ability to use and enjoy assets held by the VIEs that are material to the operation of our business if the VIEs go bankrupt or become subject to a dissolution or liquidation proceeding.

The VIEs hold substantially all of our assets. Under the contractual arrangements, the VIEs may not and the VIE Shareholder may not cause it to, in any manner, sell, transfer, mortgage or dispose of its assets or its legal or beneficial interests in the business without our WFOE’s prior consent. However, in the event that the VIE Shareholder breaches these contractual arrangements and voluntarily liquidates the VIEs, or the VIEs declare bankruptcy and all or part of their assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our WFOE’s consent, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If the VIEs undergo a voluntary or involuntary liquidation

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proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

If the custodians or authorized users of our controlling non-tangible assets, including chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations may be materially and adversely affected.

Under PRC law, legal documents for corporate transactions, including agreements and contracts that our business relies on, are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with the relevant local branch of the SMAR, formerly known as the State Administration for Industry and Commerce (“SAIC”). We generally execute legal documents by affixing chops or seals, rather than having the designated legal representatives sign the documents.

We use two major types of chops: corporate chops and finance chops. Chops are seals or stamps used by a PRC company to legally authorize documents, often in place of a signature. We use corporate chops generally for documents to be submitted to government agencies, such as applications for changing business scope, directors or company name, and for legal letters. We use finance chops generally for making and collecting payments, including issuing invoices. Use of corporate chops must be approved by our legal department and administrative department, and use of finance chops must be approved by our finance department. The chops of our PRC subsidiary and the VIEs are generally held by the relevant entities so that documents can be executed locally. Although we usually utilize chops to execute contracts, the registered legal representatives of our PRC subsidiary and the VIEs have the apparent authority to enter into contracts on behalf of such entities without chops, unless such contracts set forth otherwise.

In order to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to the designated key employees of our legal, administrative or finance departments. Our designated legal representatives generally do not have access to the chops. Although we have approval procedures in place and monitor our key employees, including the designated legal representatives of our PRC subsidiary and VIEs, the procedures may not be sufficient to prevent all instances of abuse or negligence. In addition, we also separate the authorized user of chops from the keeper of keys to the storage room and install security camera for the storage room. There is a risk that our key employees or designated legal representatives could abuse their authority, for example, by binding our PRC subsidiary and the VIEs with contracts against our interests, as we would be obligated to honor these contracts if the other contracting party acts in good faith in reliance on the apparent authority of our chops or signatures of our legal representatives. If any designated legal representative obtains control of the chop in an effort to obtain control over the relevant entity, we would need to have a shareholder or board resolution to designate a new legal representative to take legal action to seek the return of the chop, apply for a new chop with the relevant authorities, or otherwise seek legal remedies for the legal representative’s misconduct. If any of the designated legal representatives obtains and misuses or misappropriates our chops and seals or other controlling intangible assets for whatever reason, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve the matter, while distracting management from our operations, and our business operations may be materially and adversely affected.

If we exercise the option to acquire equity ownership of the VIEs, the ownership transfer may subject us to certain limitation and substantial costs.

Pursuant to the contractual arrangements, our WFOE has the exclusive right to purchase all or any part of the equity interests in any of the VIEs from the VIE Shareholder for a nominal price, unless the relevant government authorities or then applicable PRC laws request that a minimum price amount be used as the purchase price, in such case the purchase price shall be the lowest amount under such request. The VIE Shareholder will be subject to PRC individual income tax on the difference between the equity transfer price and the then current registered capital of the VIEs. Additionally, if such a transfer takes place, the competent tax authority may require our WFOE to pay enterprise income tax for ownership transfer income with reference to the market value, in which case the amount of tax could be substantial.

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Risks Related to Offering and Ownership of Ordinary Shares

There is no active trading market for our ordinary shares and there can be no assurance any market will develop or that the trading price will not decline below the price paid by investors.

We have applied to have our ordinary shares listed on the Nasdaq under the symbol “YGF.” Prior to the completion of this offering, there has been no public market for our ordinary shares, and we cannot assure you that a liquid public market for our ordinary shares will develop. If an active public market for our ordinary shares does not develop following the completion of this offering, the market price and liquidity of our ordinary shares may be materially and adversely affected. The initial public offering price for our ordinary shares was determined by negotiation between us and the underwriters based upon several factors, and we can provide no assurance that the trading price of our ordinary shares after this offering will not decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ordinary shares.

Sales or the anticipation of sales of our ordinary shares by the selling shareholders could affect the market price of our ordinary shares and the Underwriters’ stabilization activities and the exercise of its over-allotment option.

The selling shareholders may sell or otherwise engage in transactions with respect to its ordinary shares as described in “Plan of Distribution.” The sale or the anticipation of the sale by the selling shareholders of ordinary shares may have a negative impact on the market for and market price of our ordinary shares. Further, sales or the anticipation of sales by the selling shareholders may affect the exercise by Underwriters of their stabilization activity and their willingness to exercise their over-allotment option.

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

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

Our directors and officers will collectively own an aggregate of [•]% of the total voting power of our outstanding ordinary shares immediately after the completion of this offering, assuming the underwriters do not exercise their over-allotment option.

Our directors and officers will collectively own an aggregate of [•]% of the total voting power of our outstanding ordinary shares immediately after the completion of this offering. These beneficial owners could have significant influence on determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations, the election of directors and other significant corporate actions. In cases where their interests are aligned and they vote together, these beneficial owners will also have the power to prevent or cause a change in control. Without the consent of some or all of these shareholders, we may be prevented from entering into transactions that could be beneficial to us or our minority shareholders. The interests of these beneficial owners

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may differ from the interests of our other shareholders. The concentration in the ownership of our ordinary shares may cause a material decline in the value of our ordinary shares. For more information regarding our beneficial owners and their affiliated entities, see “Principal Shareholders.”

The trading price of our ordinary shares may be volatile, which could result in substantial losses to investors.

The trading price of our ordinary shares may be volatile and could fluctuate widely due to factors beyond our control. This may happen because of the broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. A number of Chinese companies have listed or are in the process of listing their securities on U.S. stock markets. The securities of some of these companies have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performance of these Chinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in the United States in general and consequently may impact the trading performance of our ordinary shares, regardless of our actual operating performance.

In addition to market and industry factors, the price and trading volume for our ordinary shares may be highly volatile for factors specific to our own operations, including the following:

        regulatory developments affecting us or our industry;

        actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results;

        changes in financial estimates by securities research analysts;

        conditions in the market for intermediary services;

        announcements by us or our competitors of new product and/or service offerings, acquisitions, strategic relationships, joint ventures, capital raisings or capital commitments;

        additions to or departures of our senior management;

        fluctuations of exchange rates between the Renminbi and the U.S. dollar;

        release or expiry of lock-up or other transfer restrictions on our outstanding shares;

        negative publicity regarding Chinese listed companies;

        Political or legal actions taken or restrictions imposed by the government in China; and

        sales or perceived potential sales of additional ordinary shares.

Any of these factors may result in large and sudden changes in the volume and price at which our ordinary shares will trade.

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

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If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ordinary shares, the market price for our ordinary shares and trading volume could decline.

The trading market for our ordinary shares will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our ordinary shares, the market price for our ordinary shares would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our ordinary shares to decline.

The sale or availability for sale of substantial amounts of our ordinary shares could adversely affect their market price.

Sales of substantial amounts of our ordinary shares in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of our ordinary shares and could materially impair our ability to raise capital through equity offerings in the future. The ordinary shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 under the Securities Act and the applicable lock-up agreements. Following the consummation of our initial public offering, there will be [•] ordinary shares outstanding immediately after this offering. In connection with this offering, we and each of our directors and officers named in the section “Management,” and certain shareholders have agreed not to sell any ordinary shares for [•] months from the date of this prospectus without the prior written consent of the underwriter, subject to certain exceptions. However, the underwriters may release these securities from these restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”). We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ordinary shares. See “Underwriting” and “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our securities after this offering.

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

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

Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ordinary shares will likely depend entirely upon any future price appreciation of our ordinary shares. There is no guarantee that our ordinary shares will appreciate in value after this offering or even maintain the price at which you purchased our ordinary shares. You may not realize a return on your investment in our ordinary shares and you may even lose your entire investment.

Because the initial public offering price is substantially higher than the pro forma net tangible book value per share, you will experience immediate and substantial dilution.

If you purchase ordinary shares in this offering, you will pay more for each share than the corresponding amount paid by existing shareholders for their ordinary shares. As a result, you will experience immediate and substantial dilution of $[•] per share, representing the difference between our net tangible book value per share of $[•] as of June 30, 2021, after giving effect to this offering and an assumed initial public offering price of $[•] per share. See “Dilution” for a more complete description of how the value of your investment in our ordinary shares will be diluted upon the completion of this offering.

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You must rely on the judgment of our management as to the use of the net proceeds from this offering, and such use may not produce income or increase our share price.

We plan to use the net proceeds of this offering primarily for the R&D of new services and technologies, and equipment upgrades, the marketing activities and brand promotion, new hires and employee training, pursuing business development opportunities and working capital and other general corporate purposes. See “Use of Proceeds.” However, our management will have considerable discretion in the application of the net proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. The net proceeds may be used for corporate purposes that do not improve our efforts to achieve or maintain profitability or increase our share price. The net proceeds from this offering may be placed in investments that do not produce income or that lose value.

If we are classified as a passive foreign investment company, United States taxpayers who own our ordinary shares may have adverse United States federal income tax consequences.

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

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

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

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

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

Depending on the amount of cash we raise in this offering, together with any other assets held for the production of passive income, it is possible that, for our current 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 treat our consolidated affiliated entities as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results in our consolidated financial statements. 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, directly or indirectly, at least 25% of the equity by value.

Our status as a PFIC is a fact-intensive determination made on an annual basis. Accordingly, our U.S. counsel expresses no opinion with respect to our PFIC status and also expresses no opinion with regard to our expectations regarding our PFIC status.

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers who own our ordinary shares if we were determined to be a PFIC, see “Taxation — Material United States Federal Income Tax Considerations — Passive Foreign Investment Company.”

The amended and restated memorandum and articles of association that we intend to adopt contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares.

Some provisions of our second amended and restated memorandum and articles of association which will become effective immediately prior to the completion of this Offering may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue shares at such times and on such terms and conditions as the board of directors may decide without any further vote or action by our shareholders.

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Our Chief Executive Officer and Chairman of the board of directors, Mr. Junguo He, has a substantial influence over our company. His interests may not be aligned with the interests of our other shareholders, and he could prevent or cause a change of control or other transactions.

As of the date of this prospectus, Mr. Junguo He, our Chairman of the board of directors and our Chief Executive Officer, beneficially owns an aggregate of 39.53 % of our outstanding ordinary shares. Upon the completion of this offering, Mr. He will beneficially own approximately [•] ordinary shares, or approximately [•]% of our outstanding ordinary shares.

Accordingly, Mr. He could have significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations, the appointment of directors and other significant corporate actions. Mr. He will also have the power to prevent or cause a change in control. Without the consent of Mr. He, we may be prevented from entering into transactions that could be beneficial to us or our minority shareholders. In addition, Mr. He could violate his fiduciary duties by diverting business opportunities from us to himself or others. The interests of Mr. He may differ from the interests of our other shareholders. The concentration in the ownership of our ordinary shares may cause a material decline in the value of our ordinary shares. For more information regarding Mr. He and his affiliated entity, see “Principal Shareholders.”

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

We are an exempted company incorporated under the laws of the Cayman Islands with limited liability. As a result, it may be difficult for investors to effect service of process within the United States upon our directors or officers, or enforce judgments obtained in the United States courts against our directors or officers.

Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties 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 of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States.

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

Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the U.S. Currently, we do not plan to rely on home country practice with respect to any corporate governance matter. However, if we choose to follow our home country practice in the future, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital — Comparison of Cayman Islands Corporate Law and U.S. Corporate Law.”

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

The 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. These rights, however, may be provided in a company’s articles of association. Our amended and restated articles of association allow our shareholders holding shares representing in aggregate not less than ten (10%) percent 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 fourteen (14) clear days is required for the convening of our general shareholders’ meeting. A quorum required for a meeting of shareholders consists of at least one or more shareholders present or by proxy, or if a corporation, by its duly authorized representative, representing not less than one-third of of all votes attaching to all ordinary shares in issue and entitled to vote at such general meeting of the Company. For these purposes, “clear days” means that period excluding (a) the day when the notice is given or deemed to be given and (b) the day for which it is given or on which it is to take effect.

Newly enacted Economic Substance Legislation in the Cayman Islands may have an impact on the Company.

The Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Law, 2018 (the “Substance Law”) came into force in the Cayman Islands introducing certain economic substance requirements for Cayman Islands entities which are classified as “relevant entities” engaging in certain “relevant activities” in accordance with the Substance Law which in the case of exempted companies incorporated before January 1, 2019 will apply in respect of financial years commencing July 1, 2019 onwards. A “relevant entity” which engages in one or more “relevant activities” is required to satisfy the economic substance test as set out under the Substance Law. However, it is anticipated that the Company itself may be subject to reduced substance requirements. Although it is presently anticipated that the Substance Law will have little material impact on the Company or its operations, as the legislation is new and remains subject to further clarification and interpretation it is not currently possible to ascertain the precise impact of these legislative changes on the Company.

Certain judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. Substantially all of our current operations are conducted in the PRC. In addition, most of our current directors and officers are nationals and residents of countries other than the United States. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to seek recognition and/or enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and the PRC, see “Enforceability of Civil Liabilities.”

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from 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 for so long as we are an emerging growth company.

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take

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advantage of the extended transition period. As a result of this election, our future financial statements may not be comparable to other public companies that comply with the public company effective dates for these new or revised accounting standards.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.

Because we are a foreign private issuer under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

        the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC;

        the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;

        the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

        the selective disclosure rules by issuers of material non-public information under Regulation FD.

We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of the Nasdaq Capital Market. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.

We will incur significantly increased costs and devote substantial management time as a result of the listing of our ordinary shares.

We will incur additional legal, accounting and other expenses as a public reporting company, particularly after we cease to qualify as an emerging growth company. For example, we will be required to comply with the additional requirements of the rules and regulations of the SEC and the Nasdaq rules, including applicable corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. We cannot predict or estimate the number of additional costs we may incur as a result of becoming a public company or the timing of such costs.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidelines are provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may also initiate legal proceedings against us and our business may be adversely affected.

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If a limited number of participants in this offering purchase a significant percentage of the offering, the effective public float may be smaller than anticipated and the price of our ordinary shares may be volatile which could subject us to securities litigation and make it more difficult for you to sell your shares.

As a company conducting a relatively small public offering, we are subject to the risk that a small number of investors will purchase a high percentage of the offering. While the underwriters are required to sell shares in this offering to at least 300 round lot shareholders (a round lot shareholder is a shareholder who purchases at least 100 shares) in order to ensure that we meet the Nasdaq initial listing standards, we have not otherwise imposed any obligations on the underwriters as to the maximum number of shares they may place with individual investors. If, in the course of marketing the offering, the underwriters were to determine that demand for our shares was concentrated in a limited number of investors and such investors determined to hold their shares after the offering rather than trade them in the market, other shareholders could find the trading and price of our shares affected (positively or negatively) by the limited availability of our shares. If this were to happen, investors could find our shares to be more volatile than they might otherwise anticipate. Companies that experience such volatility in their share price may be more likely to be the subject of securities litigation. In addition, if a large portion of our public float were to be held by a few investors, smaller investors may find it more difficult to sell their shares.

Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

We have applied to have our ordinary shares listed on the Nasdaq under the symbol “YGF.” We cannot guarantee that our securities will be approved for listing on Nasdaq; however, we will not complete this offering unless we are so listed. Although after giving effect to this offering we expect to meet, on a pro forma basis, the minimum initial listing standards set forth in the Nasdaq listing standards, we cannot assure you that our securities will be, or will continue to be, listed on Nasdaq in the future. In order to continue listing our securities on Nasdaq, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in shareholders’ equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders). Additionally, we will be required to demonstrate compliance with Nasdaq’s initial listing requirements after this offering, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on Nasdaq. For instance, our share price would generally be required to be at least $4.00 per share, our shareholders’ equity would generally be required to be at least $5.0 million and we would be required to have a minimum of 300 round lot holders of our securities (with at least 50% of such round lot holders holding securities with a market value of at least $2,500). We cannot assure you that we will continue to meet those initial listing requirements.

If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

        a limited availability of market quotations for our securities;

        reduced liquidity for our securities;

        a determination that our ordinary shares come within the definition of “penny stock” which will require brokers trading in our ordinary shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

        a limited amount of news and analyst coverage; and

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

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because we expect that our ordinary shares will be listed on Nasdaq, our ordinary shares will be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and “Regulation.” Known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” 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:

        the expected or potential impact of the novel coronavirus (COVID-19) pandemic, and the related responses of the government, customers, suppliers and the Company, on our business, financial condition and results of operations;

        our dependence on introducing new products on a timely basis;

        our dependence on growth in the demand for our products;

        our ability to effectively manage inventories;

        our ability to compete effectively;

        our dependence on a small number of suppliers for a substantial portion of our supplies;

        our ability to successfully manage our capacity expansion and allocation in response to changing industry and market conditions;

        implementation of our expansion plans and our ability to obtain capital resources for our planned growth;

        our ability to acquire sufficient raw materials and certain products and obtain equipment and services from our suppliers in suitable quantity and quality;

        our dependence on key personnel;

        our ability to expand into new businesses, industries or internationally and to undertake mergers, acquisitions, investments or divestments;

        the effect of any sales or the anticipation of sales by the selling shareholders upon the market price of our ordinary shares or the Underwriters’ stabilization activity or the exercise by the underwriters of their over-allotment option;

        changes in technology and competing products;

        general economic and political conditions, including those related to the healthy food industry;

        possible disruptions in commercial activities caused by events such as natural disasters, terrorist activities;

        fluctuations in foreign currency exchange rates; and

        other factors in the “Risk Factors” section in this prospectus.

These forward-looking statements are subject to various and significant risks and uncertainties, including those which are beyond our control. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. 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

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to reflect the occurrence of unanticipated events. You should thoroughly read this prospectus and the documents that we refer to herein with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. We disclaim any obligation to update our forward-looking statements, except as required by law.

This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Statistical data in these publications also include projections based on a number of assumptions. While we believe these industry publications and third-party research, surveys and studies are reliable, you are cautioned not to give undue weight to this information.

In addition, the new and rapidly changing nature of the healthy food industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our industry. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $[], after deducting estimated underwriting discounts, the non-accountable expense allowance and the estimated offering expenses payable by us, and based upon an assumed initial offering price of $[] per ordinary share (excluding any exercise of the underwriters’ over-allotment option), the midpoint of the price range set forth on the cover page of this prospectus. A $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) the net proceeds to us from this offering by approximately $[], after deducting the estimated underwriting discounts, non-accountable expense allowance and estimated aggregate offering expenses payable by us and assuming no change to the number of ordinary share offered by us as set forth on the cover page of this prospectus. We will not receive any proceeds from the sale of any ordinary shares by the selling shareholders.

We plan to use the net proceeds from this offering as follows:

        approximately 30% of the net proceeds from this offering in the construction of additional production facilities, purchase of new equipment and upgrades of existing equipment;

        approximately 10% of the net proceeds from this offering for the R&D of new products and technologies, upgrades of existing products and technologies, new hires of R&D staff;

        approximately 12% of the net proceeds from this offering for global business expansion, primarily to North America, South East Asia and Japan; and

        approximately 20% of the net proceeds from this offering for marketing and brands promotion;

        approximately 28% of the net proceeds from this offering for working capital and other general corporate purposes;

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus.

In utilizing the proceeds from this offering, we are permitted under PRC laws and regulations to provide funding to our WFOE only through loans or capital contributions, and to the VIEs only through loans, and only if we satisfy the applicable government registration and approval requirements. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, YanGuFang Group, through YanGuFang HK, made capital contributions to WFOE of $9,794,012, $1,510,000 and nil, respectively. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2021 and 2020, WFOE provided working capital loans to the VIEs of $9,749,850, $1,509,849 and nil, respectively. The relevant filing and registration processes for capital contributions typically take approximately eight weeks to complete. The filing and registration processes for loans typically take approximately four weeks or longer to complete. While we currently see no material obstacles to completing the filing and registration procedures with respect to future capital contributions and loans to our WFOE or to the VIEs, we cannot assure you that we will be able to complete these filings and registrations on a timely basis, or at all. We cannot assure you that we will be able to meet these requirements on a timely basis, if at all. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation on loans to, and direct investment in, our PRC subsidiary by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of this offering to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Pending use of the net proceeds, we intend to hold our net proceeds in short-term, interest-bearing, financial instruments or demand deposits.

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DIVIDEND POLICY

Our board of directors has discretion regarding whether to declare or pay dividends. In addition, our shareholders may by ordinary resolution declare a dividend, provided that no dividend may exceed the amount recommended by our directors. All dividends are subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of either profits or share premium account, and provided always that in no circumstances may a dividend be paid if this would result in the Company being unable to pay our debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

We have never declared or paid cash dividends on our shares. We currently do not have any plans to pay cash dividends. Rather, we currently intend to retain all of our available funds and any future earnings to operate and grow our business.

Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

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CAPITALIZATION

The following table sets forth our capitalization as of December 31, 2021 as follows:

        on an actual basis; and

        on an adjusted basis to reflect the sale of [] ordinary shares in this offering, at an assumed initial public offering price of $[] per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us.

The adjustments reflected below are subject to change and are based upon available information and certain assumptions that we believe are reasonable. Total shareholders’ equity and total capitalization following the completion of this offering are subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this capitalization table in conjunction with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes appearing elsewhere in this prospectus.

 

As of December 31, 2021

  

Actual

 

Pro Forma
As
Adjusted
(1)

 

Pro Forma
As Adjusted
with Full
Exercise of
Over-Allotment
Option

  

US$

 

US$

 

US$

Shareholders’ Equity

      

Ordinary shares, $0.0001 par value, 500,000,000 ordinary shares authorized, 150,000,000 ordinary shares issued and outstanding

 

15,000

    

Additional paid-in capital

 

8,746,336

    

Statutory reserves

 

3,290,250

    

Retained earnings

 

3,863,294

    

Accumulated other comprehensive income

 

1,058,279

    

Total shareholders’ equity

 

16,973,159

 

 

 

 

Total capitalization

 

16,973,159

 

 

 

 

____________

(1)      Reflects the sale of ordinary shares in this offering (excluding any ordinary shares that may be sold pursuant to the underwriters’ over-allotment option) at an assumed initial public offering price of $[] per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. Additional paid-in capital reflects the net proceeds we expect to receive, after deducting the underwriting discounts and estimated offering expenses payable by us. We estimate that such net proceeds will be approximately $[] based on the assumed offering price of $[] per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus.

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DILUTION

If you invest in our ordinary shares, your interest will be diluted to the extent of the difference between the initial public offering price per ordinary shares and the pro forma net tangible book value per ordinary share after the offering. Dilution results from the fact that the per ordinary share offering price is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares. Our net tangible book value attributable to shareholders at December 31, 2021 was $14,311,731 or approximately $0.10 per ordinary share. Net tangible book value per ordinary share as of December 31, 2021 represents the amount of total assets less intangible assets and total liabilities, divided by the number of ordinary shares outstanding.

We will have [] ordinary shares outstanding upon completion of the offering or [] ordinary shares assuming the full exercise of the underwriters’ over-allotment option based on the assumed offering price of $[] per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus. Our post offering pro forma net tangible book value, which gives effect to receipt of the net proceeds from the offering and issuance of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after December 31, 2021, will be approximately $[] or $[] per ordinary share. This would result in dilution to investors in this offering of approximately $[] per ordinary share or approximately []% from the assumed offering price of $[] per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus. Net tangible book value per ordinary share would increase to the benefit of present shareholders by $[] per share attributable to the purchase of the ordinary shares by investors in this offering.

The following table sets forth the estimated net tangible book value per ordinary share after the offering and the dilution to investors purchasing ordinary shares in the offering.

 

Offering
Without
Over-Allotment

 

Offering
With
Over-Allotment

Assumed offering price per ordinary share

 

$

  

$

 

Net tangible book value per ordinary share as of December 31, 2021

 

$

  

$

 

Increase per ordinary share attributable to payments by new investors

 

$

  

$

 

Pro forma net tangible book value per ordinary share after the offering

 

$

  

$

 

Dilution per ordinary share to new investors

 

$

  

$

 

Assuming the underwriters’ over-allotment option is not exercised, each $1.00 increase (decrease) in the assumed initial public offering price of $[] per ordinary share would increase (decrease) the pro forma as adjusted amount of total capitalization by $[], assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us.

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ENFORCEABILITY OF CIVIL LIABILITIES

We were incorporated in the Cayman Islands as an exempted company with limited liability in order to enjoy the following benefits:

        political and economic stability;

        an effective judicial system;

        a favorable tax system;

        the absence of exchange control or currency restrictions; and

        the availability of professional and support services.

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include, but are not limited to, the following:

        the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors; and

        Cayman Islands companies may not have the standing to sue before the federal courts of the United States.

Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated. Currently, substantially all of our operations are conducted outside the United States, and substantially all of our assets are located outside the United States. All of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

We have appointed Puglisi & Associates, as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

Carey Olsen Hong Kong LLP, our counsel as to Cayman Islands law, and Beijing Sunland Law Firm, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and China, respectively, would:

        recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

        entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

Enforcement of Judgments/Enforcement of Civil Liabilities

We have been advised by our Cayman Islands legal counsel, Carey Olsen Hong Kong LLP, that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of courts of the United States obtained against us or our directors or officers that are predicated upon the civil liability provisions of the securities laws of the United States or any State; and (ii) entertain original actions brought in the Cayman Islands against us or our directors or officers that are predicated upon the federal securities laws of the United States or the securities laws of any state in the United States. In those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will, at common law, recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary

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to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy). A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

We have been advised by our PRC counsel, Beijing Sunland Law Firm, that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedure Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedure Law based either on treaties between China and the country where the judgment is made or on reciprocity between different jurisdictions, and PRC courts will not recognize or enforce these foreign judgments if PRC courts believe the foreign judgments violate the basic principles of PRC laws or national sovereignty, security or public interest after review. However, currently, China does not have treaties or reciprocity arrangement providing for recognition and enforcement of foreign judgments ruled by courts in the United States or the Cayman Islands. Thus, it is uncertain whether a PRC court would enforce a judgment ruled by a court in the United States or the Cayman Islands.

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SELLING SHAREHOLDERS

The following table sets forth the names of the selling shareholders, the number of ordinary shares owned beneficially by the selling shareholders as of [], 2022, and the number of our ordinary shares that may be offered by the selling shareholders pursuant to this prospectus. The table and the other information contained herein and under the caption “Plan of Distribution” have been prepared based upon information furnished to us by or on behalf of the selling shareholders. The following table sets forth, as to the selling shareholders, the number of ordinary shares beneficially owned, the number of shares being sold, the number of shares beneficially owned and the percentage of beneficial ownership upon completion of the offering.

     

After Sale of Shares
in Offering

Name

 

Shares Beneficially
Owned

 

Shares Being
Sold

 

Shares Beneficially
Owned

 

Percent of
Outstanding

Fred Chang

 

1,500,000

 

1,500,000

 

 

Liuyi Zhang

 

1,500,000

 

1,500,000

 

 

The selling shareholders do not have, and within the past three years have not had, any position, office or material relationship with us or with any of our predecessors or affiliates except as described below.

The selling shareholders acquired the shares in exchange for their services pursuant to a consulting service agreement and its amendment between Allstar Advisory, Inc. (Beijing) and the Company. Fred Chang and Liuyi Zhang are partners of Allstar Advisory, Inc. (Beijing).

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PLAN OF DISTRIBUTION

The selling shareholders and any of their respective pledgees, donees, assignees and successors-in-interest may, from time to time, sell any or all of their ordinary shares on any stock exchange, market or trading facility on which the shares are traded or in private transactions or by gift. The shares offered by this prospectus may be sold by the selling shareholders at market prices prevailing at the time of sale or at negotiated prices. The selling shareholders will not sell any shares pursuant to this prospectus until such time as our ordinary shares are traded on Nasdaq. The selling shareholders may use any one or more of the following methods when selling or otherwise transferring shares:

        ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

        block trades in which a broker-dealer will attempt to sell the shares as agent but may purchase a position and resell a portion of the block as principal to facilitate the transaction;

        sales to a broker-dealer as principal and the resale by the broker-dealer of the shares for its account;

        an exchange distribution in accordance with the rules of the applicable exchange if we are listed on an exchange at the time of sale;

        privately negotiated transactions, including gifts;

        covering short sales made after the date of this prospectus;

        pursuant to an arrangement or agreement with a broker-dealer to sell a specified number of such shares at a stipulated price per share;

        a combination of any such methods of sale; and

        any other method of sale permitted pursuant to applicable law.

To the extent permitted under Rule 144, the selling shareholders may also sell ordinary shares owned by them pursuant to Rule 144 rather than pursuant to this prospectus.

Broker-dealers engaged by the selling shareholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling shareholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. None of the selling shareholders is an affiliate of any broker-dealer.

The selling shareholders may from time to time pledge or grant a security interest in some or all of the shares owned by them and, if the selling shareholders default in the performance of the secured obligations, the pledgees or secured parties may offer and sell the ordinary shares from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus.

In connection with the sale of our ordinary shares or interests therein, the selling shareholders may enter into hedging transactions with broker-dealers or other financial institutions which may in turn engage in short sales of our ordinary shares in the course of hedging the positions they assume. The selling shareholders may, after the date of this prospectus, also sell our ordinary shares short and deliver these securities to close out their short positions, or lend or pledge their ordinary shares to broker-dealers that in turn may sell these securities. The selling shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of ordinary shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The selling shareholders also may transfer the ordinary shares in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

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The selling shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, they will be subject to the prospectus delivery requirements of the Securities Act, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act, and federal securities laws, including Regulation M, may restrict the timing of purchases and sales of our ordinary shares by the selling shareholders and any other persons who are involved in the distribution of the ordinary shares pursuant to this prospectus. The selling shareholders has informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute the ordinary shares.

We may be required to amend or supplement this prospectus in the event that (a) a selling shareholder transfers securities under conditions which require the purchaser or transferee to be named in the prospectus as a selling shareholder, in which case we will be required to amend or supplement this prospectus to name the selling shareholder, or (b) the selling shareholder sells shares to an underwriter, in which case we will be required to amend or supplement this prospectus to name the underwriter and the method of sale.

We are paying all fees and expenses incident to the registration of the shares being offered by the selling shareholders. We have agreed to indemnify the selling shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

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CORPORATE HISTORY AND STRUCTURE

Corporate History

YanGuFang Group is a holding company incorporated as an exempted company on May 28, 2020 under the laws of the Cayman Islands. As a holding company with no material operations of its own, it conducts substantially all of its operations through its subsidiary and the VIEs in China.

We started our business in the healthy food industry in August 2012 through YanGuFang Agroeco Tech, the sole shareholder of each of the VIEs. With the growth of our business and in order to facilitate international capital investment in us, we started a reorganization as described below involving new offshore and onshore entities in the second quarter of 2020 and completed it in December 2020.

YanGuFang HK, formed on June 29, 2020 under the laws of Hong Kong, is our wholly-owned subsidiary in Hong Kong and a holding company with no business operations, which, in turn, wholly owns all of the equity interest of YanGuFang China, a wholly foreign-owned enterprise formed on December 8, 2020 under the laws of China. WFOE wholly owns all of the equity interest of Yanna Technology, a limited liability company formed on February 25, 2021 under the laws of China. As of the date of this prospectus, Yanna Technology has not commenced operation yet.

On December 20, 2020, YanGuFang China entered into a series of contractual arrangements with each of YanGuFang E-Commerce, YanGuFang Contract Farming and YanGuFang Whole Grain, and their respective shareholder. The VIE Agreements were designed to provide YanGuFang China control over the VIEs and thereby enable it to consolidate the financial statements of the VIEs under U.S. GAAP. Each of the VIEs is wholly owned by one same shareholder YanGuFang Agroeco Tech. See “— Contractual Arrangements with the VIEs.

The VIEs and Their Subsidiaries in China

Our operations in China are primarily conducted by the VIEs and their subsidiaries. Below is a list of the VIEs and their subsidiaries in China:

YanGuFang E-Commerce, formed in Shanghai under the laws of China on June 29, 2017, with a registered capital of RMB10.0 million, is primarily engaged in the e-commerce business, including operating the self-developed APP and online sales accounts with third party e-commerce platforms in China, such as Tmall, JD, or Pinduoduo. YanGuFang E-Commerce wholly owns a subsidiary, YanGuFang E-Commerce (Inner Mongolia).

YanGuFang E-Commerce (Inner Mongolia), formed in Inner Mongolia under the laws of China on June 20, 2022, with a registered capital of RMB10.0 million, is primarily engaged in the e-commerce business, including utilizing the third party e-commerce platforms for sales in China. As of the date of this prospectus, it has not commenced operation yet.

YanGuFang Contract Farming, was formed in Inner Mongolia on May 8, 2019 under the laws of China, with a registered capital of RMB5.0 million. It is primarily engaged in marketing and sales of the Company’s oat products.

YanGuFang Whole Grain, formed in Inner Mongolia under the laws of China on January 29, 2015, with a registered capital of RMB70.0 million, is primarily engaged in the production, research and development, marketing, sales and distribution of Company’s oat products in China. YanGuFang Whole Grain wholly owns a subsidiary, YanGuFang I&E Trading.

YanGuFang I&E Trading, a wholly-owned subsidiary of YanGuFang Whole Grain, was formed in Inner Mongolia under the laws of China on May 2, 2018, with a registered capital of RMB5.0 million. It is primarily engaged in exporting the Company’s oat products to the international markets.

YanGuFang Hainan I&E Trading, a wholly-owned subsidiary of YanGuFang I&E Trading, was formed in Haikou City, Hainan province under the laws of China on January 29, 2021, with a registered capital of RMB50.0 million. It is primarily engaged in exporting the Company’s oat products to the international markets.

Our Subsidiary in the USA

Our operations in the United States will be primarily conducted by YGF Oats.

YGF Oats, a limited liability company organized under the laws of the State of Texas in the United States on February 22, 2021, is our newly launched wholly-owned subsidiary to develop and grow our business in the United States. As of the date of this prospectus, YGF Oats has not commenced operation but expects to start sales in the second half of 2022.

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Corporate Structure

The chart below summarizes our corporate structure, including our subsidiaries, the VIEs and their subsidiaries, as of the date of this prospectus:

As shown in the above diagram, we wholly own YGF Oats, YanGuFang HK and YanGuFang China. However, we do not have any ownership interest in the VIEs, which accounted for substantially all of our revenue for the fiscal years ended June 30, 2021 and 2020 and the six months ended December 31, 2021 and 2020. We seek to control the VIEs through our VIE Agreements with the VIEs, and the VIE Shareholder, YanGuFang Agroeco Tech. Our Chief Executive Officer and Chairman, Mr. Junguo He, our Chief Technical Officer and Director, Mr. Zhu Sun, and our Chief Operating Officer, Mr. Ya Zhang, are YanGuFang Agroeco Tech Shareholders. The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where the PRC law prohibits direct foreign investment in the operating companies. As a result, investors will not and may never directly hold equity interests in the VIEs. Our current corporate structure and business operations and the market price of our ordinary shares may be affected by the newly enacted PRC Foreign Investment Law which does not explicitly classify whether the VIEs that are controlled through contractual arrangements would be deemed foreign-invested enterprises if they are ultimately “controlled” by foreign investors. Our ordinary shares being offered in this prospectus are shares of our Cayman Islands holding company YanGuFang Group, and, as a shareholder of YanGuFang Group, you will have an equity interest in an entity which does not have ownership of the VIEs which produce the oat products and generate substantially all of the consolidated revenue. Because we do not have ownership of the VIEs, we must rely on the VIE Shareholder and YanGuFang Agroeco Tech Shareholders to comply with their contractual obligations.

Contractual Arrangements with the VIEs

As part of the reorganization for our initial public offering, on December 20, 2020, YanGuFang China, our WFOE, entered into VIE Agreements with each of the VIEs and the VIE Shareholder, on substantially similar terms. The VIE Agreements are designed to enable WFOE to, among other things, (i) exercise control over the VIEs, and (ii) receive substantially all of the economic benefits of the VIEs. As a result of these contractual arrangements, under U.S. GAAP, we are considered the primary beneficiary of the VIEs for accounting purposes and thus consolidate their results in our consolidated financial statements.

As the VIE Agreements do not provide us with an equity interest in the VIEs, the VIE structure may be less effective than direct ownership in providing us with control over the VIEs. If any of the VIEs or the VIE Shareholder fails to perform their respective obligations under the VIE Agreements, our recourse to the assets held by the VIEs is indirect and we may have to incur substantial costs to enforce the terms of the arrangements and expend significant

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resources to enforce such arrangements in reliance on legal remedies under PRC law. All of these VIE Agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these agreements would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal system could limit our ability to enforce these VIE Agreements. In the event that we are unable to enforce the VIE Agreements, or if we suffer significant time delays or other obstacles in the process of enforcing the VIE Agreements, it would be very difficult to exert effective control over the VIEs as the direct ownership may afford, and our ability to conduct our business and our financial condition and results of operations may be materially and adversely affected. In addition, there are still uncertainties regarding the status of the rights of the Cayman Islands holding company with respect to the VIE Agreements with the VIEs and the VIE Shareholder, and the challenges we may face enforcing the VIE Agreements due to legal uncertainties and jurisdictional limits as the VIE Agreements have not been tested in a court of law. The PRC regulatory authorities could disallow the VIE structure, which would likely result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or become worthless. See “Risk Factors — Risks Related to Our Corporate Structure — We conduct substantially all of our operations through the VIEs, which are established in the PRC, and we rely on the VIE Agreements with the VIEs and the VIE Shareholder to operate our business, which may not be as effective as direct ownership in providing operational control and we may incur substantial costs to enforce the terms of the VIE Agreements, which could result in a material change in our operations and a material change in the value of the securities we are registering for sale, and cause the value of such securities to significantly decline or become worthless” beginning on page 72.

We believe that our corporate structure and contractual arrangements comply with the current applicable PRC laws and regulations. Our PRC legal counsel, Beijing Sunland Law Firm, based on its understanding of the relevant laws and regulations, is of the opinion that each of the VIE Agreements is valid, binding and enforceable in accordance with its terms. See “Risk Factors — Risks Related to Our Corporate Structure — The VIE structure poses risks to investors. Investors will not and may never directly hold equity interests in the VIEs. The VIE structure may be less effective than direct ownership and the Company may incur substantial costs to enforce the terms of the VIE Agreement. If the PRC government deems that the VIE Agreements do not comply with PRC regulatory restrictions on foreign investment in the relevant industries or other laws or regulations of the PRC, 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, which may therefore materially reduce the value of our ordinary shares or render it worthless if the determinations, changes, or interpretations result in our inability to assert contractual control over the assets of our PRC subsidiary or the VIEs that conduct substantially all of our operations.

Set forth below is a summary of the material terms of our VIE Agreements. However, investors are cautioned that the enforceability of such VIE agreements has not been tested in a court of law.

Exclusive Option Agreements

An Exclusive Option Agreement was fully executed by and among WFOE, each of the VIEs and the VIE Shareholder, on substantially similar terms.

Pursuant to Exclusive Option Agreements, the VIE Shareholder has irrevocably granted WFOE or its designee an exclusive option to purchase all or part of the equity interests of each VIE either at the purchase price of RMB100, or the lowest price permitted by applicable PRC laws if a share valuation is required by PRC law in exercising the option, or upon separate agreements between WFOE and the VIE Shareholder, at a specific amount. The VIE Shareholder further undertakes, among other things, that it will neither allow the encumbrance of any security interest in each VIE, nor transfer, mortgage or otherwise dispose of its legal or beneficial interests in each VIE, nor incur any debts (with certain exceptions), merge with, acquire or invest in any third party, without the prior written consent of WFOE or us.

Each VIE has also granted WFOE or its designee an exclusive option to purchase all or part of its assets either at the purchase price of RMB100 or the lowest price permitted by applicable PRC laws, or upon separate agreements between WFOE and each VIE, at a specific amount.

Each agreement is valid for a term of ten (10) years commencing from December 20, 2020 until expiration or early termination under certain circumstances, which may be renewed for an additional ten (10) years at the sole discretion of WFOE.

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Exclusive Technology Development, Consulting and Services Agreements

An Exclusive Technology Development, Consulting and Services Agreement was fully executed by and between WFOE and each of the VIEs, on substantially similar terms.

Pursuant to the Exclusive Technology Development, Consulting and Services Agreements, WFOE provides each VIE with technology development, consulting and services for which WFOE collects a consulting and service fee (“Service Fee”) quarterly from each VIE. The Service Fee is generally calculated based on the balance between all revenues of each VIE and its related expenses and costs, or, upon separate negotiations of the parties, a specific amount.

Each agreement is valid for a term of ten (10) years commencing from December 20, 2020 until expiration or early termination under certain circumstances, which may be renewed, with the prior written consent of WFOE, for an additional ten (10) years, or a specific term upon agreements of the parties.

Equity Pledge Agreements

An Equity Pledge Agreement was fully executed by and among WFOE, each of the VIEs and the VIE Shareholder, on substantially similar terms.

Pursuant to the Equity Pledge Agreements, VIE Shareholder has pledged all of its equity interests of each VIE to WFOE as collateral to guarantee the performance by such shareholder of its obligation to pay the Service Fee under each Exclusive Technology Development, Consulting and Services Agreement. As of the date of this prospectus, all pledge documents have been duly filed with the local government. As a pledgee, WFOE is entitled to receive all dividends and interests in cash or cash equivalents generated from the pledged equity interests of each VIE.

In the event the VIE Shareholder breaches its contractual obligations, WFOE, as pledgee, has the right of first refusal to receive all proceeds arising out of the auction, sale or other means of disposition of the equity interests of each VIE as permitted under law. The VIE Shareholder also agreed, without WFOE’s prior written consent, not to transfer, directly and indirectly, the pledged equity interests, establish or permit the existence of any security interest or other encumbrance on the pledged equity interests, or dispose of the pledged equity interests by any other means.

Each agreement will be terminated upon full payment of the Service Fee and the full performance of the services under each corresponding Exclusive Technology Development, Consulting and Services Agreement.

Powers of Attorney

A Power of Attorney was fully executed by the VIE Shareholder for each of the VIEs, on substantially similar terms.

Pursuant to the Powers of Attorney, the VIE Shareholder has irrevocably authorized WFOE or its designee to act as its exclusive agent to exercise all of its rights as a shareholder of each VIE, including, but not limited to, attending shareholder’s meetings and executing shareholder resolutions; exercising all shareholder rights permitted by law or regulated in the articles of associations of the VIEs, including without limitation, voting rights, sell, transfer, pledge or dispose of any or all of the shares; nominating, designating or appointing the legal representative, chairman, the directors, supervisors, general manager and other senior management. Unless otherwise provided, with the oral or written instruction of the VIE Shareholder, WFOE is also entitled to allocate, use or otherwise dispose of all cash dividends and non-cash interests generated from the equity interests of each VIE.

Each Power of Attorney is irrevocable and shall remain in full force and effect as long as the VIE Shareholder remains as the shareholder of each VIE.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following summary consolidated financial data are derived from our unaudited consolidated financial statements for the six months ended December 31, 2021 and 2020, and audited consolidated financial statements for the fiscal years ended June 30, 2021 and 2020.

Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP.

Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should read the following summary financial information in conjunction with the consolidated financial statements and related notes, unaudited condensed consolidated financial statements and related notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The following table presents our summary of unaudited condensed consolidated statements of income and comprehensive income for the six months ended December 31, 2021 and audited statements of income and comprehensive income for the fiscal years ended June 30, 2021 and 2020.

 

For the Six
Months Ended
December 31
2021

 



For Fiscal Years Ended June 30

2021

 

2020

Revenues

 

$

18,775,430

 

 

$

29,837,029

 

 

$

24,089,699

 

Cost of Sales

 

$

4,834,363

 

 

$

(8,200,913

)

 

$

(10,112,832

)

Gross profit

 

$

13,941,067

 

 

$

21,636,116

 

 

$

13,976,867

 

Total Operating expenses

 

$

8,876,010

 

 

$

(8,745,524

)

 

$

(5,581,884

)

Income from operations

 

$

5,065,057

 

 

$

12,890,592

 

 

$

8,394,983

 

Total other expenses, net

 

$

(110,175

)

 

$

(182,942

)

 

$

(139,684

)

Provision for income taxes

 

$

(1,037,288

)

 

$

(2,164,096

)

 

$

(1,746,972

)

Net income

 

$

3,917,594

 

 

$

10,543,554

 

 

$

6,508,327

 

Earnings per share, basic and diluted

 

$

0.03

 

 

$

0.07

 

 

$

0.04

 

Weighted average ordinary shares outstanding

 

 

150,000,000

 

 

 

150,000,000

 

 

 

150,000,000

 

The following table presents our summary consolidated balance sheets data as of December 31, 2021, and June 30, 2021 and 2020.

 

As of
December 31
2021

 


As of 
June 30

2021

 

2020

Balance sheet data

 

 

  

 

  

 

 

Current assets

 

$

21,932,979

 

$

15,156,250

 

$

20,646,565

Total assets

 

$

61,101,910

 

$

47,579,183

 

$

37,093,089

Total liabilities

 

$

44,128,751

 

$

34,727,026

 

$

25,000,428

Total liabilities and shareholders’ equity

 

$

61,101,910

 

$

47,579,183

 

$

37,093,089

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.” All amounts included herein with respect to the six months ended December 31, 2021 and 2020 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. All amounts included herein with respect to the fiscal years ended June 30, 2021 and 2020 are derived from our audited consolidated financial statements included elsewhere in this prospectus. Our financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP.

Overview

YanGuFang Group is a holding company incorporated as an exempted company on May 28, 2020 under the laws of the Cayman Islands. As a holding company with no material operations of its own, it conducts substantially all of our operations through our subsidiary and the VIEs in China.

We are primarily engaged in the production, research and development, and sales of oat and grain products through our own sales team and distribution network. We are driven by a creative and experienced management team, led by Junguo He, our Chairman and CEO, with a focus on the healthy food industry and a fresh take on our mission, building from our deep understanding of and commitment to oat-based food science.

Our commitment to oats has resulted in core technical advancements that enable us to unlock the breadth of our product portfolio, which is broadly categorized into oat series products (including, but not limited to, oat germ groats, oatmeal, oat flour, oat bran, some of which are organic or green food series) and oat nutrient and health series products (including, but not limited to, oat peptide series, dietary fiber powder, oat biscuits, oil series, oat hand cream and soap, and oat toothpaste). Based on our vision and understanding of oats, we also source products from third party suppliers that complement our own oat product portfolio.

As of the date of this prospectus, the VIEs have two production facilities with a total of eight auto production lines in Wuchuan County, Inner Mongolia, five of which have been put into use with the remaining being installed and tested and expected to commence production by the end of December 31, 2022. Our production lines currently in use have a combined production capacity of 13,720 tons per year and are expected to reach 33,348 tons once the remaining three lines are put into use.

We generate revenues primarily through sales of our products. During the six months ended December 31, 2021 and 2020, our revenues were $18,775,430 and $10,882,096, respectively, and net income was $3,917,594 and $2,470,846, respectively. During the fiscal years ended June 30, 2021 and 2020, our revenues were $29,837,029 and $24,089,699, respectively, and net income was $10,543,554 and $6,508,327, respectively.

Reorganization

For the purpose of this offering and listing on the NASDAQ Capital market, a reorganization of our legal structure was completed on December 20, 2020. The reorganization involved the incorporation of the Company’s wholly-owned subsidiary — YanGuFang HK and YanGuFang HK’s wholly-owned subsidiary — YanGuFang China. On December 20, 2020, YanGuFang China entered into a series of VIE Agreements with the VIEs and the VIE Shareholder, which were designed to provide YanGuFang China control over the VIEs and thereby enable it to consolidate the financial statements of the VIEs under U.S. GAAP. Each of the VIEs is wholly owned by a sole shareholder YanGuFang Agroeco Tech. See “Corporate History and StructureContractual Arrangements with the VIEs.” YanGuFang Group, through its wholly-owned subsidiaries, the VIEs and their subsidiaries, is engaged in the production, research and development, and sales of oat and grain products through our own sales team and distribution network.

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Since our businesses are effectively controlled by the same group of the shareholders before and after the reorganization, they are considered under common control. The above mentioned transactions were accounted for as a recapitalization. The consolidation of YanGuFang Group, its subsidiaries and the VIEs has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the consolidated financial statements.

Key Factors that Affect Operating Results

We currently derive a majority of revenue from our product sales. We intend to continually enrich our product mix, enhance our production process and acquire new customers by increasing our market penetration with deeper market coverage and a broader geographical reach. Our ability to maintain and expand our customer base affects our operating results.

As the healthy food industry continues to expand, we expect that the number of our current and potential customers will also increase. We intend to maintain our existing customers and acquire new customers by continually maintaining high-quality standard as well as invest in sales marketing activities to increase our revenue and profit.

Our ability to grow will depend on a number of factors, such as our customers’ satisfaction with the sales, product velocities and profitability of our products as well as increasing consumer awareness and demand for healthy food products.

We believe there is significant opportunity to drive growth through the e-commerce channel. Our e-commerce strategy is focused on strategically partnering with leading third-party e-commerce platforms to market our products and increase our reach to more customers. We believe our success in the e-commerce channel demonstrates our potential for increased e-commerce penetration. Our presence on Tmall.com, JD.com and other mainstream e-commerce platforms in China has contributed to our revenue growth. For the six months ended December 31, 2021, our online sales through our own APP and third party e-commerce platforms increased to approximately $1.1 million (approximately 6.1% of total revenues) from approximately $0.3 million (approximately 2.9% of total revenues) for the six months ended December 31, 2020. For the fiscal year ended June 30, 2021, our online sales through our own APP and third party e-commerce platforms increased to approximately $0.7 million (approximately 2.4% of total revenues) from approximately $0.3 million (approximately 1.3% of total revenues) for the fiscal year ended June 30, 2020.

Recent Development

In December 2019, a novel strain of coronavirus (COVID-19) surfaced. COVID-19 has spread rapidly to many parts of the PRC and other parts of the world in the first half of 2020, which has caused significant volatility in the PRC and international markets. For the six months ended December 31, 2021 and the fiscal years ended June 30, 2020 and 2021, the COVID-19 pandemic did not have a material net impact on the Company’s financial positions and operating results. The extent of the impact on the Company’s future financial results will be dependent on future developments such as the length and severity of the pandemic, the potential resurgence of the pandemic, future government actions in response to the pandemic and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. Given this uncertainty, the Company is currently unable to quantify the expected impact of the COVID-19 pandemic on its future operations, financial condition, liquidity and results of operations if the current situation continues. For the six months ended December 31, 2021, our revenue reached approximately $18.8 million, representing an increase of approximately $7.9 million or 72.5% from approximately $10.9 million for the six months ended December 31, 2020. For the fiscal year ended June 30, 2021, our revenue reached approximately $29.8 million, representing an increase of approximately $5.7 million or 23.9% from approximately $24.1 million for the fiscal year ended June 30, 2020. For the six months ended December 31, 2021, our net income was approximately $3.9 million, representing an increase of approximately $1.4 million or 58.6% from approximately $2.5 million for the six months ended December 31, 2020. For the fiscal year ended June 30, 2021, our net income was approximately $10.5 million, representing an increase of approximately $4.0 million or 62% from approximately $6.5 million for the fiscal year ended June 30, 2020.

In March 2022, a new COVID-19 subvariant (omicron) outbreak hit China, and spread faster and more easily than previous variants of the virus. As a result, a new round of lockdown, quarantines or travel restrictions were imposed upon different provinces or cities in China by the relevant local government authorities. In the recent lockdown of Shanghai between late March and June 2022, we temporarily closed our Shanghai office from April 1, 2022 to June 1, 2022 but did not close our production facilities in Inner Mongolia, China. Due to the restrictions on logistics and supply chain disruptions

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in certain areas of China, we reduced our production output during the lockdown period in Shanghai, which to some extent adversely affected our results of operations for the same period. Starting from June 1, 2022, we resumed our production scale to the pre-lockdown level. Our warehouses are currently located in Inner Mongolia and Shanghai, and we plan to open new warehouses in other regions of China in the second half of 2022 to expand our storage capacity as well as mitigate the adverse impact on our supply chain due to the concentrated warehouses in one or two regions. Notwithstanding the foregoing, we have not experienced inventory, raw material or labor shortages or reduced headcount of our employees during the lockdown period in Shanghai as our other offices and production facilities in China were operational in the lock down period.

On February 22, 2021, we incorporated YGF Oats Life LLC under the laws of the State of Texas in the United States, as a wholly-owned subsidiary of YanGuFang Group. This is an important step for us to further explore overseas markets and expand our business. YGF Oats Life LLC is currently registered with the FDA, with certificate expiring in December 31, 2022. We expect to be able to renew the certificate in December 2022.

Results of Operations

For Six Months Ended December 31, 2021 and 2020

The following table summarizes the results of our operations for the six months ended December 31, 2021 and 2020, respectively, and provides information regarding the dollar and percentage increase during such periods.

 

For the Six Months Ended
December 31,

    
  

2021

 

2020

 

Change

 

% Change

Revenue

 

$

18,775,430

 

 

$

10,882,096

 

 

$

7,893,334

 

 

72.5

%

Cost of revenues

 

 

4,834,363

 

 

 

3,695,143

 

 

 

1,139,220

 

 

30.8

%

Gross profit

 

 

13,941,067

 

 

 

7,186,953

 

 

 

6,754,114

 

 

94.0

%

  

 

 

 

 

 

 

 

 

 

 

 

  

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Selling

 

 

5,028,214

 

 

 

2,098,137

 

 

 

2,930,077