SEC Info℠

Home

Search

My Interests

Help

Sign In

Please Sign In

Huahui Education Group Ltd. – ‘20-F’ for 12/31/22

On:  Monday, 5/1/23, at 4:05pm ET   ·   For:  12/31/22   ·   Accession #:  1493152-23-14957   ·   File #:  333-213314

Previous ‘20-F’:  ‘20-F’ on 5/2/22 for 12/31/21   ·   Latest ‘20-F’:  This Filing

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

 Text Wildcards:  ? (any letter/digit),  * (many).  Search Logic:  for Documents:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).  Details... 

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 5/01/23  Huahui Education Group Ltd.       20-F       12/31/22   66:5.2M                                   M2 Compliance LLC/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 20-F        Annual or Annual-Transition Report by a Foreign     HTML   1.38M 
                Non-Canadian Issuer                                              
 4: EX-13.1     Annual or Quarterly Report to Security Holders      HTML     20K 
 5: EX-13.2     Annual or Quarterly Report to Security Holders      HTML     20K 
 2: EX-12.1     Statement re: the Computation of Ratios             HTML     23K 
 3: EX-12.2     Statement re: the Computation of Ratios             HTML     23K 
11: R1          Cover                                               HTML     91K 
12: R2          Consolidated Balance Sheets                         HTML    135K 
13: R3          Consolidated Balance Sheets (Parenthetical)         HTML     26K 
14: R4          Consolidated Statements of Income (Loss) and        HTML     91K 
                Comprehensive Income (Loss)                                      
15: R5          Consolidated Statements of Changes in Equity        HTML     46K 
                (Deficit)                                                        
16: R6          Consolidated Statements of Cash Flows               HTML     88K 
17: R7          Description of Business                             HTML    101K 
18: R8          Summary of Significant Accounting Policies          HTML    101K 
19: R9          Leasehold Improvement and Equipment, Net            HTML     30K 
20: R10         Accounts Receivable                                 HTML     26K 
21: R11         Other Receivables                                   HTML     22K 
22: R12         Prepaid Expenses and Other Current Assets           HTML     22K 
23: R13         Accounts Payable, Other Payables and Accruals       HTML     29K 
24: R14         Income Taxes                                        HTML     42K 
25: R15         Loss on disposal of a subsidiary                    HTML     29K 
26: R16         Leases                                              HTML     40K 
27: R17         Related Parties Transactions                        HTML     51K 
28: R18         Reserves                                            HTML     24K 
29: R19         Segment Data                                        HTML     42K 
30: R20         Summary of Significant Accounting Policies          HTML    148K 
                (Policies)                                                       
31: R21         Description of Business (Tables)                    HTML     86K 
32: R22         Summary of Significant Accounting Policies          HTML     31K 
                (Tables)                                                         
33: R23         Leasehold Improvement and Equipment, Net (Tables)   HTML     27K 
34: R24         Accounts Receivable (Tables)                        HTML     25K 
35: R25         Accounts Payable, Other Payables and Accruals       HTML     28K 
                (Tables)                                                         
36: R26         Income Taxes (Tables)                               HTML     33K 
37: R27         Loss on disposal of a subsidiary (Tables)           HTML     30K 
38: R28         Leases (Tables)                                     HTML     37K 
39: R29         Related Parties Transactions (Tables)               HTML     46K 
40: R30         Segment Data (Tables)                               HTML     35K 
41: R31         Summary of Subsidiary Information (Details)         HTML     72K 
42: R32         Description of Business (Details Narrative)         HTML     30K 
43: R33         Schedule of Estimate Useful Life of Assets          HTML     32K 
                (Details)                                                        
44: R34         Summary of Exchange of Currency Rates (Details)     HTML     25K 
45: R35         Summary of Significant Accounting Policies          HTML     98K 
                (Details Narrative)                                              
46: R36         Schedule of Leasehold Improvements and Equipment    HTML     34K 
                (Details)                                                        
47: R37         Leasehold Improvement and Equipment, Net (Details   HTML     22K 
                Narrative)                                                       
48: R38         Schedule of Accounts Receivable and Allowance       HTML     27K 
                (Details)                                                        
49: R39         Schedule of Accounts Payable, Other Payables and    HTML     30K 
                Accruals (Details)                                               
50: R40         Schedule of Income Tax Expenses Benefits (Details)  HTML     30K 
51: R41         Schedule of Reconciliation of Effective Income Tax  HTML     33K 
                Rates (Details)                                                  
52: R42         Schedule of Reconciliation of Effective Income Tax  HTML     22K 
                Rates (Details) (Parenthetical)                                  
53: R43         Income Taxes (Details Narrative)                    HTML     31K 
54: R44         Schedule of Loss on Disposal of A Subsidiary        HTML     39K 
                (Details)                                                        
55: R45         Loss on disposal of a subsidiary (Details           HTML     32K 
                Narrative)                                                       
56: R46         Schedule of Future Minimum Payments Under           HTML     34K 
                Long-Term Non -Cancelable Operating Leases                       
                (Details)                                                        
57: R47         Schedule of Other Information of Operating Leases   HTML     30K 
                (Details)                                                        
58: R48         Leases (Details Narrative)                          HTML     31K 
59: R49         Schedule of Amount Due to Related Parties           HTML     48K 
                (Details)                                                        
60: R50         Reserves (Details Narrative)                        HTML     21K 
61: R51         Schedule of Segment Data (Details)                  HTML     65K 
64: XML         IDEA XML File -- Filing Summary                      XML    117K 
62: XML         XBRL Instance -- form20-f_htm                        XML    904K 
63: EXCEL       IDEA Workbook of Financial Reports                  XLSX    107K 
 7: EX-101.CAL  Inline XBRL Taxonomy Extension Calculation           XML    152K 
                Linkbase Document -- hhegf-20221231_cal                          
 8: EX-101.DEF  Inline XBRL Taxonomy Extension Definition Linkbase   XML    342K 
                Document -- hhegf-20221231_def                                   
 9: EX-101.LAB  Inline XBRL Taxonomy Extension Label Linkbase        XML    703K 
                Document -- hhegf-20221231_lab                                   
10: EX-101.PRE  Inline XBRL Taxonomy Extension Presentation          XML    526K 
                Linkbase Document -- hhegf-20221231_pre                          
 6: EX-101.SCH  Inline XBRL Taxonomy Extension Schema Document --    XSD    122K 
                hhegf-20221231                                                   
65: JSON        XBRL Instance as JSON Data -- MetaLinks              288±   424K 
66: ZIP         XBRL Zipped Folder -- 0001493152-23-014957-xbrl      Zip    449K 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM  i 20-F

OR

OR

OR

Commission File Number:  i 333-213314

 i HUAHUI EDUCATION GROUP LIMITED

(Exact name of Registrant as specified in its charter)

 i Cayman Islands

(Jurisdiction of incorporation or organization)

 i 13^th Floor, Building B1, Wisdom Plaza,

 i Qiaoxiang Road, Nanshan District

 i Shenzhen,  i Guangdoang Province,  i China  i 518000

(Address of principal executive offices)

 i Junze Zhang, President

Tel:  i (86)  i 13728708818

Email:  i junze_zhang@126.com

 i 13^th Floor, Building B1, Wisdom Plaza,

 i Qiaoxiang Road, Nanshan District

 i Shenzhen,  i Guangdoang Province,  i China  i 518000

(Name, Telephone, email and/or fax number and address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

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

 i 302,734,900 Ordinary Shares, $0.0001 par value, at December 31, 2022

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.

Yes ☐  i No ☒

If the report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15D of the Securities Exchange Act of 1934.

Yes ☐  i No ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 i Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 i Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.

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

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

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

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

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

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow:

Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐  i No ☒

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report on Form 20-F, other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Securities Act and the Exchange Act, as applicable by law. Such statements include, in particular, statements about our plans, strategies and prospects, and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words.

If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Annual Report on Form 20-F and other reports and registration statements filed by us with the U.S. Securities and Exchange Commission (“SEC”). Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We will not update the forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements. Forward-looking information and statements should not be viewed as predictions and should not be the primary basis upon which investors evaluate us. Any investor in our Ordinary Shares should consider all risks and uncertainties disclosed in our filings with the SEC, all of which are accessible on the SEC’s website at http://www.sec.gov. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

FINANCIAL STATEMENTS AND CURRENCY PRESENTATION

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and publish our financial statements in United States Dollars.

REFERENCES

In this Annual Report, “China” refers to all parts of the People’s Republic of China other than the Special Administrative Region of Hong Kong. The terms “HHEG,” “we,” “our,” “us,” and the “Company” refer to Huahui Education Group Limited, a holding company incorporated in the Cayman Islands with no material operations of its own. As a holding company with no material operations of our own, we conduct operations in China through our operating subsidiaries, Zhongdehui (Shenzhen) Education Development Co., Limited, incorporated in the PRC, and Shenzhen Huahui Media Technology Co., Limited, also incorporated in the PRC (together, the “Operating Subsidiaries. References to “dollars,” “U.S. Dollars” or “US$” are to United States Dollars and “RMB” are to Chinese Renminbi.

INTRODUCTION

Huahui Education Group Limited is a holding company incorporated in the Cayman Islands whose operations are conducted through operating subsidiaries in the People’s Republic of China (the “PRC” or “China”) and holding company subsidiaries in the Seychelle Island and Hong Kong. Our corporate structure does not contain any= variable interest entities. We are not a Chinese operating company and our structure involves unique risks to investors. As used herein the terms “we,” “us,” “our,” “Huahui” and the “Company” means Huahui Education Group Limited, a Cayman Islands corporation, and its subsidiaries.

Through its indirect wholly-owned subsidiary, Zhongdehui (Shenzhen) Education Development Co., Limited (“ZDSE”) the Company is engaged in the business of professional management coaching, including researching, developing and applying methods for helping individuals to improve their personal and professional leadership skills and effectiveness. ZDSE’s clients consist of executive managers from large scale, small and medium-sized enterprises, as well as professionals and employees in various fields. Through another indirect wholly-owned subsidiary, Shenzhen Huahui Media Technology Co., Limited, we provide business planning, event planning and production.

Corporate Structure

The following chart sets forth our corporate structure:

Huahui Education Group Limited is the public company in which investors hold our Ordinary Shares and as a holding company does not conduct any of our operations. All of our Operating Subsidiaries, except for an 80% owned subsidiary, are wholly-owned. A listing identifying the place of incorporation, type of legal entity, principal activity and the ownership interest in our Company and each of its subsidiaries follows:

Huahui Group Stock Limited (“HGSL”) was incorporated under the laws of the Republic of Seychelles on May 17, 2017. It became a wholly owned subsidiary of the Company in July 2019 as a result of the Share Exchange described above. HGSL has a wholly owned subsidiary, formed under the laws of Hong Kong, Huahui Group (HK) Co., Limited (“HGHK”), which, in turn, has a wholly owned subsidiary corporation formed under the laws of the Peoples Republic of China (the “PRC” or “China”), Huahui (Shenzhen) Education Management Co., Limited (“HEMC”). HEMC owns 100% of Shenzhen Huahui Shangxing Education Consulting Co., Limited (“HSEC”). HSEC owns 100% of Zhongdehui (Shenzhen) Education Development Co., Limited (“ZDSE”), which is currently the Company’s primary operating subsidiary. HSEC also owns 100% of Shenzhen Huahui Media Technology Co., Limited (“HHMT”), which commenced operations in August 2020 and Huahui Jinming (Shenzhen) Education Technology Co., Limited (“JMET”), JEMT started operation in June 2022,as well as 80% of Shandong Yuli Big Data Technology Co., Limited (“SDYL”), SDYL initiated operations in May 2022.

HGSL has a second wholly owned subsidiary formed under the laws of the Republic of Seychelles, Huahui Group Co., Limited (“HGCL”), which owns 100% of Huahui Technology (HK) Co., Limited, a Hong Kong corporation formed in March 2020 (“HTCL”). HTCL, which has not commenced operations, has a wholly-owned subsidiary, Huahui (Shenzhen) Education Technology Co., Limited (“HSET”), formed in July 2020 under the laws of the PRC.

HGSL intends to develop additional businesses through one or more subsidiaries in artificial intelligence technology system development, art training and vocational skills training. There can be no assurance that any of these proposed businesses will ever be developed.

Huahui Group (HK) Co., Limited (“HGHK”) was incorporated in Hong Kong on January 4, 2017 as an investment holding limited liability company. The original shareholder, Junze Zhang, held 100% of the shares and transferred all of the shares to HGSL on April 20, 2018.

Huahui (Shenzhen) Education Management Co., Limited (“HEMC”), was established under the laws of the PRC on March 28, 2017 by HGHK with a registered capital of RMB 100,000. HEMC is currently in the business of providing consulting services.

Shenzhen Huahui Shangxing Education Consulting Co., Limited (“HSEC”) was incorporated in the PRC on January 5, 2018 as an education consulting limited liability company. The original shareholders, Qixuan Zhang (99%) and Weiqing Xu (1%), each transferred his shares to HEMC on May 4, 2018 for RMB 0.5. HSEC has not yet commenced operations. HSEC has four wholly-owned subsidiaries - Shenzhen Huahui Media Technology Co., Limited, Huahui Jinming (Shenzhen) Education Technology Co., Limited, Zhongdehui (Shenzhen) Education Development Co., Limited and Shandong Yuli Big Data Technology Co., Limited.

Shenzhen Huahui Media Technology Co., Limited (“HHMT”) was incorporated in the PRC on August 25, 2020 as a wholly owned subsidiary of HSEC. HHMT’s business includes several areas related to business planning and to event planning and production. HHMT has one wholly-owned subsidiary, Shenzhen Jiarui Media Co., Limited (“SJMC”), which was formed on June 4, 2021 under the laws of the PRC. SJMC’s principal business is essentially the same as that of HHMT.

Huahui Jinming (Shenzhen) Education Technology Co., Limited (“JMET”) was incorporated in the PRC on July 8, 2020 as a wholly owned subsidiary of HSEC. JEMT started operation in June 2022, holding training courses for individuals and enterprises to improve their professional and management skills

Zhongdehui (Shenzhen) Education Development Co., Limited (“ZDSE”) was incorporated in the PRC on January 19, 2016 and commenced operations in April 2016. The original shareholders, Qing Zuo (50%), Mengling Zhang (20%), Henghui Investment Consulting (Shenzhen) Partnership (10%) and Hengqing Investment Consulting (Shenzhen) Partnership (20%), each transferred his/her/its shares to HSEC on June 27, 2018 for RMB 1,000, RMB 400, RMB 200 and RMB 400, respectively. ZDSE is in the business of professional leadership development.

ZDSE has the following wholly-owned subsidiaries: Zhongdehui (Shenyang) Education Consulting Co., Limited (“SYZDH”), established as of December 29, 2020, and Zhongdehui (Guangzhou) Education Consulting Co., Limited (“GZZDH”), established as of December 28, 2020. SYZDH has taken over the business of ZDSE’s Shenyang branch and GZZDH has taken over the business of ZDSE’s Guangzhou branch. On February 26, 2021, ZDSE’s Shenzhen Branch established a wholly-owned subsidiary, Shenzhen Zhengxinhui Education Technology Co., Limited, which was sold to an unrelated third party on June 28, 2021. Zhongdehui (JiNan) Education Consulting Co., Limited (“JNZDH”) was established as of April 14, 2022, engaged in researching, developing and applying methods for helping individuals to improve their personal and professional leadership skills and effectiveness. ZDSE’s clients include executive managers from large scale, small and medium-sized enterprises, as well as professionals and employees in various fields.

Shandong Yuli Big Data Technology Co., Limited (“SDYL”) was incorporated in the PRC on December 14, 2021, and is an 80% owned subsidiary of HSEC; 20% of SDYL’s shares are owned by the corporate representative Xinwen Yang. Twenty percent of SDYL’s shares are owned by SYDL’s Legal Representative, Xinwen Yang. SDYL’s business model of “HR Technology + Platform + Service” utilizes human resources (“HR”) technology to build a HR platform that will provide payroll, personnel recruitment, labor dispatch, flexible employment, fiscal and tax planning and legal HR consultation through a mobile app and SDYL’s website. SDYL started operation in May 2022.

Significant Factors Relating to PRC Government Oversight of Our Operating Businesses.

Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions 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. China’s economy differs from the economies of other countries in many respects, including with respect to the level of development, growth rate, amount of government involvement, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth over the past four decades, growth has been uneven across different regions and among various economic sectors. The Chinese government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are currently applicable to us. In addition, in the past the Chinese government implemented certain measures, including interest rate increases, to manage the pace of economic growth and prevent the economy from overheating. These measures may cause decreased economic activity in China, which may adversely affect our business and results of operations.

Status under Holding Foreign Companies Accountable Act

In December 2021, the SEC adopted rules (the “Final Rules”) to implement the Holding Foreign Companies Accountable Act (the “HFCAA”). The HFCAA includes requirements for the SEC to identify issuers who file annual reports with audit reports issued by independent registered public accounting firms located in foreign jurisdictions that the Public Company Accounting Oversight Board (“PCAOB”) is unable to inspect or investigate completely because of a position taken by a non-U.S. authority in the accounting firm’s jurisdiction (“Commission-Identified Issuers”). The HFCAA also requires that, to the extent that the PCAOB has been unable to inspect an issuer’s independent registered public accounting firm for three consecutive years since 2021, the SEC shall prohibit the issuer’s securities registered in the United States from being traded on any national securities exchange or over-the-counter markets in the United States. In December 2022, the Accelerating Holding Foreign Companies Accountable Act amended the HFCAA to shorten the three-year period to two years.

Under the Final Rules, the SEC adopted submission and disclosure requirements by amending Form 10-K and other annual reporting forms and established procedures to identify issuers and prohibit the trading of the securities of certain registrants as required by the HFCAA. Specifically, the Final Rules require each Commission-Identified Issuer to submit documentation to the SEC annually on or before its annual report due date that establishes that it is not owned or controlled by a government entity in its public accounting firm’s foreign jurisdiction and require additional specified disclosures by “foreign issuers” as defined in Rule 3b-4 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The SEC identifies an issuer as a Commission-Identified Issuer after the issuer files its annual report and on a rolling basis, and will impose an initial trading prohibition on an issuer as soon as practicable after it has been conclusively identified as a Commission-Identified Issuer for two consecutive years. To end an initial or subsequent trading prohibition, a Commission-Identified Issuer must certify that it has retained a registered public accounting firm that the PCAOB has determined it is able to inspect or investigate. To make that certification, the Commission-Identified Issuer must file financial statements that include an audit report signed by such a registered public accounting firm.

In August 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the People’s Republic of China, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. PCAOB staff members conducted on-site inspections and investigations from September to November 2022, and in December 2022, the PCAOB announced that it has secured complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and confirmed that until such time as the PCAOB issues any new determination, there are no Commission-Identified Issuers at risk of having their securities subject to a trading prohibition under the HFCAA.

Pan-China Singapore PAC (“Pan-China Singapore”), the independent registered public accounting firm that issued the audit report included in this Annual Report, is subject to PCAOB inspections. Pan-China Singapore is headquartered in Singapore and there are no limitations in Singapore on PCAOB inspections. Therefore, we believe that, as of the date of this Annual Report, we are not at risk of having our securities be subject to a trading prohibition under the HFCAA. If in the future the PCAOB is unable to conduct inspections of our auditors’ work papers in China it would make it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. As a result, our investors may be deprived of the benefits of the PCAOB’s oversight of our auditor through such inspections and they may lose confidence in our reported financial information and procedures and the quality of our financial statements. We cannot assure you whether Nasdaq or other regulatory authorities will apply additional or more stringent criteria to us. Such uncertainty could cause the market price of our Ordinary Shares to be materially and adversely affected.

Recent Regulatory Developments in China

The PRC government has recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities that are conducted outside of China and over foreign investment in China-based companies. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China, including enforcement actions against illegal activities in the securities market, enhancing supervision over China-based companies listed outside of China using the variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. For example, in July 2021, the relevant PRC government authorities made public the Opinions on Intensifying Crack-Down on Illegal Securities Activities (the “Securities Opinions”) which 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 measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. In November 2021, the Cyberspace Administration of China (the “CAC”) released the draft Administrative Regulations on Cyber Data Security for public comments, which requires, among others, that a prior cybersecurity review should be required for listing abroad of data processors which process over one million users’ personal information, and the listing of data processors in Hong Kong which affects or may affect national security. On February 17, 2023, the CSRC released the Overseas Listing Trial Measures, and five relevant guidelines, which became effective on March 31, 2023, requiring the Chinese domestic companies’ overseas offerings and listings of equity securities be filed with the CSRC.

The Chinese government may further promulgate relevant laws, rules and regulations that may impose additional and significant obligations and liabilities on overseas listed PRC companies regarding data security, cross-border data flow, anti-monopoly and unfair competition, and compliance with China’s securities laws. It is uncertain whether or how these new laws, rules and regulations and the interpretation and implementation thereof may affect us, but among other things, our ability to obtain external financing through the issuance of equity securities in the United States, Hong Kong or other markets could be negatively affected, and as a result, the trading prices of our Ordinary Shares could significantly decline or become worthless. For a detailed description of risks related to our doing business in China, please see the section of this Annual Report titled “Item 3D. Risk Factors—Risks Related to Our Doing Business in the PRC.”

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. For more details, see “Item 3D. Risk Factors—Risks Related to Doing Business in China— Uncertainties with respect to the PRC legal system and the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us or result in a material adverse change to our subsidiaries’ business operations, and damage our and our subsidiaries’ 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.”

In light of such developments, the SEC has imposed enhanced disclosure requirements on China-based companies seeking to register securities with the SEC. Any future PRC, U.S. or other rules and regulations that place restrictions on capital raising or other activities by companies with extensive operations in China could adversely affect our business and results of operations. Any such action, once taken by the Chinese government, could significantly limit or completely hinder our ability to offer or continue to offer our securities to investors, and could cause the value of our Ordinary Shares to significantly decline or become worthless. 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, our business in China and United States may also be adversely affected. For more details, see “Item 3D. Risk Factors—Risks Related to Doing Business in China— Uncertainties with respect to the PRC legal system and the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us or result in a material adverse change to our subsidiaries’ business operations, and damage our and our subsidiaries’ 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.”

Cybersecurity

As we conduct substantially all of our operations in China, we are subject to legal and operational risks associated with having substantially all of our operations in China, including risks related to the legal, political and economic policies of the Chinese 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. New laws, such as the Measures for Cybersecurity Review, could significantly limit or completely hinder our ability to offer or continue to offer securities to overseas investors and cause such securities to significantly decline in value or to be worthless.

The PRC, through the Cyberspace Administration of China (the “CAC”), has recently proposed new rules and enacted new laws that would require companies collecting or holding large amounts of data to undergo a cybersecurity review prior to listing in foreign countries, a move that would significantly tighten oversight over China-based Internet giants. Pursuant to Article 6 of the Measures for Cybersecurity Review (Draft for Comments), companies holding data on more than 1 million users must now apply for cybersecurity approval when seeking listings in other nations due to the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.” On January 4, 2022 and effective February 15, 2022, the CAC issued the Revised Measures on Cyberspace Security (the “Revised Measures”), which requires that operators of critical information infrastructure (“CII”) intending to procure network products and services that may affect national security undergo cybersecurity review. This has impacted and could potentially impact a broad range of data-rich tech companies. The Revised Measures expand the scope of reviewed business entities to now include network platform (“NP”) operators intending to engage in certain activities, such as applying to list abroad. The Revised Measures establish a Cybersecurity Review Office (the “CRO”), an administrative body within the CAC, to formulate the regulations for cybersecurity review and to lead the cybersecurity review process. Applicable CII operators and NP operators are required to submit an application to the CRO, and the CRO will assess whether a cybersecurity review is required.

If an entity is a CII operator or a NP operator, it is required to apply for cybersecurity review if any of the following three conditions is met: (i) the CII operator proposes to procure network products and services that affect or may affect national security; (ii) the NP operator proposed to carry out data processing activities that affect or may affect national security; (iii) or the NP operator controls personal information of more than 1,000,000 users and proposes to apply for overseas listing. The term “overseas listings” is often interpreted as listings outside of China, such as in the U.S. And, “network products and services” include core network equipment, high capability computers and servers, high capacity data storage, large databases and applications, network security equipment, cloud computing services; “data processing” means the collection, storage, use, processing, transmission, provision and disclosure of data.

The Company is in the business of professional management coaching through ZDSE and business planning and event planning and production through HHMT, which do not involve the collection of user data, implicate cybersecurity or involve any other type of restricted industry. Based on our understanding of currently applicable PRC laws and regulations, our Operating Subsidiaries are not subject to cybersecurity review under the Revised Measures nor are the Shares subject to the review or prior approval of the CAC or the CRSC. Uncertainties still exist, however, due to the possibility that laws, regulations or policies in the PRC could change rapidly in the future. Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CRSC or the CAC could significantly limit or completely hinder our ability to offer or continue to offer securities to overseas investors and could cause such securities to significantly decline in value or to be worthless.

PART I

Item 1. Identity of Directors, Senior Management and Advisors

Not Applicable

Item 2. Offer Statistics and Expected Timetable

Not Applicable

Item 3. Key Information

A. Reserved

B. Capitalization and Indebtedness

Not applicable

C. Reasons for the offer and use of proceeds.

Not applicable

D. Risk Factors

Investing in our Ordinary Shares involves a high degree of risk and uncertainty. You should carefully consider the risks and uncertainties described below before investing. Our business, prospects, financial condition and results of operations could be adversely affected due to any of the following risks. In that case, the value of our ordinary shares could decline, and you could lose all or part of your investment. These risk factors include, but are not limited to:

Risks Related to Business

General Business Risks

Risks Related to Doing Business in the People’s Republic of China

Risks Related to Our Ordinary Shares

Certain Legal Consequences of Foreign Incorporation and Operations

Risks Related to Our Business

There are doubts about our company’s ability to continue as a going concern.

Our company’s independent auditors have raised doubts about our ability to continue as a going concern. There can be no assurance that sufficient funds that will be required during the next year or thereafter will be generated from operations or that funds will be available from external sources, such as securities, debt or equity financing or other potential sources. We intend to overcome the circumstances that impact our ability to remain a going concern through a combination of new sources of revenues, with interim cash flow deficiencies being addressed through additional financing. We anticipate raising additional funds through public or private financing, securities financing and/or strategic relationships or other arrangements in the near future to support our business operations; however, we may not have commitments from third parties for a sufficient amount of additional capital. We cannot be certain that any such financing will be available to us on acceptable terms, or at all, and our failure to raise capital when needed could limit our ability to continue our operations. Our ability to obtain additional funding will determine if we can continue as a going concern. Failure to secure additional financing in a timely manner and on favorable terms would have a material adverse effect on our financial performance, results of operations and share price and require us to curtail or cease operations, sell off assets, seek protection from creditors through bankruptcy proceedings, or otherwise. Furthermore, additional equity financing may be dilutive to the holders of our shares, and debt financing, if available, may have onerous terms. including restrictive covenants. Any additional financing could have a negative effect on our shareholders.

Our Operating Subsidiaries limited operating histories makes it difficult to evaluate their future prospects and results of operations.

The Company, through its Operating Subsidiaries, is in the process of developing its businesses and has a limited operating history. You should consider our Operating Subsidiaries’ future prospects in light of the risks and uncertainties experienced by early-stage companies. Some of these risks and uncertainties relate to their ability to:

If our Operating Subsidiaries are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.

We envision a period of rapid growth that may impose a significant burden on our administrative and operational resources which, if not effectively managed, could impair our Operating Subsidiaries’ growth.

Our strategy envisions a period of rapid growth that may impose a significant burden on our administrative and operational resources. The growth of our Operating Subsidiaries’ businesses will require significant investments of capital and management’s close attention. Our ability to effectively manage our Operating Subsidiaries’ growth will require us to substantially expand the capabilities of our administrative and operational resources and to attract, train, manage and retain qualified management, IT, sales and marketing, coaching and other personnel; we may be unable to do so. In addition, our failure to successfully manage our Operating Subsidiaries’ growth could result in their sales not increasing commensurately with capital investments. If we are unable to successfully manage our Operating Subsidiaries’ growth, we may be unable to achieve our goals.

We may not be able to raise the additional capital necessary to execute our and our Operating Subsidiaries’ business strategies, which could result in the curtailment of their operations.

We will need to raise additional funds to fully fund our Operating Subsidiaries’ existing operations and for development and expansion of their businesses. We have no current arrangements with respect to sources of additional financing and the needed additional financing may not be available on commercially reasonable terms, on a timely basis or at all. The inability to obtain additional financing when needed would have a negative effect on us, including possibly requiring us to curtail our Operating Subsidiaries’ operations. If any future financing involves the sale of equity securities, the Shares held by our shareholders could be substantially diluted. If we borrow money or issue debt securities, we will be subject to the risks associated with indebtedness, including the risk that interest rates may fluctuate and the possibility that we may not be able to pay principal and interest on the indebtedness when due. Insufficient funds would prevent us from implementing our and our Operating Subsidiaries’ business plans and would require us to delay, scale back or eliminate certain of their operations.

We will be required to hire and retain skilled managerial, IT, sales and marketing and coaching personnel.

Our continued success depends in large part on our ability to attract, train, motivate and retain qualified management, IT, sales and marketing and coaching personnel. Any failure to attract and retain the required managerial, technical, sales and coaching personnel that are integral to our Operating Subsidiaries’ business may have a negative impact on our operations, which would have a negative impact on revenues. There can be no assurance that we will be able to attract and retain skilled persons and the loss of skilled coaches or managerial, technical or sales personnel would adversely affect us.

We are dependent upon our officers and management for direction and the loss of any of these persons could adversely affect our operations and results.

We are dependent upon our officers for implementation of our proposed strategy and execution of our business plan. The loss of any of our officers could have a material adverse effect upon our results of operations and financial position. We do not maintain “key person” life insurance for any of our officers. The loss of any of our officers could delay or prevent the achievement of our business objectives.

We are currently dependent on our primary operating subsidiary, ZDSE, for our revenue.

Although we currently have a total of 15 subsidiaries, we are essentially dependent on ZDSE for our revenue. Accordingly, our financial condition and results of operations are, and will continue to be, directly tied to those of ZDSE unless and until our other subsidiaries commence generating significant revenue. There can be no assurance that either ZDSE or any of our other direct or indirect subsidiaries will generate net income at any future time.

We may be sued or become a party to litigation, which could require significant management time and attention and result in significant legal expenses and may result in an unfavorable outcome, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may be subject to a number of lawsuits from time to time arising in the ordinary course of our business. The expense of defending ourselves against such litigation may be significant. The amount of time to resolve these lawsuits is unpredictable and defending ourselves may divert management’s attention from the day-to-day operations of our business, which could adversely affect our business, results of operations and cash flows. In addition, an unfavorable outcome in such litigation could have a material adverse effect on our business, results of operations and cash flows.

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

We are an “emerging growth company,” as defined in the JOBS Act and take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

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. The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act that allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

We have identified material weaknesses in our internal control over financial reporting. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our Shares.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. Ineffective internal control could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Shares.

We have identified material weaknesses in our internal control over financial reporting in the Company and its subsidiaries. As defined in Regulation 12b-2 under the Exchange Act, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented, or detected on a timely basis. Specifically, we determined that we had the following material weaknesses in our internal control over financial reporting: (i) we do not have a financial expert on U.S. GAAP in top management; (ii) we do not have an audit committee; and (iii) we do not have standard procedures for all accounting cycles. Although the financial statements and footnotes are reviewed by our management, we do not have a formal policy to review significant accounting transactions and the accounting treatment of such transactions.

Even if we develop effective internal controls over financial reporting, such controls may become inadequate due to changes in conditions, or the degree of compliance with such policies or procedures may deteriorate, which could result in the discovery of additional material weaknesses and deficiencies. In any event, the process of determining whether our existing internal control over financial reporting is compliant with Section 404 of the Sarbanes-Oxley Act (“Section 404”) and is sufficiently effective requires the investment of substantial time and resources by our senior management. As a result, this process may divert internal resources and take a significant amount of time and effort to complete. In addition, we cannot predict the outcome of this process and whether we will need to implement remedial actions in order to establish effective controls over financial reporting. The determination of whether or not our internal controls are sufficient, and any remedial actions required could result in us incurring additional costs that we did not anticipate, including the hiring of additional outside consultants. We may also fail to timely complete our evaluation, testing and any remediation required to comply with Section 404.

We are required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. However, for as long as we are a “smaller reporting company,” our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. While we could be a smaller reporting company for an indefinite amount of time, and thus relieved of the above-mentioned attestation requirement, an independent assessment of the effectiveness of our internal control over financial reporting could detect problems that our management’s assessment might not. Such undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.

There may be conflicts of interest between our management and our shareholders.

Conflicts of interest create the risk that our officers and directors may have an incentive to act adversely to the interests of the Company. A conflict of interest may arise between our officers and directors’ personal pecuniary interests and their fiduciary duty to our shareholders.

ZDSE’s business depends on the market recognition of its brand. If ZDSE is not able to maintain its reputation and enhance its brand recognition, its business and operating results may be materially and adversely affected.

ZDSE’s track record in providing quality coaching services will determine whether ZDSE becomes recognized as a leading brand in the industry. We believe that market recognition of ZDSE’s brand is a key factor to ensuring our future success. As ZDSE continues to grow in size and broaden the scope of its program and services, however, it may become increasingly difficult to maintain the quality and consistency of the services it offers, which may negatively impact its brand and the popularity of its products and services offered thereunder.

ZDSE’s brand value will also be affected by client perceptions. Those perceptions are affected by a number of factors; some of them are based on first-hand observation of ZDSE’s service quality while others may be based on indirect information from media or other sources. Incidents and any negative publicity related thereto, even if factually incorrect, may lead to significant deterioration of ZDSE’s brand image and reputation, and consequently negatively affect clients’ interest in its services and products, as well as top-notch executive coaches’ interest in being associated with its brand. Particularly in the age of digital media and social network, impacts of negative publicity associated with any single incident could be easily amplified and potentially cause impacts that go beyond our estimation or control.

In addition, scientific studies on education are constantly evolving and new or innovative conclusions on education methodologies or philosophies may affect clients’ perceptions of ZDSE’s services and products. If ZDSE is unable to maintain its reputation, enhance its brand recognition or increase positive awareness of its coaching products and services, it may be difficult to maintain and grow client enrollment or attract more business partners to join ZDSE’s network, and its business and growth prospects may be materially and adversely affected.

If ZDSE fails to maintain and increase its client base, our revenues may decline, and we may not be able to sustain profitability.

The success of our ZDSE’s business depends largely on the number of clients. Therefore, ZDSE’s ability to continue to attract new clients and to retain existing clients is critical to its continued success and growth. ZDSE’s client enrollment is affected by several factors, including its ability to develop new program materials and improve existing modules, expand its geographic reach, manage its growth while maintaining consistent and high coaching and service quality, effectively market and precisely target its services to a broader base of prospective clients and respond effectively to competition. If ZDSE is unable to continue to attract a sufficient number of new clients or to retain existing clients, its revenues may decline or it may not be able to sustain profitability, either of which could have a material adverse effect on its business, financial condition and results of operations.

ZDSE’s business relies on its ability to recruit, train and retain dedicated and qualified coaches and management personnel.

ZDSE’s coaches are critical to the quality of its services and reputation. We seek to recruit, train and retain qualified and dedicated coaches; however, there is a limited pool of executive coaches with the attributes we require. In addition, any foreign coaches we hire must hold valid working permits, which may not be obtained in a timely manner, or at all. Despite our various initiatives, investments to secure qualified personnel and competitive compensation, we still may not be able to recruit, train and retain sufficient qualified coaches to keep pace with our growth while maintaining consistent coaching quality in the different markets we serve. A shortage of qualified coaches or a deterioration in the quality of our coaches’ services, whether actual or perceived, or a significant increase in the average compensation paid by our competitors to their coaches would have a material adverse effect on our business, financial condition and results of operations.

Competition

The leadership and executive coaching market in China is rapidly evolving, highly fragmented and intensely competitive with relatively easy entry. Competition in this industry may persist and even intensify. As more competitors enter the market, ZDSE will have to compete based on brand image, program content and structure and service quality. New competitors may enter the market and one or more of our competitors may develop and implement training courses or methodologies that may adversely affect ZDSE’s ability to sell its services to new clients. Competitors continually introduce new programs and services that may compete directly with ZDSE’s services, or that may make its programs uncompetitive or obsolete. Larger competitors may have superior abilities to compete for clients and skilled professionals, reducing ZDSE’s ability to deliver quality work to its clients. Some of our competitors may have greater financial or other resources than we do. We cannot assure you that ZDSE will be able to compete successfully against existing or potential competitors, and if ZDSE fails to gain or maintain, or if it loses market share, our business, financial condition and results of operations may be materially and adversely affected.

ZDSE may not be successful in introducing new products or enhancing its existing products.

ZDSE currently offers only one module sequence - “The Way of Management.” It intends to continue developing new products, as well as further enhancing its existing products. This process is subject to risks and uncertainties, such as unexpected technical, operational, logistical or other problems that could delay the process temporarily or permanently. Moreover, we cannot assure you that any of these new products or enhancements of existing products will fulfill client needs, match the quality or popularity of those developed by our competitors, achieve widespread market acceptance or generate incremental revenues.

In addition, introducing new products or enhancing existing products requires us to make various investments in program and materials development and management, incur personnel expenses and potentially reallocate other resources. If ZDSE is unable to develop new products or cannot do so in a cost-effective manner or is otherwise unable to manage effectively the quality of those products, our financial condition and results of operations could be adversely affected.

General Business Risks

Our success depends on the continuing efforts of our senior management team and other key personnel and our business may be harmed if we lose their services.

Our success depends in part on the continued application of services, efforts and motivation of our senior management team and key personnel. If one or more of our senior management members or key personnel are unable to continue in their present positions, we may not be able to find replacements successfully, and our business may be disrupted.

We will need to continue to hire additional personnel as our business grows. A shortage in the supply of personnel with the requisite skills could negatively impact our ability to manage our existing products and services, launch new products and expand our operations. There is competition for experienced personnel in the executive coaching industry and key personnel could leave us to join our competitors. Losing the services of our experienced personnel may be disruptive to and cause uncertainty for our business, which may have a material adverse effect on our business, financial condition and results of operations.

We could incur additional liabilities or our reputation could be damaged if we do not protect client data or if our information systems are breached.

We are dependent on information technology networks and systems to process, transmit and store electronic information and to communicate between our locations around China and with our clients. Security breaches of this infrastructure could lead to shutdowns or disruptions of our systems and potential unauthorized disclosure of confidential information. We are also required at times to manage, utilize and store sensitive or confidential client or employee data. As a result, we are subject to laws and regulations designed to protect this information. If any person, including any of our employees, mismanages or misappropriates such data, we could be subject to monetary damages, fines and/or criminal prosecution. Unauthorized disclosure of sensitive or confidential client or employee data, whether through systems failure, employee negligence, fraud or misappropriation could damage our reputation and cause us to lose clients.

Legal requirements relating to the collection, storage, handling, and transfer of personal data continue to evolve. China’s Cybersecurity Law (“CSL”), which came into effect in June 2017, regulates how organizations should protect digital information and outlines measures to safeguard Internet systems, products and services against cyberattacks. The CSL was supplemented in May 2018 with the Personal Information Security Specification, which was amended and strengthened in February 2019. Although these amendments attempt to ease the compliance burden placed on businesses, the laws could impose significant limitations, require changes to our business or restrict our use or storage of personal information, which may increase our compliance expenses and make our business more costly or less efficient to conduct.

Our Operating Subsidiaries’ businesses are sensitive to general economic conditions.

Our Operating Subsidiaries’ businesses may be negatively affected by a downturn in general economic conditions and rising labor and material costs in China. Furthermore, a serious and/or prolonged economic downturn combined with a negative or uncertain political climate could adversely affect their clients’ financial condition and the amount they are able to spend for such services. These conditions may reduce the demand for our Operating Subsidiaries’ services or depress the pricing of those services and have an adverse impact on our results of operations. Changes in global economic conditions may also shift demand to services for which we do not have competitive advantages, and this could negatively affect the amount of business that we are able to obtain. Such economic, political and client spending conditions are influenced by a wide range of factors that are beyond our control and that we have no comparative advantage in forecasting. If we are unable to successfully anticipate these changing conditions, we may be unable to effectively plan for and respond to those changes, and our business could be adversely affected.

ZDSE’s business success also depends in part upon continued growth in the use of coaching. In challenging economic environments, its clients may reduce or defer their spending on new services and solutions in order to focus on other priorities. At the same time, many companies have already invested substantial resources in their current means of conducting their business and they may be reluctant or slow to adopt new approaches that could disrupt existing personnel and/or processes. If growth in the general use of coaching services in business or ZDSE’s clients’ spending on these items declines, or if ZDSE cannot convince its clients or potential clients to embrace new services and solutions, our results of operations could be adversely affected.

In addition, the executive coaching business tends to lag behind economic cycles and, consequently, the benefits of an economic recovery following a period of economic downturn may take longer for ZDSE to realize than other segments of the economy.

Cybersecurity risks and the failure to maintain the integrity of data belonging to our company, employees and customers could expose us to data loss, litigation and liability, and our reputation could be significantly harmed.

We collect and retain large volumes of data relating to our business and from our employees and clients for business purposes, including for transactional and promotional purposes, and our various information technology systems enter, process, summarize and report such data. The integrity and protection of this data is critical to our business. We are subject to significant security and privacy regulations, as well as requirements imposed by the credit card industry. Maintaining compliance with these evolving regulations and requirements could be difficult and may increase our expenses. In addition, a penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of data could result in theft, loss or fraudulent or unlawful use of data relating to our company, our employees or our customers, which could harm our reputation, disrupt our operations or result in remedial and other costs, fines or lawsuits.

Our business is subject to risks arising from epidemic diseases, such as the recent COVID-19 outbreak.

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. On March 11, 2020, the World Health Organization categorized it as a pandemic. To reduce the spread of COVID-19, the Chinese government has employed measures including city lockdowns, quarantines, travel restrictions, suspension of business activities and school closures.

Our business has been and may continue to be adversely impacted. Our Operating Subsidiaries are located in China, as are all of their employees and customers. Due to the outbreak, ZDSE (our primary operating subsidiary) had to temporarily suspend offline teaching and conduct all of its coaching and student support activities online. As a result of the epidemic, ZDSE’s revenues in 2020 fell by 48% compared to 2019,ZDSE’s revenues in 2021 fell by 52% compared to 2019. In addition, lockdown measures and travel restrictions impeded ZDSE’s ability to work towards expanding its coaching network. We resumed routine operations on June 1, 2020; however, due to recurrences of the coronavirus in China, ZDSE’s revenues in 2022 were 67% below its revenue for the fiscal year ended December 31, 2019.

The long-term downturn brought by and the duration of the COVID-19 outbreak is difficult to assess or predict and the full impact of the virus on our operations will depend on many factors beyond our control. A prolonged slowdown in the Chinese economy and/or negative business sentiment could potentially have a significant negative impact on the executive coaching market. There can be no assurance that there will not be large-scale re-occurrences of COVID-19 in the future. A major resurgence of the epidemic in China could be expected to significantly reduce the demand for our services. An additional negative result of a resurgence would be if the government reinstituted bans on large-scale events and gatherings because such bans could cause the cancellation of many large-scale events that could not be rescheduled, which would have a direct negative impact on HHMT’s revenue. The extent to which the COVID-19 outbreak will impact our business, results of operations and financial condition remains uncertain. Our business, results of operations, financial condition and prospects could be materially adversely affected to the extent that COVID-19 persists in China or harms the Chinese and global economies in general. The Company will continue to pay close attention to the development of the coronavirus epidemic situation and evaluate and actively respond to other possible impacts on the Company’s financial situation and operating results.

We may also experience negative effects from future public health crises beyond our control. These events are impossible to forecast, their negative effects may be difficult to mitigate and they could adversely affect our business, financial condition and results of operations.

Risks Related to Doing Business in the People’s Republic of China

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

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

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

Adverse changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

Recent statements by the PRC government have indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investments in China-based issuers. The PRC government recently 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 using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement.

Currently, these statements and regulatory actions have had no impact on our daily business operations, the ability to accept foreign investments and list our securities on a U.S. or other foreign exchange. However, since these statements and regulatory actions are new, it is highly uncertain how the legislative or administrative regulation making bodies will further respond and what existing or new laws or regulations or detailed implementations and interpretations will be further modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operations, the ability to accept foreign investments and list our securities on a U.S., Hong Kong, or other stock exchanges. There are still substantial uncertainties as to how PRC governmental authorities will regulate overseas listing in practice and whether we are required to obtain any specific regulatory approvals from the CSRC, CAC or any other PRC governmental authorities for our offshore offerings. If the CSRC, CAC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for our future offshore offerings, we may be unable to obtain such approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. Any such circumstance could significantly limit or completely hinder our ability to continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline. Therefore, investors of our company face potential uncertainty from actions taken by the PRC government affecting our business.

All of our business operations are currently conducted in the PRC, under the jurisdiction of the PRC government. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, and control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past 20 years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources.

If for any reason we were to fail to meet the audit requirements of the HFCAA for two consecutive years, we may be prohibited from listing our securities on a national securities exchange, including Nasdaq, or on over-the-counter markets in the United States, which could adversely affect the market price of our Ordinary Shares and our ability to raise capital.

In recent years, the U.S. Congress and regulatory authorities have expressed concerns about challenges in their oversight of financial statement audits of U.S.-listed companies with significant operations in mainland China and with auditors located in mainland China. For example, PCAOB inspections of auditors located in mainland China and Hong Kong have at times identified deficiencies in those auditors’ audit procedures and quality control procedures, and limitations on the ability of the PCAOB to inspect or investigate auditors in mainland China or Hong Kong could deprive investors of the benefits of PCAOB inspections, which could adversely affect the ability of companies using such auditors to access U.S. capital markets.

As part of the continued focus on access to audit and other information for companies with substantial operations in China, in December 2020, the United States enacted the HFCAA, which requires the SEC to identify issuers that have filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a restriction imposed by a non-U.S. authority in the auditor’s local jurisdiction (a “Commission-Identified Issuer”). Under the HFCAA, as amended in December 2022, if the SEC conclusively identifies an issuer as a Commission-Identified Issuer for two consecutive years, the SEC is required to prohibit the trading of the issuer’s securities on a national securities exchange or through any other method that is within the jurisdiction of the SEC to regulate, including over-the-counter markets in the United States.

In 2021, the PCAOB issued a Determination Report, which found that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by Chinese authorities in those jurisdictions. In December 2022, the PCAOB vacated its determination that it was unable to inspect and investigate PCAOB-registered public accounting firms in mainland China. As a result, until such time as the PCAOB issues a new determination, the SEC has determined that there are no issuers currently at risk of having their securities subject to a trading prohibition under the HFCAA. Although we are not currently at risk of delisting pursuant to the HFCAA, if the PCAOB were to issue a new determination regarding limitations on its ability to inspect or investigate our independent auditor and we were to fail to meet the audit requirements of the HFCAA for two consecutive years, our securities may be prohibited from trading on a national securities exchange or over-the-counter market in the United States, and this could result in our Ordinary Shares being delisted from Nasdaq. Delisting of our Ordinary Shares would force holders to sell their shares of our Ordinary Shares. The foregoing could adversely affect the market price of our Ordinary Shares and our ability to raise capital. The market price of our Ordinary Shares could be adversely affected as a result of anticipated negative impacts of such legislative or executive actions upon, as well as negative investor sentiment toward, companies with significant operations in mainland China and Hong Kong that are listed in the United States, regardless of whether such actions are implemented and regardless of our actual operating performance.

Pan-China Singapore, the independent registered public accounting firm that issued the audit report included in this Annual Report, is subject to PCAOB inspections. Pan-China Singapore is headquartered in Singapore and there are no limitations in Singapore on PCAOB inspections. Therefore, we believe that, as of the date of this Annual Report, our auditor is not subject to the determinations announced by the PCAOB on December 16, 2021 relating to the PCAOB’s inability to inspect or investigate completely registered public accounting firms headquartered in the PRC or Hong Kong because of a position taken by one or more authorities in the PRC or Hong Kong. However, to the extent that our auditor’s work papers may, in the future, become located in China, such work papers will not be subject to inspection by the PCAOB because the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities. Inspections of certain other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of the PCAOB to conduct inspections of our auditors’ work papers in China would make it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. As a result, our investors may be deprived of the benefits of the PCAOB’s oversight of our auditor through such inspections and they may lose confidence in our reported financial information and procedures and the quality of our financial statements. We cannot assure you whether Nasdaq or other regulatory authorities will apply additional or more stringent criteria to us. Such uncertainty could cause the market price of our Ordinary Shares to be materially and adversely affected.

Because all of our operations are in China, our business is subject to the complex and rapidly evolving laws and regulations there. The Chinese government may exercise significant oversight and discretion over the conduct of our business and may intervene in or influence our operations at any time, which could result in a material change in our operations and/or the value of our Ordinary Shares.

As a business operating in China, we are subject to the laws and regulations of the PRC, which can be complex and evolve rapidly. The PRC government has the power to exercise significant oversight and discretion over the conduct of our business, and the regulations to which we are subject may change rapidly and with little notice to us or our shareholders. As a result, the application, interpretation, and enforcement of new and existing laws and regulations in the PRC are often uncertain. In addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, and inconsistently with our current policies and practices. New laws, regulations, and other government directives in the PRC may also be costly to comply with, and such compliance or any associated inquiries or investigations or any other government actions may: (i) delay or impede our development; (ii) result in negative publicity or increase our operating costs; (iii) require significant management time and attention; and (iv) subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations.

The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we conduct our Operating Subsidiary’s business and could require us to change certain aspects of its business to ensure compliance, which could decrease demand for its products, reduce revenues, increase costs, require our Operating Subsidiary to obtain more licenses, permits, approvals or certificates, or subject us to additional liabilities. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected as well as materially decrease the value of our Ordinary Shares.

The filing or other procedures with, the CSRC or other Chinese regulatory authorities may be required in connection with issuing our equity securities to foreign investors under Chinese law, and, we cannot predict whether we will be able, or how long it will take us, to complete such filing or other procedures. If we fail to complete a filing with the CSRC, our future offering application may be impacted and we may be subject to penalties, sanctions and fines imposed by the CSRC.

On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Administrative Measures”) and relevant supporting guidelines (collectively, the “New Administrative Rules Regarding Overseas Listings”), which came into force on March 31, 2023. According to the New Administrative Rules Regarding Overseas Listings, among other things, a domestic company in the PRC that seeks to offer and list securities in overseas markets must fulfill the filing procedure with the CSRC pursuant to the requirements of the Trial Administrative Measures. Initial public offerings or listings in overseas markets must file with the CSRC within three (3) working days after the relevant application is submitted overseas. If an issuer offers securities in the same overseas market where it has previously offered and listed securities subsequently, filings have to be made with the CSRC within three (3) working days after the offering is completed. Upon occurrence of any material event, such as change of control, investigations or sanctions imposed by an overseas securities regulatory agency or other relevant competent authority, change of listing status or transfer of listing segment, or voluntary or mandatory delisting, after an issuer has offered and listed securities in an overseas market, the issuer must submit a report thereof to CSRC within three (3) working days after the occurrence and public disclosure of such event. On February 24, 2023, the CSRC promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Confidentiality and Archives Administration Provisions”), which also became effective on March 31, 2023. The Confidentiality and Archives Administration Provisions set out rules, requirements and procedures relating to provision of documents, materials and accounting archives for securities companies, securities service providers, overseas regulators and other entities and individuals in connection with overseas offering and listing, including without limitation to, domestic companies that carry out overseas offering and listing (either in direct or indirect means) and the securities companies and securities service providers (either incorporated domestically or overseas) that undertake relevant businesses shall not leak any state secret and working secret of government agencies, or harm national security and public interest, and a domestic company shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level, if it plans to, either directly or through its overseas listed entity, publicly disclose or provide any documents and materials that contain state secrets or working secrets of government agencies. Working papers produced in the Chinese mainland by securities companies and securities service providers in the process of undertaking businesses related to overseas offering and listing by domestic companies shall be retained in the Chinese mainland. Where such documents need to be transferred or transmitted to outside the Chinese mainland, relevant approval procedures stipulated by regulations shall be followed. While we believe we do not involve leaking any state secret and working secret of government agencies, or harming national security and public interest in connection with provision of documents, materials and accounting archives, there is uncertainty how the new provisions will be interpreted and implemented in the future, and we may be required to perform additional procedures in connection with the provision of accounting archives after the Confidentiality and Archives Administration Provisions come into effect. Any failure by 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 or our other securities, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause our Ordinary Shares or such other securities to significantly decline in value or become worthless.

PRC regulations on loans and direct investments by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC subsidiaries and may prevent the use of our funds held in the PRC or Hong Kong or by a PRC or Hong Kong entity to fund our operations or for use outside of the PRC or Hong Kong.

As an offshore holding company of our PRC subsidiaries, we may make loans to our PRC subsidiaries, or we may make additional capital contributions to our PRC subsidiaries. Such loans to our PRC subsidiaries in China and capital contributions are subject to PRC regulations and approvals or filing. For example, loans by us to our PRC subsidiaries cannot exceed statutory limits and must be registered with SAFE or its local branch. Information about capital contributions to our PRC subsidiaries must be filed with the PRC Ministry of Commerce or its local counterpart. In addition, the PRC government also restricts the convertibility of foreign currencies into Renminbi and use of the proceeds. On March 30, 2015, SAFE promulgated Circular 19, which took effect and replaced certain previous SAFE regulations from June 1, 2015. SAFE further promulgated Circular 16, effective on June 9, 2016, which, among other things, amend certain provisions of Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital converted from foreign currency denominated registered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyond its business scope or to provide loans to persons other than affiliates unless otherwise permitted under its business scope. On October 23, 2019, SAFE promulgated Circular 28, which stipulates that non-investment foreign-funded enterprises are allowed to make domestic equity investment with their capital funds on the premise that the Negative List is not violated and the projects invested thereby in China are true and compliant. Violations of the applicable circulars and rules may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations. The Circular Regarding Further Optimizing the Cross-border RMB Policy to Support the Stabilization of Foreign Trade and Foreign Investment jointly promulgated by the PBOC, NDRC, the Ministry of Commerce, the State-owned Assets Supervision and Administration Commission of the State Council, the China Banking and Insurance Regulatory Commission and SAFE on December 31, 2020 and effective on February 4, 2021 allows the non-investment foreign-invested enterprises to make domestic reinvestment with RMB capital in accordance with the law on the premise that they comply with prevailing regulations and the invested projects in China are authentic and compliant. In addition, if a foreign-invested enterprise uses RMB income under capital accounts to conduct domestic reinvestment, the invested enterprise is not required to open a special deposit account for RMB capital.

Due to interventions or the imposition of transfer restrictions by the PRC government, funds or assets located in the PRC or Hong Kong or held by a PRC or Hong Kong entity, may not be available to us to fund operations or for other use outside of the PRC or Hong Kong.

The applicable foreign exchange circulars and rules may significantly limit our ability to convert, transfer and use the net proceeds from public or private financings of equity or convertible notes or any offering of any equity securities in China, which may adversely affect our business, financial condition and results of operations. As the foreign exchange related regulatory regime and practice are complex and still evolving and involve many uncertainties, we cannot assure you that we have complied or will be able to comply with all applicable foreign exchange circulars and rules, or that we will be able to complete the necessary government registrations or filings on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or with respect to future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or filings, our ability to contribute additional capital to fund our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.

The Chinese government may exert substantial influence over the manner in which our Operating Subsidiaries conduct their business operations in China.

The Chinese government has exercised, and continues to exercise, substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our Operating Subsidiaries’ ability to conduct their operations in China may be harmed by changes in its laws and regulations, including those relating to regulation of the coaching, business planning and event planning and production industries, taxation and other matters. We believe that our Operating Subsidiaries’ operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of the jurisdictions in which our Operating Subsidiaries’ operate may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on their part to ensure compliance with such regulations or interpretations. Accordingly, government actions in the future could have a significant effect on us and our business.

China’s economic policies could affect our Operating Subsidiaries’ businesses.

Substantially all of our assets are located in China and substantially all of our revenue is derived from our Operating Subsidiaries’ operations in China. Accordingly, our results of operations and prospects are subject, to a significant extent, to economic, political and legal developments in China.

While China’s economy has experienced significant growth over the past decades, growth has been irregular, both geographically and among various sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our Operating Subsidiaries’ business and operating results, lead to reduction in demand for their services and adversely affect their competitive positions. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall economy of China but may also have a negative effect on us. For example, our operating results and financial condition may be adversely affected by government control over capital investments or changes in tax regulations.

The economy of China has been transitioning from a planned economy to a more market-oriented economy. In recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform and the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises; however, a substantial portion of productive assets in China are still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. It also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

Any lack of requisite approvals, licenses or permits applicable to our Operating Subsidiaries’ businesses may have a material and adverse impact on our business, financial condition and results of operation.

In accordance with the relevant laws and regulations in the PRC, our Operating Subsidiaries are required to maintain various approvals, licenses and permits to operate their businesses, including but not limited to, business licenses. These approvals, licenses and permits are obtained upon satisfactory compliance with, among other things, the applicable laws and regulations.

The large number of regulatory measures imposed by various governmental entities in the PRC as follows: (i) Regulations Relating to Consumer Protection; (ii) Regulations Relating to Product Quality; (iii) Regulations Relating to Competition; (iv) Administrative Measures for the Administration of Sales Promotional Activities of Retailers; (v) Regulations Related to Online Trading: Administrative Measure for Online Trading; (vi) Regulations Relating to Intellectual Property: Copyright, Trademark, Patent and Domain Name; (vii) Regulations on Offshore Parent Holding Companies’ Direct Investment in and Loans to their PRC Subsidiaries; (viii) Regulations Relating to Foreign Exchange; (ix) Regulations Relating to Dividend Distributions; (x) Regulations Relating to Overseas Listings; (xi) Regulations Relating to Employment; (xii) Regulations Relating to Customer Rights Protection; (xiv) Regulations Relating to Tax: Income Tax, Value-Added Tax.

As of the date of this Annual Report, our Operating Subsidiaries have received all necessary governmental approvals for operations in the PRC and have not been denied any such approvals. For further discussion, including the possible consequences for non-compliance, see “Regulations in China Applicable to our Business.”

Any PRC regulations pertaining to our corporate structure, loans to and investment in PRC entities by offshore holding companies may delay us from making loans or capital contributions to our Operating Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

With regards to our corporate structure, any funds we may transfer to our Operating Subsidiaries, either as a loan or as an increase in registered capital, are subject to approval by or registration with relevant government authorities in China regardless of the amount of the transfer. According to the relevant PRC regulations, capital contributions to our Operating Subsidiaries are subject to the submission of reports of changes through the enterprise registration system and registration with a local bank authorized by SAFE. In addition, any foreign loan procured by our Operating Subsidiaries is required to be registered with SAFE and such loan is required to be registered with the NPRC. We may not be able to complete such registrations or obtain necessary approvals on a timely basis with respect to future capital contributions or foreign loans by us to our Operating Subsidiaries. If we fail to complete such registration or other procedures, our ability to maintain our corporate structure while capitalizing our Operating Subsidiaries’ operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

The PRC government’s control over the conversion of foreign exchange and fluctuations in the value of RMB may result in foreign currency exchange losses and limit our ability to pay dividends.

Since our Operating Subsidiaries conduct business in the PRC, we receive part of their revenue and pay part of our expenses in the RMB. The value of RMB against the U.S. dollar and other currencies fluctuates from time to time and is subject to changes in the domestic and international political and economic developments, including the global and monetary effects of the war in Ukraine, as well as the fiscal and foreign exchange policies prescribed by the PRC government. We cannot assure you that the value of the RMB will remain at the current level against the U.S. dollar or any other foreign currency. If the RMB appreciates or depreciates against the U.S. dollar or any other foreign currency, it will have mixed effects on our Operating Subsidiaries’ business and there is no assurance that the overall effect will be positive.

The RMB is not currently a freely convertible currency. Conversion and remittance of foreign currencies are subject to PRC foreign exchange regulations. Pursuant to the existing foreign exchange regulations in the PRC, we are allowed to carry out foreign exchange transactions for current account items (including dividend payment) without submitting the relevant documentary evidence of such transactions to SAFE for approval in advance as long as they are processed by banks designated for foreign exchange trading. However, we may need to obtain the SAFE’s prior approval for foreign exchange transactions for capital account items. If we fail to obtain the SAFE’s approval to convert RMB into foreign currencies for foreign exchange transactions, our Operating Subsidiaries’ business operations, financial condition, results of operations and prospects, as well as our ability to pay dividends, could be materially and adversely affected.

Dividends payable by the Company to our foreign investors and gain on the sale of our Shares may be subject to PRC income taxes.

Pursuant to the EIT Law and the EIT Rules, subject to any applicable tax treaty or arrangement between the PRC and the jurisdiction of residence of our investors that provides a different income tax arrangement, the payment of dividends by a PRC resident enterprise to investors that are non-PRC resident enterprises (including enterprises that do not have an establishment or place of business in the PRC and enterprises that have an establishment or place of business but their income is not effectively connected with the establishment or place of business) or any gain realized on the transfer of shares by such investors is generally subject to PRC income tax at a rate of 10% to the extent such dividend has its source in the PRC or such gain is regarded as income derived from sources within the PRC. Under Individual Income Tax Law of the PRC and its implementation rules, dividends sourced within the PRC paid to foreign individual investors who are not PRC residents and gains from PRC sources realized on the transfer of our Shares by such investors would be subject to PRC income tax at a rate of 20%, subject to any reduction or exemption set out in applicable tax treaties and PRC laws.

It is uncertain whether we will be considered a PRC “resident enterprise.” If we are considered a PRC “resident enterprise,” dividends payable by us with respect to our Shares, or any gain realized from the transfer of our Shares may be treated as income derived from sources within the PRC and may be subject to PRC income tax, subject to the interpretation, application and enforcement of the EIT law and the EIT rules by the relevant tax authorities. If we are required under the EIT Law or other related regulations to withhold PRC income tax on our dividends payable to foreign holders of our Shares which are “non-resident enterprises,” or if our Shareholders are required to pay PRC income tax on the transfer of our Shares under PRC tax laws, the value of an investment in our Shares may be materially and adversely affected.

Fluctuation of the RMB may affect our financial condition by affecting the volume of cross-border money flow.

The value of the RMB fluctuates and is subject to changes in the PRC’s political and economic conditions. Since July 2005, the conversion of RMB into foreign currencies, including USD, has been based on rates set by the People’s Bank of China which are set based upon the interbank foreign exchange market rates and current exchange rates of a basket of currencies on the world financial markets.

We may face obstacles from the communist system in the PRC.

Foreign companies conducting operations in the PRC face significant political, economic, and legal risks. The communist regime in the PRC may hinder Western investment.

We may have difficulty establishing adequate management, legal and financial controls in the PRC.

The PRC historically has been deficient in Western style management and financial reporting concepts and practices, as well as in modern banking, computer and other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards.

Because our assets and operations are located in China, you may have difficulty enforcing any civil liabilities against us under the securities and other laws of the United States or any state.

We are a holding company, and all of our assets are located in the PRC. In addition, our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon these non-residents, or to enforce against them judgments obtained in United States courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state.

There is uncertainty as to whether courts of the PRC would enforce:

Enforcement of a foreign judgment in the PRC also may be limited or otherwise affected by applicable bankruptcy, insolvency, liquidation, arrangement, moratorium or similar laws relating to or affecting creditors’ rights generally and will be subject to a statutory limitation of time within which proceedings may be brought.

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

Shareholder claims or regulatory investigations 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 a 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. 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 our shareholders in protecting their interests.

The PRC legal system embodies uncertainties, which could limit law enforcement availability.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, decided legal cases have little precedence. In 1979, 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 several decades has significantly enhanced the protections afforded to various forms of foreign investment in China. Our PRC subsidiaries are subject to PRC laws and regulations. However, these laws and regulations change frequently, and the interpretation and enforcement involve uncertainties. For instance, we may have to resort to administrative and court proceedings to enforce the legal protection that we are entitled to by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting statutory and contractual terms, it may be difficult to evaluate the outcome of administrative court proceedings and the level of law enforcement that we would receive in more developed legal systems. Such uncertainties, including the inability to enforce our contracts, could affect our business and operation. In addition, confidentiality protections in China may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the PRC legal system, particularly with regard to our business, including the promulgation of new laws. This may include changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the availability of law enforcement, including our ability to enforce our agreements.

Failure to make adequate contributions to various employee benefit 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 they operate their businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. Our failure in making contributions to various employee benefit plans and in complying with applicable PRC labor-related laws may subject us to late payment penalties. We may be required to make up the contributions for these plans as well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.

We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.

We are a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from our PRC subsidiaries for our cash requirements, including for services of any debt we may incur. Our PRC subsidiaries’ ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of their after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of their registered capital. Our PRC subsidiaries, as foreign invested enterprises, or FIEs, are also required to further set aside a portion of their after-tax profit to fund an employee welfare fund, although the amount to be set aside, if any, is determined at their discretion. These reserves are not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiaries to distribute dividends or other payments to their shareholders 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.

Changes to PRC tax laws may subject us to greater taxes.

We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various administrative regions and countries in which we have assets or conduct activities. However, our tax position is subject to review and possible challenge by taxing authorities and to possible changes in law, which may have retroactive effect. We cannot determine in advance the extent to which some jurisdictions may require us to pay taxes or make payments in lieu of taxes.

Chinese regulations relating to overseas investment by Chinese residents may restrict our overseas and cross-border investment activities and adversely affect the implementation of our strategy as well as our business and prospects.

On July 4, 2014, the State Administration of Foreign Exchange of China, or SAFE, issued the Circular on the Administration of Foreign Exchange Issues Related to Overseas Investment, Financing and Roundtrip Investment by Domestic Residents through Offshore Special Purpose Vehicles, or the SAFE Circular 37, which replaced the former circular commonly known as “SAFE Circular 75” promulgated on October 21, 2005. The SAFE Circular 37 requires Chinese residents to register with the competent local SAFE branch in connection with their direct establishment or indirect control of an offshore special purpose vehicle, for the purpose of overseas investment and financing, with such Chinese residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests. The SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as any change of basic information (including change of the Chinese residents, name and operation term), increase or decrease of capital contribution by Chinese individuals, share transfer or exchange, merger, division or other material event. In the event that a Chinese shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the Chinese subsidiaries 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 Chinese subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under Chinese law for evasion of foreign exchange controls.

The failure of our Chinese beneficial owners to comply with the registration procedures set forth in the SAFE Circular 37 may subject such beneficial owners and our Chinese subsidiaries to fines and legal sanctions. Such failure may also result in restrictions on our Chinese subsidiaries’ ability to distribute profits to us or our ability to inject capital into our Chinese subsidiaries or otherwise materially adversely affect our business, financial condition and results of operations.

Risks Related to Our Ordinary Shares

There is currently no trading market for our Ordinary Shares.

There currently is no trading market for our Ordinary Shares. Other than the Resale Shares, which will be tradeable after our registration statement is declared effective, our outstanding shares cannot be offered, sold, pledged or otherwise transferred unless subsequently registered pursuant to, or exempt from registration under, the Securities Act and any other applicable federal or state securities laws or regulations in the United States. These restrictions will limit the ability of our shareholders to liquidate their investment.

We have registered 31,901,900 of our outstanding Ordinary Shares for resale in the United States and are in the process of applying for our Ordinary Shares to be admitted to quotation on the OTCQB. We cannot assure you that our Shares will be admitted to quotation on the OTCQB, or that, if the Ordinary Shares are admitted to quotation on the OTCQB, a regular public market will ever develop. There is no guarantee that our Shares will ever be quoted on the OTCQB or any exchange. Furthermore, even if your Ordinary Shares are registered under the Securities Act, you will likely not be able to sell your securities if a regular trading market for our securities does not develop and we cannot predict the extent, if any, to which investor interest will lead to the development of a regular trading market in our Ordinary Shares. There is a risk that the absence of potential buyers will prevent any potential sellers from selling their Shares.

The offering price of our Ordinary Shares was determined based on management’s assessment of the market for similar companies in the United States OTC Market and should not be used as an indicator of the future market price of the securities.

Since our Shares were not listed or quoted on any exchange or quotation system, the offering price of $0.08 per share for the Ordinary Shares was determined based on management’s assessment of the market for similar companies in the United States OTC Market. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market. The offering price bears no relationship to the book value, assets or earnings of the Company or any other recognized criterion of value. The offering price should not be regarded as an indicator of the future market price of the securities.

It may be difficult for investors to dispose of their Ordinary Shares as long as they remain an OTC security.

In order to be able to publicly trade a security, such security is required to have a trading symbol. Trading symbols for OTC securities are assigned by FINRA following a submission by a market maker of a Form 211. In the past, the review of such submissions by FINRA was a routine matter that would typically be completed within weeks. Recently, FINRA reviews have often taken well in excess of six months, with many securities being subject to indefinite delays. As a result of the enhanced regulatory scrutiny and long review process, many market makers are now declining to submit Forms 211.

In addition, and in response to increased scrutiny and recent regulatory actions by FINRA, many brokers have started to refuse deposits of OTC securities, whether restricted or free trading and regardless of the price at which these securities are traded, even after they obtained a trading symbol. As a result, investors may find it increasingly difficult to dispose of their Ordinary Shares.

We may not be able to achieve secondary trading of our Shares in certain states because our Ordinary Shares are not nationally traded, which could subject our shareholders to significant restrictions and costs.

Our Ordinary Shares are not eligible for trading on The NASDAQ Capital Market or on a national securities exchange. Therefore, our Ordinary Shares are subject to the securities laws of the various states and jurisdictions of the United States in addition to federal securities law. While we may register our Ordinary Shares or qualify for exemptions for our Ordinary Shares in one or more states, if we fail to do so the investors in those states where we have not taken such steps may not be allowed to purchase our Shares or those who presently hold our Shares may not be able to resell their Shares without substantial effort and expense. These restrictions and potential costs could be significant burdens on our shareholders.

Risks relating to low priced stocks

The Company’s Ordinary Shares are not quoted and traded on any market or on any exchange, and the price at which the Shares will trade in the future cannot currently be estimated. There can be no assurance that trading will be commenced or sustained, although management intends to take such actions as are necessary to initiate trading on the OTCQB. The trading price of the Ordinary Shares will most likely be below $5.00. If our Ordinary Shares trade below $5.00 per share, trading in the Shares may be subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a penny stock (generally, any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions) and a two business day “cooling off period” before broker-dealers can effect transactions in penny stocks. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. These, and the other burdens imposed upon broker-dealers by the penny stock requirements, could discourage broker-dealers from effecting transactions in our Shares which could severely limit the market liquidity of our Shares and the ability of holders of our Ordinary Shares to sell them.

We do not intend to pay dividends.

We have not paid any cash dividends on any of our securities since inception and we do not anticipate paying any cash dividends on any of our securities in the foreseeable future.

Future sales of our securities, or the perception in the markets that these sales may occur, could depress our stock price.

We currently have issued and outstanding approximately 302,734,900 Ordinary Shares, 31,901,900 of which have been registered for resale in the U.S. The remaining 270,833,000 Shares also may be sold in the future if registered under the Securities Act or if the shareholder qualifies for an exemption from registration under Rule 144, Rule 701 or other applicable exemption under the Securities Act. The market price of our capital stock could drop significantly if the holders of these restricted Shares sell them or are perceived by the market as intending to sell them. These factors also could make it more difficult for us to raise capital or make acquisitions through the issuance of additional Ordinary Shares or other equity securities.

The ability of the Board of Directors of the Company to issue preferred shares and any anti-takeover provisions we adopt may depress the value of our Ordinary Shares.

Our Articles of Association authorize our Board of Directors to provide, out of unissued Shares, for preferred shares in one or more classes or series within a class upon authority of the Board without further shareholder approval. Any preferred shares issued in the future may rank senior to the Ordinary Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Company, or both, and any such preferred shares may have class or series voting rights. In addition, the Board of Directors may, in the future, adopt anti-takeover measures (albeit the Board of Directors may not introduce any anti-takeover measures in our Articles of Association within a Special Resolution of Shareholders). The authority of the Board of Directors to issue preferred shares and any future anti-takeover measures it may adopt may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in control of the Company not approved by its Board of Directors. As a result, the Company’s shareholders may lose opportunities to dispose of their Shares at favorable prices generally available in takeover attempts or that may be available under a merger proposal and the market price of the Ordinary Shares and the voting and other rights of the Company’s shareholders may also be affected.

We are controlled by Feier Co. Limited, whose interest may differ from those of the other shareholders.

As of the date of this Annual Report, Feier Co. Limited is the record and beneficial owner of approximately 50.54% of our Ordinary Shares. Feier Co. Limited is in a position to elect the Board of Directors and to control the business and affairs of the Company including significant corporate actions such as mergers and acquisitions, the sale or purchase of assets and the issuance and sale of our securities. The Company also may be prevented from entering into transactions that could be beneficial to the Company’s other shareholders. The interest of our largest shareholder may differ from the interests of our other shareholders.

Our principal shareholder may engage in a transaction to cause the Company to repurchase its Ordinary Shares.

In order to provide an interest in the Company to a third party, our principal shareholder may choose to cause the Company to sell its securities to third parties, with the proceeds of such sale being utilized by the Company to repurchase its Ordinary Shares. As a result of such transaction, our management, principal shareholders and Board of Directors may change.

Certain Legal Consequences of Foreign Incorporation and Operations

Our shareholders may face difficulties in protecting their interests, and their ability to protect their rights through the U.S. federal courts may be limited because we are incorporated under Cayman Islands law, we conduct substantially all of our operations in China and all of our directors and officers reside outside the United States.

We are incorporated in the Cayman Islands and conduct substantially all of our operations in China. All of our directors and officers reside outside the United States and their assets are located outside of the United States. As a result, it may be difficult or impossible for a shareholder to bring an action against us or against these individuals in the Cayman Islands or in China in the event that a shareholder believes that his rights have been infringed under the securities laws or otherwise. Even if a shareholder is successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render the shareholder unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

Our corporate affairs are governed by our memorandum and articles of association, as amended and restated from time to time, and by the Companies Law (Revised) and common law of the Cayman Islands. The rights of shareholders to take legal action against us and our directors, actions by minority shareholders and the fiduciary responsibilities of our directors 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 English common law, which provides persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States and provides significantly less protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in U.S. federal courts.

As a result, our shareholders may have more difficulty in protecting their interests through actions against us, our management, our directors or our major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

Our shareholders do not have the same protections or information generally available to shareholders of U.S. corporations because the reporting requirements for foreign private issuers are more limited than those applicable to public corporations organized in the United States.

We are a foreign private issuer within the meaning of rules promulgated under the Exchange Act. We are not subject to certain provisions of the Exchange Act applicable to United States public companies, including: the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K, the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations with respect to a security registered under the Exchange Act and the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction (i.e., a purchase and sale, or sale and purchase, of the issuer’s equity securities within six months or less). Because we are not subject to these rules, our shareholders are not afforded the same protections or information generally available to investors in public companies organized in the United States.

Judgments against the Company and management may be difficult to obtain or enforce.

We are organized as an exempted company under the laws of the Cayman Islands and our principal executive offices are located in the PRC. Outside the United States, it may be difficult for investors to enforce judgments obtained against us in actions brought in the United States, including actions predicated upon the civil liability provisions of United States federal securities laws. In addition, our sole officer and director resides outside the United States, and his assets are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon him or to enforce against the Company or him judgments predicated upon the liability provisions of United States federal securities laws.

There is uncertainty as to whether the courts of the Cayman Islands and the PRC, respectively, would:

It is uncertain whether the courts of the Cayman Islands will allow shareholders of our Company to originate actions in the Cayman Islands based upon securities laws of the United States. In addition, there is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such a determination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the Cayman Islands. Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), a judgment obtained in such jurisdiction will be recognized and enforced in the courts of the Cayman Islands at common law, without any reexamination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment (a) is given by a foreign court of competent jurisdiction, (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (c) is final, (d) is not in respect of taxes, a fine or a penalty, and (e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

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

Because we are incorporated in the Cayman Islands, you may not have the same protections as shareholders of U.S. corporations.

We are organized under the laws of the Cayman Islands. Principles of law relating to matters affecting the validity of corporate procedures, the fiduciary duties of our management, directors and controlling shareholder and the rights of our shareholders differ from, and may not be as protective of shareholders as, those that would apply if we were incorporated in a jurisdiction within the United States. Our directors have the power to take certain actions without shareholder approval, including approving certain fundamental corporate transactions, such as reorganizations and the sale or transfer of assets. In addition, there is doubt that the courts of the Cayman Islands would enforce liabilities predicated upon United States federal securities laws.

Item 4. Information on the Company

History of the Company

Our Company was originally incorporated in Nevada under the name “Duonas Corp.” on September 19, 2014. It maintains its principal executive offices at 13th Floor, Building B1, Wisdom Plaza, Qiaoxiang Road, Nanshan District, Shenzhen, Guangdong Province, China 518000. The Company was formed to produce and sell stylish decorative items made from concrete, such as a variety of sculptures, candleholders, lamps, tabletops, bookcases, vases of various shapes and forms and decorations for the garden.

We filed a registration statement on Form S-1 with the SEC on August 25, 2016, which was declared effective on October 12, 2016. In November 2017, subsequent to a change of control, our name was changed to Huahui Education Group Corporation, our ticker symbol was changed to “HHEG” and our management of the Company abandoned its business plan and determined to seek a possible business combination. The business purpose of our Company changed to seeking the acquisition of, or merger with, an existing company.

As a result, we became a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act) with nominal assets and no business operations, and it sought to identify, evaluate and investigate various companies with the intent that, if such investigation warranted, a reverse merger transaction could be negotiated and completed pursuant to which we would acquire a target company with an operating business with the intent of continuing the acquired company’s business as a publicly held entity.

Effective February 26, 2019, we changed our domicile from Nevada to the Cayman Islands by merging into our wholly owned Cayman Islands subsidiary, Huahui Education Group Limited (the “Redomicile Merger”). As a result of the redomicile merger, our name was changed to Huahui Education Group Limited.

On July 3, 2019 (the “Closing Date”), the Company closed on a share exchange (the “Share Exchange”) with HGSL, a Seychelles company limited by shares, and the HGSL Shareholders, Mr. Junze Zhang, Feier Co., Limited and Meisi Co., Limited. As a result, HGSL is now a wholly owned subsidiary of the Company. Under the Share Exchange Agreement, the HGSL Shareholders exchanged all of the shares that they held in HGSL for 300,000,000 Ordinary Shares of our Company.

For accounting purposes, the Share Exchange was treated as a reverse acquisition with the HGSL Shareholders as the acquirers and the Company as the acquired party. When we refer to business and financial information for periods prior to the consummation of the Share Exchange, we are referring to the business and financial information of HGSL unless the context suggests otherwise.

As a result of the closing of the Share Exchange, the HGSL Shareholders own approximately 99.1% of the total outstanding Ordinary Shares of the Company and the former shareholders of the Company own approximately 0.9%. Mr. Zihua Wu, the former sole officer and a former director of the Company, resigned from all positions with the Company immediately after the closing of the Share Exchange and Mr. Junze Zhang was appointed as the Company’s President, Chief Executive Officer, Chief Financial Officer and Secretary, as well as a director. Mr. Zhongpeng Chen remained a director of the Company.

The Shares issued to the HGSL Shareholders in connection with the Share Exchange were not registered under the Securities Act in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and/or Regulation S promulgated by the U.S. SEC. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.

The Company filed a registration statement on Form F-1 with the SEC on November 26, 2019, which was declared effective on October 14, 2020. The registration statement registered 31,901,900 of the Company’s outstanding Ordinary Shares for resale in the United States. The remaining 270,833,000 outstanding Ordinary Shares may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.

As a result of the reverse acquisition described above, management of the Company believes that it is no longer a shell company. The Company’s operations now consist of the operations of HGSL and its subsidiaries.

Throughout the remainder of this Annual Report, when we use phrases such as “we,” “our,” “company” and “us,” we are referring to the Company and all of its subsidiaries, as a combined entity.

Corporate Structure

The following chart sets forth our corporate structure:

Huahui Group Stock Limited (“HGSL”) was incorporated under the laws of the Republic of Seychelles on May 17, 2017. It became a wholly owned subsidiary of the Company in July 2019 as a result of the Share Exchange described above. HGSL has a wholly owned subsidiary, formed under the laws of Hong Kong, Huahui Group (HK) Co., Limited (“HGHK”), which, in turn, has a wholly owned subsidiary corporation formed under the laws of the Peoples Republic of China (the “PRC” or “China”), Huahui (Shenzhen) Education Management Co., Limited (“HEMC”). HEMC owns 100% of Shenzhen Huahui Shangxing Education Consulting Co., Limited (“HSEC”). HSEC owns 100% of Zhongdehui (Shenzhen) Education Development Co., Limited (“ZDSE”), which is currently the Company’s primary operating subsidiary. HSEC also owns 100% of Shenzhen Huahui Media Technology Co., Limited (“HHMT”), which commenced operations in August 2020 and Huahui Jinming (Shenzhen) Education Technology Co., Limited (“JMET”), JEMT started operation in June 2022,as well as 80% of Shandong Yuli Big Data Technology Co., Limited (“SDYL”), SDYL initiated operations in May 2022.

HGSL has another wholly-owned subsidiary formed under the laws of the Republic of Seychelles, Huahui Group Co., Limited (“HGCL”), which owns 100% of Huahui Technology (HK) Co., Limited, a Hong Kong corporation formed in March 2020 (“HTCL”). HTCL, which has not commenced operations, has a wholly-owned subsidiary, Huahui (Shenzhen) Education Technology Co., Limited (“HSET”), formed in July 2020 under the laws of the PRC.

HGSL intends to develop additional businesses through one or more subsidiaries in artificial intelligence technology system development, art training and vocational skills training. There can be no assurance that any of these proposed businesses will ever be developed.

Huahui Group (HK) Co., Limited (“HGHK”) was incorporated in Hong Kong on January 4, 2017 as an investment holding limited liability company. The original shareholder, Junze Zhang, held 100% of the shares and transferred all of the shares to HGSL on April 20, 2018.

Huahui (Shenzhen) Education Management Co., Limited (“HEMC”), was established under the laws of the PRC on March 28, 2017 by HGHK with a registered capital of RMB 100,000. HEMC is currently in the business of providing consulting services.

Shenzhen Huahui Shangxing Education Consulting Co., Limited (“HSEC”) was incorporated in the PRC on January 5, 2018 as an education consulting limited liability company. The original shareholders, Qixuan Zhang (99%) and Weiqing Xu (1%), each transferred his shares to HEMC on May 4, 2018 for RMB 0.5. HSEC has not yet commenced operations. HSEC has four wholly-owned subsidiaries - Shenzhen Huahui Media Technology Co., Limited, Huahui Jinming (Shenzhen) Education Technology Co., Limited, Zhongdehui (Shenzhen) Education Development Co., Limited and Shandong Yuli Big Data Technology Co., Limited.

Shenzhen Huahui Media Technology Co., Limited (“HHMT”) was incorporated in the PRC on August 25, 2020 as a wholly owned subsidiary of HSEC. HHMT’s business includes several areas related to business planning and to event planning and production. HHMT has one wholly-owned subsidiary, Shenzhen Jiarui Media Co., Limited (“SJMC”), which was formed on June 4, 2021 under the laws of the PRC. SJMC’s principal business is essentially the same as that of HHMT.

Huahui Jinming (Shenzhen) Education Technology Co., Limited (“JMET”) was incorporated in the PRC on July 8, 2020 as a wholly owned subsidiary of HSEC. JEMT started operation in June 2022, holding training courses for individuals and enterprises to improve their professional and management skills

Zhongdehui (Shenzhen) Education Development Co., Limited (“ZDSE”) was incorporated in the PRC on January 19, 2016 and commenced operations in April 2016. The original shareholders, Qing Zuo (50%), Mengling Zhang (20%), Henghui Investment Consulting (Shenzhen) Partnership (10%) and Hengqing Investment Consulting (Shenzhen) Partnership (20%), each transferred his/her/its shares to HSEC on June 27, 2018 for RMB 1,000, RMB 400, RMB 200 and RMB 400, respectively. ZDSE is in the business of professional leadership development.

ZDSE has the following wholly-owned subsidiaries: Zhongdehui (Shenyang) Education Consulting Co., Limited (“SYZDH”), established as of December 29, 2020, and Zhongdehui (Guangzhou) Education Consulting Co., Limited (“GZZDH”), established as of December 28, 2020. SYZDH has taken over the business of ZDSE’s Shenyang branch and GZZDH has taken over the business of ZDSE’s Guangzhou branch. On February 26, 2021, ZDSE’s Shenzhen Branch established a wholly-owned subsidiary, Shenzhen Zhengxinhui Education Technology Co., Limited, which was sold to an unrelated third party on June 28, 2021. Zhongdehui (JiNan) Education Consulting Co., Limited (“JNZDH”) was established as of April 14, 2022, engaged in researching, developing and applying methods for helping individuals to improve their personal and professional leadership skills and effectiveness. ZDSE’s clients include executive managers from large scale, small and medium-sized enterprises, as well as professionals and employees in various fields.

Shandong Yuli Big Data Technology Co., Limited (“SDYL”) was incorporated in the PRC on December 14, 2021, and is an 80% owned subsidiary of HSEC; 20% of SDYL’s shares are owned by the corporate representative Xinwen Yang. Twenty percent of SDYL’s shares are owned by SYDL’s Legal Representative, Xinwen Yang. SDYL’s business model of “HR Technology + Platform + Service” utilizes human resources (“HR”) technology to build a HR platform that will provide payroll, personnel recruitment, labor dispatch, flexible employment, fiscal and tax planning and legal HR consultation through a mobile app and SDYL’s website. SDYL started operation in May 2022.

Management of the Company is considering expanding the Company’s business through the acquisition or formation of additional subsidiaries.

Business of Zhongdehui (Shenzhen) Education Development Co., Limited

ZDSE is a professional management coaching organization engaged in researching, developing and applying methods for helping individuals to improve their personal and professional leadership skills and effectiveness. ZDSE’s clients consist of executive managers from large scale, small and medium-sized enterprises, as well as professionals and employees in various fields.

By December 31, 2022, ZDSE had coached 5,669 entrepreneurs, as well as personnel from more than 69 corporate training services and large listed companies. The types of companies served include real estate, high technology, medicine, health, schools, government agencies, auto industry, communications, logistics, robotics, property, construction, engineering, manufacturing, textile, rag trade, furniture and other fields.

ZDSE has held charity events contributing to schools in Guangdong, Jiangxi, Sichuan, Hebei, Shandong and other provinces in the PRC. It has also held charity events in Shenzhen and Shandong, for which the theme was “I am the root of everything.” Since its opening, ZDSE has directly or indirectly contributed a total of RMB 128,000 to an orphanage called the Home of Light and has donated RMB 47,000 to support events for the orphans.

Advantages of ZDSE

ZDSE has accumulated a large amount of client data and has performed management coaching services for business leaders, administrative professionals, industry professionals and ordinary employees.

ZDSE believes that the following advantages will be helpful in achieving success and a leading market position in Chinese personal leadership and business management coaching, making ZDSE stand out from its competitors.

1. ZDSE is a Pioneer in Developing Chinese Leadership Development Coaching Services.

ZDSE’s workshop, experiential learning and practice focus on personal leadership development so that its clients can apply their newly developed leadership concepts and experiences to their work. ZDSE also monitors the performance and the changes and developments of clients returning to work.

2. Excellent Team of Coaches

ZDSE believes that its team of coaches is crucial to the success of the company, and it has a team of professional and innovative coaches, most of whom have either master’s or doctoral degrees in their various professions as well as experience in the field of leadership development coaching.

Since ZDSE’s coaches regularly interact with clients, they play a vital role in maintaining the quality of ZDSE’s services and protecting the brand and reputation of ZDSE. ZDSE intends to continue to attract and retain experienced coaches.

3. Brand Perception

Management believes that ZDSE is enhancing its brand recognition and reputation as a result of its clients’ satisfaction. ZDSE believes that its coaching has attained good results for its clients and their post-training performance inspires more people to contact ZDSE. Thus, the brand, reputation and influence of ZDSE is continuously expanding. ZDSE will continue to strive to improve its client service system, including post-training client visits and consulting services, and its clients’ overall experience.

4. Industry-leading Market Size

ZDSE is headquartered in Shenzhen, and has established offices in Guangzhou, Shandong and Liaoning. Its management intends to establish additional offices in Jiangsu, Beijing, Shanghai, Chongqing and Xiamen within three to six years. ZDSE’s geographic expansion will support its efforts to expand its market scope and brand influence and gain a larger market share.

5. Innovative Program Development Capabilities

ZDSE’s service content and methods are mostly based on self-developed material. ZDSE’s program development team works with its staff and senior coaches in order to develop, update and improve ZDSE’s services. The team analyzes the latest market trends and demand, and regularly collects feedback from clients through multiple channels to improve the quality of its clients’ coaching experience.

The Strategy of ZDSE

1. Becoming China’s Best Leadership Development Coaching Service Organization

ZDSE’s goal is to become China’s leading business and leadership development coaching service organization. ZDSE believes that it can accomplish that goal due to its leadership development modules, experiential learning modules and practice integration. By continuing to improve the quality of its coaching services and supporting its clients with follow-up services, ZDSE believes it can increase the number of clients and the rate of new enrollments, thereby increasing its market share and capturing larger market niches. ZDSE has identified several areas where the Chinese economy is prosperous, and it intends to have regional service centers in several of these crucial locations in order to expand its geographic coverage. ZDSE established offices in Guangzhou in December of 2018 and in Shandong and Liaoning during the first quarter of 2019 and its management expects to further increase the number of branches in the future.

2. Formulating a Life-long Development System

ZDSE believes that it is extremely important to develop a life-long service system for its clients. Management intends to accomplish this through the Company’s online service program discussed below under “Other Planned Businesses of the Company.” ZDSE anticipates that this life-long service system will be attractive to its clients, thereby increasing enrollment in ZDSE’s offerings and achieving sustainable profitability for both HEMC and ZDSE. It is also expected to give ZDSE a significant competitive edge.

3. Extensive Strategic Alliances

ZDSE plans to seek strategic alliances on a nationwide scale. In accordance with the goal of many enterprises, institutions and industry associations, management carefully evaluates varied opportunities for cooperative relationships with other companies. Through cooperation and strategic alliances with various institutions and associations, ZDSE believes that it can effectively expand its pool of prospective clients and obtain a steady and predictable revenue source.

ZDSE’s Coaching Program

General Introduction

The Way of Management Program

Unit 1: Exploration Management

This is a four-day module that is comprised 60% of experience exercises, 20% of client interactions and 20% of individual client presentations. Through this module, clients are given the opportunity to recognize their behavioral patterns in corporate management and decision-making, identify their own deficiencies or human frailties, such as selfishness or greed, and discover the gap between themselves and the ideal manager. It also promotes more inclusive treatment of partners and colleagues.

Unit 2: Innovation Management

This five-day module helps clients learn how to build an effective and productive team and is primarily based on the previous management theories of the clients. Through this experience-rich module, the clients examine their old models, generate new insights and establish new, personal management theories.

Unit 3: Practice Management

This module involves a 120-day practical experience. At the beginning, each client will develop a business goal derived from the two previous modules that the client wants to accomplish within this module. This module usually results in major changes and breakthroughs for the clients. During this 120-day period, the coaches track the progress of the clients weekly, and a group meeting is held every week. From time to time, thematic seminars are held for the clients in this module. Technical tools are also provided to assist the clients with their individual problems so that the clients can more effectively work towards and then achieve their goals.

Unit 4: Management Art

Through this four-day experience, clients work on communication skills, including listening and questioning, as well as how to give constructive feedback. By improving their communication skills, clients can increase the level of understanding and cooperation between themselves and their team, thereby becoming more effective managers and leaders.

Unit 5: Personality Management

Through this three-day experience, clients learn about different personality types, how to identify them through the behaviors of others and how to deal most effectively with people who exhibit these various personalities. The goal of this module is to help clients deal with difficult personalities, thereby reducing stress that may result from personality clashes in and outside the workplace.

Unit 6: Foundations of Management

This module is a four-day experience that gives clients the opportunity to discover their core values and how they impact their decisions and their management style. The more clients know about their core values, the more they can create effective communication, which makes it easier for them to reach agreement with their employees.

Unit 7: Relationship Management

We believe that the best managers and leaders understand and are happy with themselves. This four-day experience demonstrates to clients how to understand and accept themselves - their strengths and their weaknesses - and helps them understand their own needs. Through this understanding, as well as development of self-love, clients can develop better relationships and more effective communication with others.

Unit 8: Positivity

Poor communication and negative experiences can both stem from and result in problems in the workplace, which, in turn, create a stressful and negative work atmosphere for all involved. This often results in reduced productivity, higher employee turnover and general dissatisfaction, which frequently carries over and affects all aspects of life. In this module, clients strive toward achieving a positive mindset and approaching work and life with a positive attitude, which can result in better physical and mental health and greater happiness both in and out of the workplace. Greater employee happiness leads to a more positive “can do” atmosphere in the workplace, more effective employees and increased productivity.

Unit 9: Leadership Development for Women

This module is a unique four-day experience for female clients. As more and more women have entered traditionally male-dominated areas of employment, an opportunity has arisen for helping them succeed within a masculine culture and achieve equilibrium between their traditionally “female” strengths and qualities and the more traditionally “male” qualities required to succeed in business.

Unit 10: Fund Management

In this module, clients learn how to manage capital, how to use capital correctly and how to diversify their investments. And perhaps most importantly, clients come to understand their relationship with money and how to keep the acquisition of money in perspective.

Coaching Staff

The main function of the ZDSE coaches is to provide guidance and support both during completion of the modules and during the provision of post-completion services. The responsibility range of the coaches usually includes:

ZDSE seeks coaches who have extensive teaching experience and who demonstrate good interpersonal and communication skills. Currently, ZDSE has numerous excellent coaches who are attracted by ZDSE’s progressive concept, advanced technology and corporate culture.

ZDSE provides introductory training for new coaches, periodic on-the-job training and workshops for coaches to help them master the system and improve their coaching. Whenever ZDSE sets up a branch office in a new city, ZDSE will assign outstanding coaches from corporate headquarters to conduct new coach training in order to maintain the company’s program quality, corporate culture and brand reputation.

ZDSE also plans to introduce a technology system, which it is developing, through which ZDSE’s coaches will be able to collect and analyze the results of their clients’ program experiences and make immediate adjustments to improve the quality of the overall program.

Research and Development

ZDSE engages in continuous research and exploration in an effort to further improve its system and grow its business. Its program development team analyzes the latest market trends and demand and regularly collects feedback from clients to improve the quality of the coaching experience offered by ZDSE.

ZDSE’s research and development team consists of:

Marketing of ZDSE

At present, ZDSE acquires new clients primarily through referrals and recommendations from past and current clients. ZDSE believes that the best promoter for its success is word-of-mouth recommendations from past and current clients who share their successes and program experiences with others. Management believes that new clients are also attracted by ZDSE’s coaching team and services.

ZDSE also holds free seminars for business executives during which it explains ZDSE’s services and gathers information about the needs and goals of the attendees and their companies. ZDSE subsequently contacts the potential clients to discuss and tailor ZDSE’s specific modules that most closely meet their individual needs.

To a lesser degree, ZDSE utilizes social media and conventional advertising to attract new clients.

Competition

ZDSE competes with both Chinese executive coaching and foreign executive coaching organizations with branches in China that offer services similar to those that it offers. However, the competition is highly fragmented with very few large competitors. ZDSE believes that its major competitors are Sun Yat-sen University School of Management, the earliest established institution specializing in business management education and research, and Elite Business Doers, which was founded in Shenzhen and describes itself as a “small learning community for SME owners.”

ZDSE believes that the principal competitive factors in the industry in which it competes include:

Management believes that the unique orientation of ZDSE’s program, including its holistic aspect, the quality of its coaches, the personal atmosphere and individualization of the program to each client’s specific needs and the quality of the post-program services distinguish it from its competitors. However, there can be no assurance that our initial competitive advantages will be retained, or that one or more competitors will not develop programs that are equal or superior to ours or are better priced than ours. In the future, we may face competition from competitors of varying sizes and geographic reach, who structure their program offerings similarly to ours. In addition, some competitors may have a longer operating history and a better ability to support and retain clients. Our revenue could be negatively impacted if our competitors were to develop and market programs that are more effective, more convenient or less expensive than our program.

ZDSE’s Future Business Plan

ZDSE’s national development plan, which is contingent on the status of the COVID-19 epidemic, includes opening 10 to 15 new branches in China, including branches in Beijing, Shanghai, Jiangsu, Chongqing and Xiamen, within three to six years. In addition, along with its geographic expansion, ZDSE is continuously improving its module offerings. More modules are being developed and put on the docket for discussion to be added in the future.

In addition, ZDSE is planning to build an online platform for clients’ life-long development programs. This service is intended to complement and increase the business of ZDSE. Using an artificial intelligence system developed by ZDSE, each client’s online program will be customized for that client. We anticipate that ZDSE’s online mobile platform application will quickly build online membership by importing address books. Members will be able to post and share ZDSE’s online services to their social circles, thereby attracting more clients to the Company and to ZDSE. Although management expects to face competition from other institutions with mature online platform services in the same market, these online services should enable the Company to reach a wider range of target clients and achieve greater sales opportunities for ZDSE with existing clients. ZDSE will also be able to promote support of its charitable activities and shape its brand image by publishing information content about those activities. Due to the COVID-19 epidemic, completion of the online service platform has been put on hold and management intends to redefine the service plan in detail over the next year.

The Business of Shenzhen Huahui Media Technology Co., Limited and Shenzhen Jiarui Media Co.,Limited

HHMT commenced operations in August 2020. Its business includes cultural exchange event planning, conference planning, corporate image planning, marketing planning, exhibition planning, stage lighting, audio equipment, display equipment and technology development and sales, leasing, door-to-door integration of multimedia teaching systems installation, on-site maintenance, domestic trade and import and export of goods and technologies. HHMT’s strategy is to empower the entire education industry chain with technology. The Company’s main customer groups are schools and other government institutions. HHMT has one wholly-owned subsidiary, Shenzhen Jiarui Media Co., Limited (“SJMC”), which was formed on June 4, 2021 under the laws of the PRC. SJMC’s principal business is essentially the same as that of HHMT. In 2022, HHMT provided stage, audio and lighting equipment, including setting-up and operating services, for stage activities of various institutions. During the fiscal year ended December 31, 2021, HHMT and SJMC accounted for approximately 32.3% of the Group’s total revenue and during the year ended December 31, 2022they accounted for approximately 26.4% of the Group’s total revenue.

HHMT and its subsidiary, SJMC, are also negotiating to provide stage, audio and lighting equipment for artistic performances at Sub-district offices of the SHENZHEN Culture and Sports Bureau and at the Shenzhen prison. In addition, HHMT intends to expand its business into the provision of intelligent systems for campuses and government offices, such as face recognition, attendance, invigilator, remote conference, intelligent home and other types of systems.

The Business of Huahui (Shenzhen) Education Management Co., Limited

HEMC commenced operations in November 2020. Its business includes consulting services for entrepreneurs, staff training and introduction services for investors and government. The company’s main customer groups are enterprise groups and government. During the fiscal year ended December 31, 2021, HEMC accounted for approximately 5.9% of the Company’s total revenue and during the year ended December 31, 2022, it accounted for approximately 1.6%.

The future plan is for HEMC to carry out daily management activities and seek new business opportunities for sustainable development.

The Business of Shandong Yuli Big Data Technology Co., Limited

HHEG is exploring entering into the provision of Human Resource (“HR”) services through a new subsidiary of HSEC, Shandong Yuli Big Data Technology Co., Ltd. (“SDYL”), which was incorporated in the PRC on December 14, 2021. SDYL’s business model of “HR Technology + Platform + Service” utilizes HR technology to build an HR platform that will provide payroll, personnel recruitment, labor dispatch, flexible employment, fiscal and tax planning and legal HR consultation through a mobile app and SDYL’s website. SDYL plans to build a service team of 20 people and 4 regional business groups in China in 2023 and management is hopeful that, if it succeeds, this business may become a significant source of revenue in the future.

Other Planned Businesses of the Company

In addition, the Company plans to establish four major structures in the future: Huahui Education Industry Chain Resources, Huahui Intelligent Education Industry Chain, Huahui Education Supply Chain and Huahui Supply Chain Finance Services.

Huahui Education Industry Chain Resources will offer basic education, elite leadership education, vocational education, art education, moral education, quality-oriented education, overseas education, entrepreneurial education and other education segmentation modules.

Huahui Intelligent Education Industry Chain will have an intelligent education curriculum resource platform, intelligent education equipment platform and intelligent education software platform, with curriculum resource innovation, intelligent software and hardware supply, online platform construction, online data sharing, online talent incubation and information management and construction functions.

Huahui Education Supply Chain’s platform will integrate planning and promotion, enrollment services, teacher allocation, logistics procurement and talent transfer services, forming an ecosystem of unified management, unified procurement, unified configuration and unified settlement.

Huahui Supply Chain Finance Services will provide an industry body chain fund, a share fund, a purchase fund, hatch funds and other financial services, at a lower cost and faster speed than its competitors, updating the way for institutions and enterprises to solve their financing problems and helping enterprises to develop rapidly.

Expansion of the Company’s business may be achieved either through the formation of subsidiaries or through the acquisition of other existing companies.

Properties

The Company’s, HEMC’s and ZDSE’s headquarters are located at 13^th Floor, Building B1, Wisdom Plaza, Qiaoxiang Road, Nanshan District, Shenzhen, China. The lease for the space, which consists of a total of 1,000 square meters shared by multiple lessees, expires on July 31, 2024. The Company’s share of the monthly rental is RMB 50,000 (approximately US$7,142), which is paid by HEMC.

GZZDH currently leases approximately 970.54 square meters for its Guangzhou office. GZZDH leases this space for a monthly rental of RMB 44,159.57 (approximately US$6,592), plus an RMB 23,778.23 (approximately US$3,549) business management fee, until March 30, 2023.

SYZDH leases approximately 1,200 square meters of office space in Shenyang City until December 25, 2022. The lease provides for a monthly rental of RMB 60,000 (approximately US$8,571).

We believe that our existing office facilities will be sufficient for our operations for the next year.

Employees

As of December 31, 2022, we employ a total of 49 full-time employees, including 27 who are employed by ZDSE, respectively. All employment contracts are in accordance with the laws of the PRC. The Company believes its relationships with its employees are satisfactory. Prior to the Share Exchange, the Company did not have any employees.

Intellectual Property

Trademarks.

ZDSE has two trademarks. It filed a trademark application on May 16, 2016 for its “Love the public, love the sailing” logo (registration number 19968013) and was granted exclusive protection until July 6, 2027.

ZDSE also filed a trademark application on May 16, 2016 for its “Zhongdehui” logo (registration number 1996771) and was granted exclusive protection for that logo until July 6, 2027.

China’s Executive Coaching Industry

China’s economy has grown so fast that demand for business leaders now far exceeds supply, and shortages are expected to continue for the rest of the decade. Despite China’s massive population and expanding higher education, Chinese and foreign companies often struggle to recruit a sufficient number of talented and experienced middle and senior managers to provide the leadership the company needs to succeed in China’s fast-growing, highly competitive business environment. The leadership gap is compounded by the fact that many experienced Chinese managers who might otherwise fill leadership positions in fast-growing sectors gained much of their experience in traditional industries and in a system where management was based on government regulation that suppressed managerial initiative.

Today, the value of executive coaches in helping nurture organizations and leaders has been completely reappraised. A growing number of companies are seeking their help to prepare senior and mid-level managers for more senior roles or to more effectively operate in their current roles.

As in other parts of the world, coaching in China is used to help executives identify and reach more of their potential. Executive coaching in China tends to be currently focused on development needs associated with leadership, often “executive presence” and other forms of communication. Dealing with cultural differences as a result of China’s decision to open itself increasingly to Western economic and cultural forces can be a challenge for both local Chinese and for China-based executives of U.S. multinational corporations. For example, executives in multinational corporations who have resided and worked in China for a considerable period of time, or Chinese executives in Western corporations who have returned to China, often lament that Western headquarters don’t understand what it takes to be successful in “our part of the world.” Back at headquarters, seniors and peers can’t understand why their high-potential colleague in China can’t understand (or worse, won’t listen to) their views.

In this situation, coaching has been used to support improvements in the leader’s executive presence. Coaching support has led, for example, to action on “active listening” goals. It has also enabled the executive to present his China market experience in the form of a conversation with (rather than a lecture to) his colleagues at headquarters.

Challenges

Chinese executives may not be as comfortable with coaching as their U.S. or Europe-based colleagues. They may perceive it less as a development vehicle than as a means of remedying their “faults.” Worse, it may be seen as a prelude to dismissal.

In addition, given the value Confucianism places on hierarchy, Chinese executives may find it difficult to “slot” the coach psychologically. For example, as a partner in the executive’s development, the coach is clearly not a subordinate. If the coach is seen as a peer, however, he or she may be perceived as insufficiently capable of providing the support the executive feels is needed. If the coach is seen as a superior, then the executive may expect to be taught, rather than coached.

Regulations in China Applicable to Our Business

Foreign Investments

On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) issued the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Administrative Measures”) and relevant supporting guidelines (collectively, the “New Administrative Rules Regarding Overseas Listings”), which will come into force on March 31, 2023. According to the New Administrative Rules Regarding Overseas Listings, among other things, a domestic company in the PRC that seeks to offer and list securities in overseas markets shall fulfill the filing procedure with the CSRC as per requirement of the Trial Administrative Measures. According to the Trial Administrative Measures, Article 2, where a domestic company seeks to directly offer and list securities in overseas markets, the issuer shall file with the CSRC and where a domestic company seeks to indirectly offer and list securities in overseas markets, the issuer shall designate a major domestic operating entity, which shall, as the domestic responsible entity, file with the CSRC. Initial public offerings or listings in overseas markets shall be filed with the CSRC within three (3) working days after the relevant application is submitted overseas. If an issuer offers securities in the same overseas market where it has previously offered and listed securities subsequently, filings shall be made with the CSRC within three (3) working days after the offering is completed. According to the Trial Administrative Measures Article 22, upon occurrence of any material event, such as change of control, investigations or sanctions imposed by overseas securities regulatory agencies or other relevant competent authorities, change of listing status or transfer of listing segment, or voluntary or mandatory delisting, after an issuer has offered and listed securities in an overseas market, the issuer shall submit a report thereof to CSRC within three (3) working days after the occurrence and public disclosure of such event. Further, according to the Trial Administrative Measures Article 21, an overseas securities company that serves as a sponsor or lead underwriter for overseas securities offering and listing by domestic companies shall file with the CSRC within 10 working days after signing its first engagement agreement for such business, and submit to the CSRC, no later than January 31 each year, an annual report on its business activities in the previous year associated with overseas securities offering and listing by domestic companies. If an overseas securities company has entered into engagement agreements before the effectuation of the Trial Administrative Measures and is serving in practice as a sponsor or lead underwriter for overseas securities offering and listing by domestic companies, it shall file with the CSRC within 30 working days after the Trial Administrative Measures take effect. On February 24, 2023, the CSRC promulgated the Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (the “Confidentiality and Archives Administration Provisions”), which will also become effective on March 31, 2023. The Confidentiality and Archives Administration Provisions set out rules, requirements and procedures relating to provision of documents, materials and accounting archives for securities companies, securities service providers, overseas regulators and other entities and individuals in connection with overseas offering and listing, including without limitation to, domestic companies that carry out overseas offering and listing (either in direct or indirect means) and the securities companies and securities service providers (either incorporated domestically or overseas) that undertake relevant businesses shall not leak any state secret and working secret of government agencies, or harm national security and public interest, and a domestic company shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level, if it plans to, either directly or through its overseas listed entity, publicly disclose or provide any documents and materials that contain state secrets or working secrets of government agencies. Working papers produced in the Chinese mainland by securities companies and securities service providers in the process of undertaking businesses related to overseas offering and listing by domestic companies shall be retained in the Chinese mainland. Where such documents need to be transferred or transmitted to outside the Chinese mainland, relevant approval procedures stipulated by regulations shall be followed. While we believe we do not involve leaking any state secret and working secret of government agencies, or harming national security and public interest in connection with provision of documents, materials and accounting archives, there is uncertainty how the new provisions will be interpreted and implemented in the future, and we may be required to perform additional procedures in connection with the provision of accounting archives after the Confidentiality and Archives Administration Provisions come into effect. Any failure by us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our ADSs, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause our ADSs to significantly decline in value or become worthless.

Foreign Exchange

The PRC government’s control over the conversion of foreign exchange and fluctuations in the value of RMB may result in foreign currency exchange losses and limit our ability to pay dividends. Since our Operating Subsidiaries conduct business in the PRC, we receive part of their revenue and pay part of our expenses in the RMB. The value of RMB against the U.S. dollar and other currencies fluctuates from time to time and is subject to changes in the domestic and international political and economic developments, including the global and monetary effects of the war in Ukraine, as well as the fiscal and foreign exchange policies prescribed by the PRC government. We cannot assure you that the value of the RMB will remain at the current level against the U.S. dollar or any other foreign currency. If the RMB appreciates or depreciates against the U.S. dollar or any other foreign currency, it will have mixed effects on our Operating Subsidiaries’ business and there is no assurance that the overall effect will be positive.

The RMB is not currently a freely convertible currency. Conversion and remittance of foreign currencies are subject to PRC foreign exchange regulations. Pursuant to the existing foreign exchange regulations in the PRC, we are allowed to carry out foreign exchange transactions for current account items (including dividend payments) without submitting the relevant documentary evidence of such transactions to SAFE for approval in advance as long as they are processed by banks designated for foreign exchange trading. However, we may need to obtain the SAFE’s prior approval for foreign exchange transactions for capital account items. If we fail to obtain the SAFE’s approval to convert RMB into foreign currencies for foreign exchange transactions, our Operating Subsidiaries’ business operations, financial condition, results of operations and prospects, as well as our ability to pay dividends, could be materially and adversely affected.

To address persistent capital outflows and the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and SAFE implemented a series of capital control measures in the subsequent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries’ dividends and other distributions may be subject to tightened scrutiny in the future. 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.

In addition, the Enterprise Income Tax Law (the “EIT LAW”) and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC-resident enterprises are tax resident. Pursuant to the tax agreement between Mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5% withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce the amount of dividends we may receive from our PRC subsidiaries.

Cash Flows

Any PRC regulations pertaining to our corporate structure, loans to and investment in PRC entities by offshore holding companies may delay us from making loans or capital contributions to our Operating Subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

With regards to our corporate structure, any funds we may transfer to our Operating Subsidiaries, either as a loan or as an increase in registered capital, are subject to approval by or registration with relevant government authorities in China regardless of the amount of the transfer. According to the relevant PRC regulations, capital contributions to our Operating Subsidiaries are subject to the submission of reports of changes through the enterprise registration system and registration with a local bank authorized by SAFE. In addition, any foreign loan procured by our Operating Subsidiaries is required to be registered with SAFE and such loan is required to be registered with the NPRC.

Moreover, as a holding company, we may rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict their ability to pay dividends to us. However, none of our subsidiaries has made any dividends or other distributions to our holding company as of the date of this Annual Report. In the future, cash proceeds raised from overseas financing activities may be transferred by us to our PRC subsidiaries via capital contribution or shareholder loans, as the case may be.

As of the date of this Annual Report, there were no cash flows between our Cayman Islands holding company and our subsidiaries. Funds are transferred among our PRC subsidiaries for working capital purposes. The transfer of funds among companies is subject to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases (2020 Revision, the “Provisions on Private Lending Cases”), which was implemented on August 20, 2020 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private Lending Cases does not prohibit using cash generated from one subsidiary to fund another subsidiary’s operations. We have not been notified of any other restriction which could limit our PRC subsidiaries’ ability to transfer cash between subsidiaries.

Cybersecurity

As we conduct substantially all of our operations in China, we are subject to legal and operational risks associated with having substantially all of our operations in China, including risks related to the legal, political and economic policies of the Chinese 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. New laws, such as the Measures for Cybersecurity Review, could significantly limit or completely hinder our ability to offer or continue to offer securities to overseas investors and cause such securities to significantly decline in value or to be worthless.

The PRC, through the Cyberspace Administration of China (the “CAC”), has recently proposed new rules and enacted new laws that would require companies collecting or holding large amounts of data to undergo a cybersecurity review prior to listing in foreign countries, a move that would significantly tighten oversight over China-based Internet giants. Pursuant to Article 6 of the Measures for Cybersecurity Review (Draft for Comments), companies holding data on more than 1 million users must now apply for cybersecurity approval when seeking listings in other nations due to the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.” On January 4, 2022 and effective February 15, 2022, the CAC issued the Revised Measures on Cyberspace Security (the “Revised Measures”), which requires that operators of critical information infrastructure (“CII”) intending to procure network products and services that may affect national security undergo cybersecurity review. This has impacted and could potentially impact a broad range of data-rich tech companies. The Revised Measures expand the scope of reviewed business entities to now include network platform (“NP”) operators intending to engage in certain activities, such as applying to list abroad. The Revised Measures establish a Cybersecurity Review Office (the “CRO”), an administrative body within the CAC, to formulate the regulations for cybersecurity review and to lead the cybersecurity review process. Applicable CII operators and NP operators are required to submit an application to the CRO, and the CRO will assess whether a cybersecurity review is required.

If an entity is a CII operator or a NP operator, it is required to apply for cybersecurity review if any of the following three conditions is met: (i) the CII operator proposes to procure network products and services that affect or may affect national security; (ii) the NP operator proposed to carry out data processing activities that affect or may affect national security; (iii) or the NP operator controls personal information of more than 1,000,000 users and proposes to apply for overseas listing. The term “overseas listings” is often interpreted as listings outside of China, such as in the U.S. And, “network products and services” include core network equipment, high capability computers and servers, high capacity data storage, large databases and applications, network security equipment, cloud computing services; “data processing” means the collection, storage, use, processing, transmission, provision and disclosure of data.

The Company is in the business of professional management coaching through ZDSE and business planning and event planning and production through HHMT, which do not involve the collection of user data, implicate cybersecurity or involve any other type of restricted industry. Based on our understanding of currently applicable PRC laws and regulations, our Operating Subsidiaries are not subject to cybersecurity review under the Revised Measures nor are the Shares subject to the review or prior approval of the CAC or the CRSC. Uncertainties still exist, however, due to the possibility that laws, regulations or policies in the PRC could change rapidly in the future. Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings are subject to review by the CRSC or the CAC could significantly limit or completely hinder our ability to offer or continue to offer securities to overseas investors and could cause such securities to significantly decline in value or to be worthless.

The Employment Promotion Law of the PRC

The Employment Promotion Law of the PRC was adopted by the National People’s Congress on August 30, 2007 and amended on May 24, 2015. The Law states that the PRC government encourages and supports various types of vocational colleges, vocational skills training institutions and employers to carry out pre-employment training, on-the-job training, reemployment training and entrepreneurship training according to law and encourages laborers to participate in various forms of training. The PRC government and relevant departments encourage and guide enterprises to strengthen vocational education and training based on market demand and industrial development direction.

Several Opinions on Further Promoting the Development of Small and Medium-sized Enterprises

On September 19, 2009, the State Council issued the Several Opinions on Further Promoting the Development of Small and Medium-sized enterprises (“SME”), which states that the state guides and supports SMEs in strengthening management, supports the development of management consulting agencies for SMEs, conducts management consulting activities, guides SMEs to strengthen basic management, marketing and risk management, improve governance structure, promote management innovation and improve business management, vigorously carry out training for all types of SMEs and implement SMEs Galaxy Training Project, increase financial support, give full play to the role of industry associations (commercial associations) and SME training institutions, extensively adopt network technologies and other means to carry out policies and regulations, corporate management, marketing, professional skills, customer service and other kinds of training. It attaches great importance to the training of business managers and selects one million growing SMEs within three years to provide comprehensive training for their.

Promotion Law on Small and Medium-sized Enterprises of the PRC

On June 29, 2002, the National People’s Congress passed the Promotion Law on Small and Medium-sized Enterprises of the PRC, which was revised on September 1, 2017 and implemented on January 1, 2018. The Law states that the state establishes a sound socialized SME public service system to provide services to SMEs. The state supports relevant agencies, colleges and universities in carrying out personnel training for the management of SMEs and production technologies, and improving the marketing, management and technology level of the company. The state supports colleges and universities, vocational education institutions and various vocational skills training institutions to cooperate with SMEs to build a practical practice base to support two-way exchanges between teachers of vocational education institutions and SMEs, and to innovate the talent training model for SMEs.

Regulations Related to Foreign Invested Enterprises

According to the Special Administrative Measures (Negative List) for the Access of Foreign Investment (2019) (the “Negative List”) as promulgated and effective in July 2019, the original Special Administrative Measures (Negative List) for the Access of Foreign Investment (2018) was repealed. Overseas investors are not allowed to invest in any foreign investment prohibited field on the Negative List and shall have an access permit for investing in a non-prohibited investment field on the Negative List. Fields not included in the Negative List for the market entry of foreign investment shall be managed according to the principle of equal treatment of domestic and foreign investment.

The business scope of ZDSE is management coaching and related business and advertisement. According to the Negative List, the business scope of ZDSE does not fall in any field on the Negative List and therefore is not subject to any special management measures for the access of foreign investment.

The Foreign Investment Law of the People’s Republic of China (the “Foreign Investment Law”), which was promulgated in March 2019 and became effective on January 1, 2020, replaced the three legacy laws on foreign invested enterprises including the Wholly Foreign-owned Enterprises Law of the People’s Republic of China (the “Wholly Foreign-owned Enterprises Law”) which was previously applicable to ZDSE. The organizational form, organization structure and activities of a foreign-invested enterprise are now governed by the provisions of the Company Law of the People’s Republic of China, the Partnership Enterprise Law of the People’s Republic of China and other relevant laws. However, the Foreign Investment Law sets up a transitional period of 5 years after the implementation of the Foreign Investment Law, during which foreign-invested enterprises established according to the Wholly Foreign-owned Enterprise Law before the implementation of the Foreign Investment Law may maintain their original organization forms, etc. Specific implementing measures are to be prescribed by State Council.

Regulations on Trademark Protection

Intellectual property rights, also known as “knowledge ownership rights,” refer to “property rights enjoyed by right holders for the intellectual work created by their intellectual work,” and are generally only valid for a limited time. Various intellectual creations such as inventions, designs, literary and artistic works, as well as signs, names and images used in commerce, can all be considered intellectual property owned by a person or organization. Since the 1980s, while continuously improving the construction of the domestic legal system, China has successively joined some major international conventions, treaties and agreements for the protection of intellectual property rights. In particular, on December 11, 2001, China became a member of the World Trade Organization’s Agreement on Trade-related Intellectual Property Rights.

The Trademark Law of the PRC was passed by the National People’s Congress on August 23, 1982 and last amended in April, 2019, effective in November 2019. The Law states that an applicant for trademark registration should fill in the product category and product name of the used trademark in accordance with the stipulated commodity classification form and file an application for registration. Trademark registration applicants can apply for registration of the same trademark for multiple categories of goods through one application. A registered trademark is valid for a period of ten years from the date of approval of the registration. If the registered trademark has expired and it needs to continue to be used, the trademark registrant must go through the renewal formalities within 12 months before the expiration of the time limit; if it cannot be handled during this period, it may grant a grace period of six months. Each renewal registration is valid for a period of ten years, counting from the date following the expiration of the previous validity period of the mark. If registrants fail to complete the renewal formalities at the expiration of the time limit, their registered trademarks shall be cancelled. In addition, if the registered trademark is a well-known trademark, it shall be managed in accordance with the Regulations on the Recognition and Protection of Well-known Trademarks issued by the State Administration of Industry and Commerce on July 3, 2014. The regulation states that well-known trademarks are trademarks that are well-known to the relevant public in China. The relevant public includes consumers who are related to the use of a certain type of goods or services marked by the trademark, other operators who produce the aforementioned goods or provide services, and the sellers and related personnel involved in the distribution channels. The recognition of well-known trademarks follows the principle of case identification and passive protection.

ZDSE has two trademarks.

Payment of Dividends

Dividends payable by the Company to our foreign investors and gain on the sale of our Shares may be subject to PRC income taxes. Pursuant to the EIT Law and the EIT rules, subject to any applicable tax treaty or arrangement between the PRC and the jurisdiction of residence of our investors that provides a different income tax arrangement, the payment of dividends by a PRC resident enterprise to investors that are non-PRC resident enterprises (including enterprises that do not have an establishment or place of business in the PRC and enterprises that have an establishment or place of business but their income is not effectively connected with the establishment or place of business) or any gain realized on the transfer of shares by such investors is generally subject to PRC income tax at a rate of 10% to the extent such dividend has its source in the PRC or such gain is regarded as income derived from sources within the PRC. Under Individual Income Tax Law of the PRC and its implementation rules, dividends sourced within the PRC paid to foreign individual investors who are not PRC residents and gains from PRC sources realized on the transfer of our Shares by such investors would be subject to PRC income tax at a rate of 20%, subject to any reduction or exemption set out in applicable tax treaties and PRC laws.

It is uncertain whether we will be considered a PRC “resident enterprise.” If we are considered a PRC “resident enterprise,” dividends payable by us with respect to our Shares, or any gain realized from the transfer of our Shares may be treated as income derived from sources within the PRC and may be subject to PRC income tax, subject to the interpretation, application and enforcement of the EIT Law and the EIT rules by the relevant tax authorities. If we are required under the EIT Law or other related regulations to withhold PRC income tax on our dividends payable to foreign holders of our Shares which are “non-resident enterprises,” or if our Shareholders are required to pay PRC income tax on the transfer of our Shares under PRC tax laws, the value of an investment in our Shares may be materially and adversely affected.

Regulations on Labor

According to the Labor Law of the PRC (promulgated in 1994, last amended in 2018), Labor Contract Law of the PRC (promulgated in 2007, amended in 2012) and Implementation Regulations of the Labor Contract Law of the PRC (promulgated in 2008), it is stipulated that employers and laborers should establish labor contracts when they establish labor relations. The labor contract concluded according to law is binding, and employers and laborers shall perform the obligations stipulated in the labor contract. Where a labor relationship has been established and a written labor contract has not been concluded at the same time, a written labor contract shall be concluded within one month from the date of employment. Where an employer and a laborer conclude a labor contract prior to employment, the labor relationship shall be established from the date of employment. The state implements a minimum wage security system. The specific standards for minimum wages are stipulated by the people’s governments of provinces, autonomous regions and municipalities directly under the Central Government and reported to the State Council for the record. The employer’s payment of laborers’ wages must not be less than the local minimum wage standard. The employer must provide laborers with labor safety and hygiene conditions that comply with the state regulations and necessary labor protection supplies. Workers engaged in occupational hazard operations should carry out regular health checks.

The provisions concerning the employment of foreigners in China are mainly based on the Regulations on the Administration of Employment of Foreigners in China jointly issued by the Ministry of Labor, the Ministry of Public Security, the Ministry of Foreign Affairs and the Ministry of Foreign Trade and Economic Cooperation on January 22, 1996, as amended on November 12, 2010 and March 13, 2017. The regulation states that employers employing foreigners must apply for employment permits for the foreigner. Foreigners can only be hired after obtaining permission and obtaining the Employment License for Foreigners of the PRC (hereinafter referred to as “permit”). Foreigners employed in China should enter the country on a Z-visa (if they have a mutual visa exemption agreement, they should be dealt with according to the agreement). After entering China and obtain the Foreigner’s Employment Permit (hereinafter referred to as “employment permit”), they will be able to obtain employment in China. Foreigners who have not obtained a residence permit (namely, those with F, L, C and G visas), foreigners studying in China or performing internships and dependents of foreigners holding a Z visa may not be employed in China. In exceptional circumstances, the employer may apply for a permit in accordance with the approval procedures stipulated in these Regulations. Foreigners employed with a permit to the public security agency change their status and apply for an employment permit or residence permit. Employing units and foreigners hired shall conclude labor contracts according to law. The duration of a labor contract must not exceed five years. When the employment contract signed between the foreigner and the employing unit expires, the employment permit will be invalid.

The provisions concerning the employment of foreigners as teachers mainly refer to the circular concerning the Handling of Work Permits for Foreign Experts Coming to China issued by the State Administration of Foreign Experts Affairs on September 30, 2004. The circular states that foreign experts hired to work in China should obtain the Work Permit for Foreign Experts to Come to China. Foreign experts applying for Work Permits for Foreign Experts to Work in China shall abide by Chinese laws and regulations, be in good health, have no criminal record and meet one of the following conditions:

(i) to implement intergovernmental agreements and agreements between international organizations, and foreign trade contracts, foreign professional skills or management personnel working for employment in China;

(ii) foreign professionals who are engaged in education, scientific research, journalism, publishing, culture, arts, health, sports, etc. in China;

(iii) appointed as a deputy general manager or above in an enterprise in China, or a foreign professional or technical person enjoying equal treatment;

(iv) foreign experts or human agency agencies accredited by the State Administration of Foreign Experts Affairs Representatives of nationalities; and

(v) applicants for work in the fields of economy, technology, engineering, trade, finance, accounting, taxation, tourism, etc., with special expertise, foreign professional skills or management personnel in short supply in China.

Foreign experts in paragraphs (ii) and (iii) shall have a bachelor’s degree or above and more than 5 years of relevant work experience (except that language teachers must have a bachelor’s degree or above and more than 2 years of relevant work experience). All units intending to hire foreign experts shall be entitled to Accreditation of Foreign Experts Units and obtain the Certificate of Employment of Foreign Expert Units. This certificate is the basic proof of foreign nationals applying for work permits, invitation letters, foreign expert certificates and residence procedures in China. Newly-run schools and other education and training institutions should run for more than one year, only after the basic stability of teachers, students, and teaching institutions, they can apply for qualification approval procedures. However, the formal establishment of Chinese-foreign cooperatively-run schools and schools that specially recruit children from foreign nationals are not subject to this restriction. The Provincial Foreign Experts Bureaus, State Council related ministries and commissions, and the directly-affiliated agencies’ foreign affairs divisions (bureaus) shall be responsible for the annual inspection work of the local or department according to the annual inspection notice issued by the State Administration of Foreign Experts Affairs and submit the regional annual inspection report to the State Administration of Foreign Experts Bureau by the end of December. The National Bureau of Foreign Experts conducts annual inspections of all eligible units from January 1 to January 31 every year. All overseas organizations that intend to send cultural and educational experts to China must obtain the Authorization of the Qualifications of Overseas Organizations that Introduce Foreign Cultural and Educational Experts to Work in China and obtain the Authority Certification for Overseas Organizations that Introduce Foreign Cultural and Educational Experts to Work in China. This certificate is the basic proof of the overseas organization’s intermediary business of cultural and educational experts in China. The State Bureau of Foreign Experts Affairs and the Bureau of Foreign Experts at the provincial level conduct annual inspections of overseas organizations that have obtained the qualifications for introducing foreign cultural and educational experts to China from January 1 to March 31 every year, and organize dispatch teams and personnel to provide training and internships. Training, study and other forms of training for overseas training institutions must all obtain the Organizational Dispatch Group and Personnel Qualifications for Overseas Training Institutions and obtain the Certificate of Organization Qualification for Organizing Delegation Groups and People to Overseas Training. Organizations that organize their own personnel to go abroad for training only shall be excluded.

According to the decision regarding the cancellation of 13 administrative licenses of the State Council issued by the State Council on February 13, 2016, the accreditation of foreign experts by the State Foreign Experts Bureau was cancelled.

On March 28, 2017, the State Administration of Foreign Experts Affairs, the Ministry of Human Resources and Social Security, the Ministry of Foreign Affairs and the Ministry of Public Security jointly issued a notice on the Full Implementation of the Work Permit System for Foreigners to Come to China. The circular states that foreigners allowed to work in China will receive Work Permits for Foreigners to Come to China to replace Foreigner Employment Permits and Foreign Experts to Work Permits in China since April 1, 2017.

Tax regulations

PRC corporate income tax

On March 6, 2007, the National People’s Congress of the PRC issued the Corporate Income Tax Law of the PRC, which was implemented on January 1, 2008 and last amended in December 2018. The tax law stipulates that foreign-invested enterprises and domestic enterprises have an income tax rate of 25%. Small and low profit enterprises that meet certain conditions will be subject to a 20% income tax rate. Enterprises with high priority which need to be supported by the state are taxed at a reduced rate of 15%. On December 6, 2007, the State Council issued the Regulations on the Implementation of the Enterprise Income Tax Law of the PRC, which took effect on January 1, 2008.

On April 22, 2009, the State Administration of Taxation issued a notice on Relevant Issues of Overseas Registered Chinese-Funded Controlled Enterprises Recognized as Resident Enterprises on the Basis of Actual Management Institutional Standards, which became effective on January 1, 2008. The circular states that overseas Chinese-invested enterprises that meet the following conditions shall determine that they are resident companies of the actual administrative agency in China (hereinafter referred to as non-domestically registered resident enterprises), implement corresponding tax administration and collect corporate income tax on their income from inside and outside China:

(i) the places where senior management personnel responsible for the implementation of daily production and operation management operations and their senior management departments perform their duties are mainly located in China;

(ii) the company’s financial decisions (such as borrowings, lending, financing, financial risk management, etc.) and personnel decisions (such as appointments, dismissals, remunerations, etc.) are determined by institutions or personnel located in China or need to be approved by an organization or person located in China;

(iii) the company’s main property, accounting book, company seal, board of directors and minutes of shareholders’ meetings, etc. are located or stored in China; and

(iv) 50% or more of the voting directors or senior executives of the corporation often reside in China.

On July 27, 2011, the State Administration of Taxation issued an announcement on the issuance of the Administrative Measures on the Income Tax of Overseas-registered Chinese-controlled Holding Enterprises (Trial), which took effect on September 1, 2011. The measure points out that non-domestic-registered resident enterprises shall, in accordance with relevant Chinese laws and regulations and regulations of the competent departments of finance and taxation under the State Council, formulate financial and accounting statements, and shall, within 15 days from the date of receipt of tax registration certificates, submit the enterprise’s financial and accounting systems or financial accounting, the handling methods and related information to the competent tax authorities for the record. Non-domiciled registered resident companies that obtain dividends, bonuses and other equity investment income derived from China, income from interest, rent, royalties, transfer of property income and other income, shall issue a copy of the company’s Certificate of Resident Identity of Overseas-registered Chinese-controlled Enterprises issued by the company. According to Article 26 of the Corporate Income Tax Law of the PRC and Articles 17, 18 and 91 of the Implementation Regulations on Enterprise Income Tax Law of the PRC, the following income of enterprises is tax exempt income:

(i) interest income from government bonds;

(ii) dividends, bonuses and other equity investment gains among eligible resident companies;

(iii) non-resident enterprises that have established establishments in China obtain dividends, dividends, and other equity investment income from resident enterprises that are actually in contact with the institution or site; and

(iv) income of qualified non-profit organizations.

The applicable tax rate for income obtained by non-resident enterprises is 20%. Corporate income tax on income earned by non-resident enterprises is levied at the rate of 10%. That is to say, general overseas companies transferring 10% of the corporate income tax shall be subject to the transfer of equity in Chinese enterprises or the dividend distribution of Chinese enterprises. However, if the non-resident enterprise is a resident enterprise belonging to a country or region that has signed a tax treaty or arrangement with China, it may enjoy preferential tax treaty provisions.

Small and micro enterprise income tax preferential policy

According to notice of the Ministry of Finance and the State Administration of Taxation No. 13 of 2019 (Abbreviated as CS (2019) No.13) on Implementing the Inclusive Tax Deduction Policy for Small and Micro Enterprises issued by the Ministry of Finance and State Administration of Taxation, the annual taxable income of small and micro-profit enterprises shall not exceed RMB 1 million, the taxable income shall be included in the taxable income of 25% and the enterprise income tax shall be paid at the rate of 20%. For the portion exceeding RMB 1 million but not exceeding RMB 3 million, the amount of taxable income shall be included in the reduction of 50%, and the enterprise income tax shall be paid at the rate of 20%. These small-scale and low-profit enterprises refer to enterprises engaged in the national non-restricted and prohibited industries, and at the same time complying with the three conditions of annual taxable income of not more than RMB 3 million, the number of employees not exceeding 300 and the total assets not exceeding RMB 50 million. This notice is effective from January 1, 2019 to December 31, 2021.

According to notice of the Ministry of Finance and the State Administration of Taxation No. 12 of 2021 for small and low profit enterprises with annual taxable income not exceeding RMB 1 million, the enterprise income tax shall be halved on the basis of the preferential policies stipulated in Article 2 of the notice of CS (2019) No.13; that is, when the taxable income does not exceed 1 million yuan, the income tax shall be levied at the tax rate of 2.5%. The implementation period of this announcement is from January 1, 2021 to December 31, 2022.

PRC withholding tax

Foreign enterprises have no institutions or places in China, but have obtained profits, interest, rent, royalties and other income from China, or have established institutions or places, but the above-mentioned income has no actual connection with institutions and places. The amount of income is subject to withholding income tax. In accordance with the accrued method, the payer (payer) pays the tax on the proceeds (payments) to the beneficiary (the payee). The withholding income tax belongs to personal income tax or corporate income tax, but it is only a source of income tax control. It is a taxation of a personal income tax or corporate income tax.

In 2008, China began to impose a dividend withholding income tax on foreign-invested enterprises at a tax rate of 20%, generally levied at 10%. Hong Kong, Macao, Singapore, Seychelles and others have signed tax treaties with China or have special taxes. The preferential national tax rate for the countries in the arrangement is as low as 5%. Therefore, when a Hong Kong company affiliated to the group obtains the after-tax profits distributed by the mainland Chinese company it invests, the mainland Chinese company must withhold and pay 5% of the withholding income tax.

In addition, Notice No.88 (2017) on “the Issues Concerning the Direct Investment of Foreign Investors in Distributing the Withholding Income Tax Policy” stipulates that foreign investors who meet the conditions of direct investment shall not be subject to withholding tax.

PRC Business Tax and Value-Added Tax (VAT)

On March 23, 2016, the Ministry of Finance and the State Administration of Taxation issued a circular on the Full Implementation of the Business Tax Levy of VAT Pilots. The circular indicates that since May 1, 2016, pilots for the change of business tax to VAT have been fully promoted throughout the country, and all business tax taxpayers, including ZDSE, were included in the scope of the pilot and were changed from paying business tax to paying VAT. According to notice No.36 (2016) issued by the Ministry of Finance and the State Administration of Taxation, the Comprehensive Project replaces Business Tax with Value-added Tax.

According to Article 1 of notice CS (2019) No. 13, VAT small-scale taxpayers with monthly sales not exceeding RMB 100,000 are exempt from VAT. The implementation date of this paper is from January 1, 2019 to December 31, 2021. According to the “Notice of the State Administration of Taxation on Issues Concerning the Exemption of Value-Added Tax for Small and Micro Enterprises” (State Administration of Taxation Announcement No. 52 of 2017, now abolished), from January 1, 2018 to December 31, 2020 sales of small-scale VAT taxpayers shall not exceed RMB 100,000 (tax payment of RMB 300,000 per quarter) and enjoy the preferential policy of exemption from VAT.

Announcement of the Ministry of Finance and the State Administration of Taxation No. 11 of 2021 repealed Article 1 of the notice of CS (2019) No. 13 and provides that, from April 1, 2021 to December 31, 2022, small-scale VAT taxpayers with monthly sales not exceeding RMB 150,000 are exempt from VAT.

To support novel coronavirus pneumonia prevention and control and to accelerate the resumption of work, the rate of small-scale VAT was reduced from 3% to 1% (Announcement on the value added tax policy of supporting individual industrial and commercial households to return to work—Announcement No.13, 2020 of the Ministry of Finance and the State Administration of Taxation). This preferential tax rate will be in effect until December 31, 2021 (Announcement No.7, 2021). Further, in accordance with The Announcement of Ministry of Finance and State Taxation Administration on Exemption of VAT for VAT Small-scale Taxpayer (No. 15, 2022), effective from April 1, 2022 to December 31 2022, VAT small-scale taxpayers, regardless of monthly sales, are exempt from VAT but are subject to a 3% tax rate for assessable income.

In accordance with the announcement of the Tax Bureau of the Ministry of Finance (No.1, 2023) on defining the policies of reducing or exempting the VAT for small-scale taxpayers, from January 1, 2023 to December 31, 2023, the VAT will be exempted for monthly sales below RMB 100,000 (inclusive) and quarterly sales below RMB 300,000, and VAT will be levied at a reduced rate of 1% for small-scale VAT payers applying a 3% levy rate.

Currently, of all the Company’s Operating Subsidiaries, with the exception of SDYL, which is a general taxpayer and subject to a VAT rate of 6%, are small-scale taxpayers and subject to a VAT rate of 3% but are exempt from VAT payments.

The following table provides details of the licenses and permissions held by our subsidiaries in China:

Item 4A. Unresolved Staff Comments

Not Applicable

Item 5. Operating and Financial Review and Prospects

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Overview

Our primary business operations are provided through ZDSE. Our second Operating Subsidiary, HHMT, is engaged in several areas related to business planning and event planning and production. HEMC, our third Operating Subsidiary, is engaged in providing consulting services for entrepreneurs, staff training and introduction services for investors and government. JEMT, our fourth Operating Subsidiary, JEMT started operation in June 2022, holding training courses for individuals and enterprises to improve their professional and management skills. For the year ended December 31, 2022, the Company derived approximately 65% of its revenue from ZDSE, 26% from HHMT, 6% from JEMT and the remaining 1% from HEMC.

For the years ended December 31, 2021 and 2022, our consolidated revenue amounted to approximately $1.7 million and $1.1 million, respectively. We sustained a net loss of approximately $0.1 million and $0.3 million, respectively, for those years.

The following table shows our Statement of Operations data for the years ended December 31, 2021 and 2022. ZDSE, HHMT, JEMT and HEMC’s financial data have been included in the Company’s consolidated financial statements as of and for the years ended December 31, 2021 and 2022. For further information regarding the results of our operations, see our consolidated financial statements appearing elsewhere in this Annual Report.

Our Primary Business

Through ZDSE, we engage in providing executive coaching services in the PRC. We are striving to become the leader in executive business coaching services by guiding and transforming our clients’ organizations into the future: into organizations that are highly motivated with a productive workforce, streamlined processes, automated workflows, cost savings and a solid path towards continuous innovations. The unique orientation of ZDSE’s programs, including its holistic aspects, the quality of its coaches, personalized atmosphere and individualization of programs sets it apart from its competition.

ZDSE strives to be a sustainable and dynamic foundation to any organization by providing career development and learning opportunities to enhance workforce agility and improve employer brand. Through our modules, we deliver actionable solutions to real life business challenges across many facets of an organization, including people, technology, data and finances. Our strategic leadership and transformational insights, obtained through years of our coaches’ experience and our research and data, result in providing our clients with thoughtful, practical guidance and recommendations.

ZDSE’s Future Business Plan

ZDSE’s national development plan, which is contingent on the status of the COVID-19 epidemic, includes opening 10 to 15 new branches in China, including branches in Beijing, Shanghai, Jiangsu, Chongqing and Xiamen, within three to six years. In addition, along with its geographic expansion, ZDSE is continuously improving its module offerings. More modules are being developed for inclusion on our future products. We will focus on (i) workforce planning, which examines the workforce lifecycle ensuring new workforce strategies are adopted and organizational analytics optimize our program deliveries; (ii) career management, which will examine current employee skills, finding mentors and tailoring our guidance for the leadership skills needed within an organization; (iii) development solutions, which will assist organizations to accelerate performance and increase productivity while enhancing company culture; and (iv) cultivating future leaders by focusing on our leader development program.

Financial Impact of COVID-19

Due to the coronavirus outbreak in China, ZDSE’s revenues in 2020 fell by 48% compared to 2019. Revenue for 2021 increased by 37% compared with that of 2020; however, due to recurrences of coronavirus in China, ZDSE’s revenues in 2021 were still 52% below its revenue for the fiscal year ended December 31, 2019. ZDSE’s revenues in 2022 were still 67% below its revenue for the fiscal year ended December 31, 2019.Beginning in January 2020, the emergence and wide spread of COVID-19 has resulted in quarantines, travel restrictions and the temporary closure of businesses in China and elsewhere. Since late July 2021, the Delta variant of COVID-19 has resurged in several provinces across China and the Omicron variant of COVID-19 has been detected and is rapidly increasing the proportion of COVID-19 cases it is causing. This has resulted in the complete lockdown of Shanghai.In Mar. 2022, sudden outbreaks of many COVID-19 variants continued to occur in Guangzhou, Shenyang, Shenzhen, etc.. Consequently, the COVID-19 outbreak and its continuous resurgences together with governmental sanctions has deeply affected our business operations, financial condition and operating results. In Dec. 2022, the Chinese government abruptly declared an overall openness for the anti-epidemic policy against COVID-19 which no longer restrains social mobility.

We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our business operations, including those that may be required by government authorities, or that we determine are in the best interests of our employees and shareholders. At this point, the extent to which the COVID-19 pandemic may impact our business and operations in the future remains uncertain.

Going Concern Uncertainties

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

As reflected in the accompanying consolidated financial statements, for the years ended December 31, 2022 and 2021, we incurred net losses of $283,276 and $113,496, respectively. In addition, we reported a cash outflow of $100,109 in the year ended December 31, 2022. As of December 31, 2022, we had an accumulated deficit of $472,503. Management believes these factors raise substantial doubt about our ability to continue as a going concern for the next twelve months. The continuation of our company as a going concern through the next twelve months is dependent upon (1) the continued financial support from our stockholders or external financing. Management believes that our existing stockholders will provide the additional cash to meet our obligations as they become due, and (2) that we will be able to implement our business plan to expand our company’s operations and generate sufficient revenues to meet our obligations. While we believe in the viability of our strategy to increase sales volume and in our ability to raise additional funds, there can be no assurance to that effect, nor that our company will be successful in securing sufficient funds to sustain the operations.

These conditions raise substantial doubt about our company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for our company to continue as a going concern.

Critical Accounting Policies and Estimates

We prepare our financial statements in conformity with U.S. GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our condensed financial statements. Actual results could differ from those estimates made by management.

We believe that of our significant accounting policies, which are described in note 2 to our consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition

Revenue is generated through the delivery of services. Revenue is recognized when a client receives services and is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for those services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with clients. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those services. The Company applies the following five-step model in order to determine this amount:

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the client. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to clients at a point in time, typically upon delivery.

For all reporting periods, the Company has not disclosed the value of unsatisfied performance obligations for all service revenue contracts with an original expected length of one year or less, which is an optional exemption that is permitted under the adopted rules.

We operate in three business segments:

(i) Coaching service derived from ZDSE. This segment has a second business unit which commenced business operations in June 2022, involved in the training of individuals and enterprises.

(ii) Conference and exhibition planning service revenue derived from HHMT, which was established on August 25, 2020.

(iii) Consulting service revenue derived from HEMC, which commenced business operations in the second half of 2020.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. As of December 31, 2022, substantially all of the Company’s cash and cash equivalents were deposited with financial institutions with high-credit ratings and quality.

Accounts receivable represent tuition fees due from customers, which are typically collected within a short period of time. Other receivables are mainly comprised of a short-term loan to a third party, Dongguan Anxiang Technology Co., Ltd., and rental and utilities deposits paid for the Guangzhou and Liaoning office which are fully refundable.

The Company did not have any clients constituting 10% or more of the net revenues for the year ended December 31, 2022.

Recently Issued and Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance supersedes existing guidance on accounting for leases with the main difference being that operating leases are to be recorded in the statement of financial position as right-of-use assets and lease liabilities, initially measured at the present value of the lease payments. For operating leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the guidance is permitted. In transition, entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Effective January 1, 2019, the Company adopted this standard, which resulted in the recognition of right-of-use assets and operating lease liabilities of $545,745 and $453,708 as of December 31, 2022 and December 31, 2021, respectively.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements.” This ASU requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. This Accounting Standards Update affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual rights to receive cash. For public business entities, the amendments in this Update are effective for fiscal years beginning after January 1, 2023, including interim periods within those fiscal years. All entities may adopt the amendments in this Update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The Company is in the process of evaluating the impact of the adoption of this pronouncement on its consolidated financial statements.

The Company reviews new accounting standards as issued. Management has not identified any other new standards that it believes will have a significant impact on the Company’s financial statements.

Key Components of Results of Operations

The following discussion should be read in conjunction with the financial statements attached hereto as Exhibit 99.2.

Financial and Operating Data

(In US$, except number of trainees and percentages)

For the Year Ended December 31, 2022 Compared to the Year Ended December 31 2021

Revenue

Net revenue for the year ended December 31, 2022 was $1,106,349 compared to $1,705,225 for the year ended December 31, 2021, a decrease of $598,876 or 35%.

Education and training revenue for the year ended December 31, 2022 was $796,257 compared to $1,052,413 for the year ended December 31, 2021, a decrease of $256,156 or 24%. The reduction is mainly attributable to the continued outbreak of the COVID-19 pandemic in the first half of 2022 in Guangzhou, China. Many branches including GZZDH were unable to carry out their businesses as normal. In the year 2022, the income of GZZDH declined by $536,316, or 74%, compared with that of 2021. JEMT started operation in June 2022 and recorded training service revenue of $72,398in 2022.

Exhibition planning service revenue for the year ended December 31, 2022 was $292,273 compared to $551,535 for the year ended December 31, 2021, a decrease of $259,262 or 47%. The main reason for the decrease is the flare-ups of COVID-19 across the country since March 2022. SJMC did not have any operating income in the first half 2022.

Consulting service revenue for the year ended December 31, 2022 was $17,698 compared to $101,277 for the year ended December 31, 2021, an decrease of $83,579 or 83%. The main reason for the decrease is the flare-ups of COVID-19 across the country since March 2022.

Human resources outsourcing service revenue derived from SDYL which commenced business operations in May 2022.Human resources outsourcing service revenue in 2022 was $121.

Cost of Revenue

Cost of revenue for the year ended December 31, 2022 was $268,408 compared to $537,427 for the year ended December 31, 2021, a decrease of $269,019, or 50%. reflecting the decrease in revenues.

Gross profit

Gross profit for the year ended December 31, 2022 was $837,941 compared with $1,167,798 for the year ended December 31, 2021.

Operating Expenses

By far the most significant component of our operating expenses for the two years ended December 31, 2022 and 2021 were general and administrative expenses of $1,094,261 and $1,228,669, respectively. The following table sets forth the main components of our general and administrative expenses for the years ended December 31, 2022 and 2021.

Net Loss

Net loss for the year ended December 31, 2022 was $283,276 compared with a net loss of $113,496 for the same period of 2021. primarily due to the significant decrease in revenue that resulted from the COVID-19 outbreak.

Liquidity and Capital Resources

At December 31, 2022, we had approximately $84,487 in cash and a working capital deficit of $666,472 cash of $184,596 and a working capital deficit of$321,038 at December 31, 2021. Historically, we have met our working capital and other liquidity requirements primarily through a combination of cash generated from our operations and loans from related parties. Going forward, we expect to fund our working capital and other liquidity requirements from various sources, including but not limited to cash generated from our operations and loans from related if and as needed, and other equity and debt financings as and when appropriate.

Cash Flows and Working Capital

Our principal sources of liquidity have been cash generated from operating activities, loans from related parties and funds raised from financing activities. As of December 31, 2022, we had $84,487 in cash and cash equivalents. Our cash and cash equivalents consist primarily of bank deposits. We believe that our current cash and anticipated cash flow from operations, along with loans from related parties if and when needed, will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months.

During the year ended December 31, 2022, $128,165 net cash was used in operating activities, compared to $339,571 used in operating activities in 2021. The Company resumed business after the COVID-19 lockdown in 2020. During the year ended December 31, 2022, $3,369 was used in investing activities, as compared to $63,145 used in investing activities in 2021, and $43,488 was provided by financing activities, as compared to $283,024 provided by financing activities in 2021. The resulting change in cash for the year was a decrease of $100,109 for 2022, as compared to a decrease of $113,510 for 2021. The cash and cash equivalents balance on January 1, 2022 was $184,596, and on December 31, 2022 it was $84,487.

As of December 31, 2022, we had $1,925,246 in total liabilities, which was primarily comprised of amounts due to related parties ($704,980), non-current operating lease liabilities ($330,987), deferred revenue ($306,785) and current operating lease liabilities ($214,758), as compared to $1,476,229 in total liabilities as of December 31, 2021, which was primarily comprised of amounts due to related parties ($674,537), non-current operating lease liabilities ($291,530), deferred revenue ($119,028) and current operating lease liabilities ($162,178).

Impact of Inflation

In accordance with the National Bureau of Statistics of China, the year-over-year percentage changes in the consumer price index for March 2019, 2020, 2021 and 2022 were 2.3%, 4.3%, 4.4% and 5.9%, respectively. Inflation in China has not materially affected our profitability and operating results. However, we can provide no assurance that we will be unaffected by higher inflation rates in China in the future.

Taxation

As an exempt company limited by shares, we are not subject to taxation in the Cayman Islands on income arising in or derived from other jurisdictions.

On July 3, 2019, we completed the Share Exchange whereby ZDSE, a PRC company, became our sole operating subsidiary. ZDSE is a general VAT taxpayer with a tax rate of 6%; its three branch companies are small-scale taxpayers with a tax rate of 3%. The corporate income tax rate in China is generally 25%; however, it may be as low as 5% to 10% for small and micro enterprises that meet certain conditions. Our income tax for the year ended December 31, 2021 was $9,024 and for the year ended December 31, 2022 it was $14,925.

Efforts by the Chinese government to increase tax revenues could result in decisions or interpretations of the tax laws by the Chinese tax authorities that are unfavorable to us and which increase our future tax liabilities or deny our expected refunds. Changes in Chinese tax laws or their interpretation or application may subject us to additional Chinese taxation in the future.

Dividends, if any, paid to any United States resident or citizen shareholder are treated as dividend income for United States federal income tax purposes. Such dividends are not eligible for the 50% dividends-received deduction allowed to United States corporations on dividends from a domestic corporation under Section 243 of the United States Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Various Internal Revenue Code provisions impose special taxes in certain circumstances on non-United States corporations and their shareholders. You are urged to consult your tax advisor with regard to such possibilities and your own tax situation.

In addition to United States federal income taxation, shareholders may be subject to state and local taxes upon their receipt of dividends.

Foreign Currency Exchange Rates

We are not materially affected by foreign currency exchange rates. However, it is difficult to predict how market forces, or PRC or U.S. government policy, might affect our operations. There remains significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant change in the value of the RMB against the U.S. dollar. Limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. So far, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we potentially may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedging transactions may be limited, and we may not be able to successfully hedge our exposure at all. Furthermore, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency.

Item 6. Directors, Senior Management and Key Employees

The names, titles and ages of the members of the Company’s and ZDSE’s Boards of Directors and their executive officers as of the date of this Annual Report are as set forth in the below tables. Our directors and those of ZDSE are elected annually and serve until their successors take office or until their death, resignation or removal. The executive officers serve at the pleasure of the respective Boards of Directors.

Mr. Junze Zhang’s election as Chairman of the Board of Directors and his appointment to the positions of President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company occurred pursuant to the terms of the Share Exchange Agreement.

Officers and Directors of the Company

Mr. Junze Zhang has served as the Company’s President, Chief Executive Officer, Chief Financial Officer, Secretary and Chairman of the Board since July 2019. He also served as Chief Financial Officer until May 19, 2020, when the Company hired Xiaoyan Xia to fill that position. Since May 1, 2018 he has been employed as General Manager of HEMC and since 2016, he has worked as a chairman in HGSL. He led and formulated the long-term development strategy for HGSL, while orchestrating internal and external changes. He also organized the company’s overall strategy, explored executive coaching market opportunities and led the innovation during the development of the company. From 1998 to 2016, Mr. Zhang worked as a chairman in Puning Fageer Clothing Co., Limited where he was responsible for the overall operation of the factory. Mr. Zhang obtained a Bachelor’s degree in Economics & Management in 1996 from Sun Yat-sen University in Guangzhou.

Since 2010, Mr. Zhang has been a member of the Shenzhen Chaoshang chamber of commerce. From 2014 to 2018, Mr. Zhang was the VP of Shenzhen Longgang District private enterprise chamber of commerce and the Vice-President of the Shenzhen Longgang District Financial chamber of commerce. From 2018 to the present, Mr. Zhang has been the honorary chairman of the Shenzhen Longgang District private enterprise chamber of commerce. Mr. Zhang has been a member of the Board of Directors of China Huiying United Supply Chain Group Co., Limited since January 2016 and a member of the Board of Directors of China Supply Chain Holdings Limited (FKA Yat Sing Holdings Limited), a Cayman Islands company that trades on the Hong Kong Stock Exchange, since December 2019.

Ms. Liqin Liu has served as the Company’s Chief Financial Officer since December 2021. Prior to joining the Company, Ms. Liu served as Chief Financial Officer for ZTE Group Finance Co., Limited from January 2018 to November 2021. From March 2014 to December 2017, she worked as Financial Director for Zhongxing Telecommunication Equipment Corporation and from October 2006 to March 2014, she served as Financial Director for the Shenzhen Branch of the Bank of Tokyo-Mitsubishi UFJ(China) Co., Ltd. Ms. Liu holds a Bachelor’s degree in Accounting from South China University of Technology and is a Certified Public Accountant.

Mr. Zhongpeng Chen became a director of the Company in November 2017. From 1996 to 2006, Mr. Chen worked as a general manager in Shenzhen Peng Fa Freight Department. As a general manager, he was responsible for the overall operation of the factory. Mr. Chen has worked as a chairman in Shenzhen Hua Peng Fa Logistics Limited since 2006, and in 2017 he was appointed Chief Executive Officer, President, Secretary, Treasurer and Chairman of the Board of Directors of that company. He leads the development of the company’s strategy, adjusting that strategy according to changes in the internal and external environment. Moreover, he oversees the implementation of the company’s overall strategy, explores market opportunities and leads innovation and change within the company. Mr. Chen obtained a Master’s degree in Business Administration in 2013 from the Graduate School of Tsinghua University in Shenzhen.

Officers, Directors and Key Employees of Zhongdehui (Shenzhen) Education Development Co., Limited

Mr. Qing Zuo has been employed by ZDSE since 2016. Mr Zuo obtained a graduate degree in Coaching Theory at Fudan University in 2016 and the Diploma of Foundation in Psychology from Hong Kong Shue Yan University in January 2019. He is the general manager of ZDSE and has 20 years of experience as a business manager. He is also a promoter of the company’s charitable activities. With his passion for business management, he hopes to improve his clients’ management skills, improve clients’ leadership skills and lead ZDSE in the corporate management industry. ZDSE will continue to carry out charitable activities, and Mr. Zuo hopes to help more orphans and poor children including helping them get a better education opportunity.

Mr. Shaogang Yin has been employed by ZDSE since May 2019, originally as head of ZDSE’s Liaoning Branch and since February 1, 2021 as head of SYZDH and GZZDH. From 2001 until 2019, Mr. Yin was employed as general manager for Shenyang Shuangbai Enterprise Management Consulting Co. Ltd. where he was responsible for the full operation and management of the company. Mr. Yin has an undergraduate degree in business administration and the certificate of corporate coach, issued by the China Employment Training Technical Instruction Center. He was invited as the chief specialist by China National Training Network from April 22, 2018 to April 21, 2019.

Family Relationships

There are no family relationships among the directors or executive officers of either the Company or its subsidiaries.

Committees of the Board of Directors

The Company’s Board of Directors has not established any committees. The functions of the audit committee are currently performed by the Board of Directors, with assistance by expert independent accounting personnel. The Company is not currently subject to any law, rule or regulation requiring that it establish or maintain an audit committee. The Company believes that while its Board of Directors is capable of analyzing and evaluating financial statements and understanding internal controls and procedures for financial reporting, the Company would be well served to retain an independent director who would qualify as an “audit committee financial expert.” The Company’s Board of Directors intends at some point in the future to establish audit, nominating and compensation committees. The audit committee will be primarily responsible for reviewing the services performed by our independent auditors and evaluating our accounting policies and our system of internal controls. The nominating committee will be primarily responsible for nominating directors, setting policies and procedures for the nomination of directors and overseeing the creation and implementation of our corporate governance policies and procedures. The compensation committee will be primarily responsible for reviewing and approving salary and benefit policies (including stock options), including compensation of the Company’s executive officers.

Compensation

The following table summarizes all compensation received by our directors and our Chief Executive Officer, President, Secretary and Chief Financial Officer and by the directors, executive officers and key employees of ZDSE in the years ended December 31, 2022 and 2021.