F-1 1 e4313_f-1.htm FORM F-1

As filed with the U.S. Securities and Exchange Commission on December 29, 2022.

Registration Statement No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Ruanyun Edai Technology Inc.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Cayman Islands		7372		Not Applicable
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

No. 698 Jing Dong Avenue, ZheJiang University HighTech Campus

Nanchang, Jiangxi, China 330096

0791-88567739

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Puglisi & Associates

850 Library Avenue, Suite 204

Newark, DE 19711

302-738-6680

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications, including communications sent to agent for service, should be sent to:

Clayton E. Parker, Esq.
Matthew Ogurick, Esq.
K&L Gates LLP
Southeast Financial Center, Suite 3900
200 South Biscayne Boulevard
Miami, Florida 33131-2399
Telephone: 305-539-3300

Ying Li, Esq.
Guillaume de Sampigny, Esq.
Hunter Taubman Fischer & Li LLC
48 Wall Street, Suite 1100
New York, NY 10005
Telephone: 212-530-2206

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.

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

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

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

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

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

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

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

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

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

Subject to Completion, DATED DECEMBER 29, 2022

PRELIMINARY PROSPECTUS

5,000,000 Ordinary Shares

Ruanyun Edai Technology Inc.

We are offering 5,000,000 ordinary shares. This is the initial public offering of ordinary shares of Ruanyun Edai Technology Inc. The offering price of our ordinary shares in this offering is expected to be between $5.00 and $6.00 per share. Prior to this offering, there has been no public market for our ordinary shares.

We have applied to list our ordinary shares on the Nasdaq Capital Market under the symbol “RYET.” There is no assurance that such application will be approved, and if our application is not approved, this offering will not be completed.

Investing in our ordinary shares is highly speculative and involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our ordinary shares in “Risk Factors” beginning on page 22 of this prospectus.

We are an “emerging growth company” as defined under the federal securities laws and, as such, will be subject to reduced public company reporting requirements. See “Prospectus Summary—Implications of Being an Emerging Growth Company and a Foreign Private Issuer” for additional information.

We are not a Chinese operating company but a Cayman Islands holding company with no operations. We conduct substantially all of our operations in the People’s Republic of China, or the PRC or China, through Jiangxi Ruanyun, the variable interest entity (VIE) and its subsidiaries. We do not have any equity ownership of the VIE, instead, we have the power to direct the activities and receive the economic benefits and absorb losses of the VIE’s business operations through certain Contractual Arrangements (as defined below) and the VIE is consolidated for accounting purposes. This structure involves unique risks to investors. This VIE structure is used to provide contractual exposure through the Contractual Arrangement to foreign investment in Chinese-based companies where Chinese law prohibits direct foreign investment in the operating companies.

Under the Contractual Arrangements, cash is transferred among the Company, Rollingthunder Technology (Jiangxi) Co., Ltd, or our WFOE, Soft Cloud and the VIE, in the following methods:

(i) dividends or other distributions may be paid by Rollingthunder Jiangxi, or our WFOE, to the Company through our Hong Kong subsidiary;

(ii) Ruanyun Edai Technology Inc., or Ruanyun (the Cayman Islands holding company) transfers proceeds raised through this offering or any other offering we conduct at this level to our wholly owned subsidiary, Soft Cloud Technology Limited, or Soft Cloud, which in turn transfers such proceeds down to the WFOE in the form of capital contributions or shareholder loans, as the case may be, which in turn transfers such proceeds in the form of loans to the VIE pursuant to the Contractual Arrangements, for the purpose of conducting business operations;

(iii) funds, may be paid by Jiangxi Ruanyun, or the VIE, to Rollingthunder Jiangxi, or our WFOE, as service fees according to the Contractual Arrangements;

As of the date of this prospectus, there were no cash flows among the Company, Soft Cloud, our WFOE, and Jiangxi Ruanyun, or the VIE. As of the date of this prospectus, no dividends or distributions have been made to the respective shareholders of such entities. For the foreseeable future, the VIE intends to keep any future earnings to re-invest in and finance the expansion of its business. We currently do not maintain any cash management policies that dictate the purpose, amount and procedure of cash transfers among the Company, Soft Cloud, our WFOE, the VIE, or investors. Rather, the funds can be transferred in accordance with applicable PRC laws and regulations. For more details, see “Regulations-Regulations Relating to Foreign Exchange Registration of Overseas Investment by PRC Residents.”

The ordinary shares offered in this offering are shares of our offshore holding company, Ruanyun Edai Technology Inc., instead of shares of the VIE or its subsidiaries in China. For a description of the Contractual Arrangements, see “Corporate History and Structure—Contractual Arrangements.” Based on the Contractual Arrangements, we account for Jiangxi Ruanyun as a VIE. More specifically, we have the power to direct the activities of Jiangxi Ruanyun and become the primary beneficiary of Jiangxi Ruanyun for accounting purposes through such Contractual Arrangements, which are less effective than direct ownership. Our power to direct the activities of Jiangxi Ruanyun and our position of being the primary beneficiary of Jiangxi Ruanyun for the accounting purposes are limited to the conditions that we met for consolidation of Jiangxi Ruanyun under U.S. GAAP. Such conditions include that (i) we have the power to direct the activities that could most significantly affect the economic performance of Jiangxi Ruanyun and (ii) we are entitled to receive benefits and obligated to absorb losses from Jiangxi Ruanyun that could potentially be significant to Jiangxi Ruanyun. Accordingly, we consolidate the accounts of Jiangxi Ruanyun for the periods presented herein for accounting purposes, in accordance with Regulation S-X-3A-02 promulgated by the SEC, and ASC Topic 810-10, Consolidation: Overall. Only if we meet the aforementioned conditions to be the primary beneficiary of Jiangxi Ruanyun under U.S. GAAP, we will consolidate Jianxi Ruanyun and Jiangxi Ruanyun will be treated as our consolidated affiliated entities for accounting purposes.

As a result of the VIE structure, investors may never directly hold equity interests in the VIE. We acknowledge that Chinese regulatory authorities could disallow this structure, which would likely result in a material change in our operations and/or value of our ordinary shares, including that it could cause the value of such securities to significantly decline or become worthless. Furthermore, the Contractual Arrangements have not been tested in a court of law. For a description of the Contractual Arrangements, see “Corporate History and Structure—Our Contractual Arrangements.” Please also see our “Risk Factors” for a detailed discussion of risks facing the Company and the offering as a result of this structure.

We currently conduct substantially all of our operations in, and substantially all of our revenue is generated in, the PRC. Accordingly, changes in economic, political, and legal environments in the PRC can significantly affect our business, including our financial condition, results of operations, and business prospects. Policies, regulations, rules, and the enforcement of laws of the Chinese government can have significant effects on economic conditions in the PRC and therefore, corporate profitability. Our profitability in the PRC may be adversely affected by changes in policies, regulations, rules, and the enforcement of laws by the Chinese government, which changes may be announced or implemented with little or no advance notice.

Recently, the Chinese government promulgated a series of statements and actions to regulate business operations in China with limited advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structures, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts with respect to anti-monopoly enforcement. For example, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law”, or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen administration over illegal securities activities and the need to strengthen supervision with respect to overseas listings of Chinese companies. Moreover, the Cyberspace Administration of China, or the CAC, promulgated the Cybersecurity Review Measure that became effective on February 15, 2022, which extend the scope of cybersecurity review to data processing operators engaging in data processing activities that affect or may affect national security, including listing in a foreign country, and require a mandate clearance of cybersecurity review to be completed by network platform operator that possess personal information of more than 1 million users. The Opinions, the Cybersecurity Review Measure and any related implementing rules that have been enacted or to be enacted may subject us to compliance requirements in the future, such as regulatory review of overseas listing of China-based company and cybersecurity review. As of the date of this prospectus, the actual number of users’ personal information used by the VIE and its subsidiaries is well below one million (based on our own calculations). The users’ personal information used by the VIE and its subsidiaries is authorized by the entity that owns and controls it. Therefore, Jiangxi Ruanyun is not subject to this review. On July 7, 2022, CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer, effective on September 1, 2022, which requires the data processors to apply for data cross-border security assessment coordinated by the CAC under the following circumstances: (i) any data processor transfers important data to overseas; (ii) any critical information infrastructure operator or data processor who processes personal information of over 1 million people provides personal information to overseas; (iii) any data processor who provides personal information to overseas and has already provided personal information of more than 100,000 people or sensitive personal information of more than 10,000 people to overseas since January 1st of the previous year and ; and (iv) other circumstances under which the data cross-border transfer security assessment is required as prescribed by the CAC. As of the date of this prospectus, we believe the VIE and its subsidiaries have none of the aforesaid circumstances. Therefore, the VIE and its subsidiaries are currently not subject to the data cross-border security assessment. However, if such assessment is required in the future, we cannot assure you that we will complete the relevant procedure on a timely basis. See “Risk Factor – We are subject to a variety of laws and other obligations regarding data protection, any failure to comply with applicable laws and obligations could have a material adverse effect on our business, financial condition and results of operations.”

In addition, on December 24, 2021, the CSRC, issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Administrative Provisions, and the Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Filing Measures, which require China-based companies seeking overseas offering and listing shall file with the CSRC within three working days after making initial applications with overseas stock markets for initial public offerings or listings. As of the date of this prospectus, the PRC laws and regulations that currently in effect do not explicitly require us to seek approval from the CSRC for our overseas listing plan, however, we will be required to file with the CSRC prior to our listing on NASDAQ if the Draft Administrative Provisions and the Draft Filing Measures have been fully enacted in the foreseeable future. See “Risk Factor – Draft rules for China-based companies seeking for securities offerings in foreign stock markets was released by the CSRC for public consultation. While such rules have not yet come into effect as of the date of this prospectus, the Chinese government may exert more oversight and control over overseas public offerings conducted by China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our Ordinary Shares to investors and could cause the value of our Ordinary Shares to significantly decline or become worthless.”. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments or list on a U.S. exchange. Given the current regulatory environment in the PRC, we are still subject to the uncertainty of different interpretation and enforcement of the rules and regulations in the PRC adverse to us, which may be announced or implemented with little or no advance notice, and which may materially and adversely impact our results of operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and/or may cause the value of such securities to significantly decline or be worthless. See “Risk Factors - Risks Related to Our Business and Industry.”

On December 18, 2020, the Holding Foreign Companies Accountable Act, or the HFCAA, was signed into law, requiring a foreign company to certify it is not owned or controlled by a foreign government if the Public Company Accounting Oversight Board, or the PCAOB, is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. Our auditor, Friedman LLP, the independent registered public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. Our auditor is headquartered in Manhattan, New York, and has been inspected by the PCAOB on a regular basis. The PCAOB currently has access to inspect the working papers of our auditor and our auditor was not subject to the determinations announced by the PCAOB on December 16, 2021, which determinations were vacated on December 15, 2022.

Pursuant to the HFCAA, the SEC has the power to identify issuers whose auditors the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in a foreign jurisdiction, or a PCAOB-Identified Firm. The SEC will provisionally identify any such issuer as a “Commission-Identified Issuer” on the SEC’s website. If we are identified as a Commission-Identified Issuer by the SEC, we may be subject to restrictions under such rules including prohibitions on the trading of our shares, either temporarily or indefinitely.

On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, or the AHFCAA. If signed into law, the AHFCAA would decrease the number of non-inspection years under the HFCAA from three years to two, thus reducing the time period before an issuer’s securities may be prohibited from trading or may be delisted.

On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol, or the SOP, with the China Securities Regulatory Commission and the Ministry of Finance of China. The SOP, together with two protocol agreements governing inspections and investigations, or together, the SOP Agreement, established a specific, accountable framework to make possible complete inspections and investigations by the PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law.

On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. The PCAOB is continuing to demand complete access in mainland China and Hong Kong moving forward and is already making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed. If the PCAOB in the future again determines that it is unable to inspect and investigate completely auditors in mainland China and Hong Kong, then the companies audited by those auditors would be subject to a trading prohibition on U.S. markets pursuant to the HFCAA.

iii

For further information relating to the HFCAA and the AHFCAA, see “Risk Factors – Risks Related to Doing Business in China – The recent joint statement by the SEC and the Public Company Accounting Oversight Board, or the PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.”

Unless otherwise indicated or the context otherwise requires, all references in this prospectus to the terms the “Company,” “we,” “us” and “our” refer to Ruanyun Edai Technology Inc., or Ruanyun, and its direct and indirect subsidiaries, including Soft Cloud Technology Limited, or Soft Cloud, and Rollingthunder Technology (Jiangxi) Co., Ltd, or Rollingthunder Jiangxi, or our WFOE, which we define as our “PRC subsidiary”, but not including Jiangxi Ruanyun Technology Co., Ltd., the variable interest entity, which we define as the “VIE” herein or “Jiangxi Ruanyun”, and the subsidiaries of the VIE including Jiangxi Alphabet Technology Co., Ltd., or Jiangxi Alphabet, Jiangxi Huizuoye Technology Co., Ltd, and Jiangxi Jiaotou Technology Co., Ltd, and the branch office of the VIE refers to Jiangxi Ruanyun Technology Co., Ltd. (Shenzhen Branch), or Shenzhen Ruanyun. We refer to the VIE, together with its subsidiaries and branch office as “the VIE and its subsidiaries” herein.

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

	PER SHARE	TOTAL
Initial public offering price	$	$
Underwriting discounts ⁽¹⁾	$	$
Proceeds, before expenses, to us	$	$

(1) We have agreed to issue, on the closing date of this offering, warrants, or the underwriters’ warrants, to the underwriters, Univest Securities, LLC, or the representative, and AC Sunshine Securities LLC, in an aggregate amount equal to 1% of the aggregate number of ordinary shares sold by us in this offering, inclusive of the underwriters’ over-allotment option. Univest Securities, LLC and AC Sunshine Securities LLC will each receive underwriters’ warrants to purchase a number of ordinary shares equal to 0.5% of the total number of ordinary shares sold in this offering, inclusive of the underwriters’ over-allotment option. For a description of other terms of the underwriters’ warrants and a description of the other compensation to be received by the underwriters, see “Underwriting” beginning on page 167.

We expect our total cash expenses for this offering (including cash expenses payable to our underwriters for their out-of-pocket expenses) to be approximately $1.1 million, exclusive of the above discounts. In addition, we will pay additional items of value in connection with this offering that are viewed by the Financial Industry Regulatory Authority, or FINRA, as underwriting compensation. These payments will further reduce proceeds available to us before expenses. See “Underwriting.”

This offering is being conducted on a firm commitment basis. The underwriters are obligated to take and pay for all of the shares if any such shares are taken. We have granted the underwriters an option for a period of 45 days after the closing of this offering to purchase up to 15% of the total number of our ordinary shares to be offered by us pursuant to this offering (excluding shares subject to this option), solely for the purpose of covering over-allotments, at the initial public offering price less the underwriting discounts. If the underwriters exercise the option in full, the total underwriting discounts payable will be $2,213,750 based on an assumed initial public offering price of $5.50 per ordinary share (the midpoint of the price range set forth on the cover page of this prospectus), and the total gross proceeds to us, before underwriting discounts, non-accountable expense allowance and expenses, will be $31,625,000. If we complete this offering, net proceeds will be delivered to us on the closing date. We will not be able to use such proceeds in China, however, until we complete capital contribution procedures which require prior approval from each of the respective local counterparts of China’s Ministry of Commerce, the State Administration for Market Regulation, and the State Administration of Foreign Exchange. See remittance procedures in the section titled “Use of Proceeds” beginning on page 63.

The underwriters expect to deliver the ordinary shares against payment as set forth under “Underwriting”, on or about , 2023.

The date of this prospectus is , 2023.

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Risk Factors	22
Special Note Regarding Forward-Looking Statements	61
Industry and Market Data	62
Use of Proceeds	63
Dividend Policy	64
Capitalization	65
Dilution	66
Exchange Rate Information	67
Corporate History and Structure	68
Selected Consolidated Financial Data	71
Management’s Discussion and Analysis of Financial Condition and Results of Operations	72
Business	90
Regulation	125
Management	141
Related Party Transactions	147
Principal Shareholders	149
Description of Share Capital and Governing Documents	150
Shares Eligible for Future Sale	160
Material Income Tax Considerations	162
Underwriting	167
Expenses Related to this Offering	172
Legal Matters	173
Experts	173
Enforcement of Liabilities	174
Where You Can Find Additional Information	175
Index to Consolidated Financial Statements	F-1

We are responsible for the information contained in this prospectus and any free writing prospectus we prepare or authorize. We have not, and the underwriters have not, authorized anyone to provide you with different information, and we and the underwriters take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell our ordinary shares in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or the sale of any ordinary shares.

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

We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability and a majority of our outstanding securities are owned by non-U.S. residents. Under the rules of the U.S. Securities and Exchange Commission, or the SEC, we currently qualify for treatment as a “foreign private issuer.” As a foreign private issuer, we will not be required to file periodic reports and financial statements with the Securities and Exchange Commission, or the SEC, as frequently or as promptly as domestic registrants whose securities are registered under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Until and including , 2023 (25 days after the date of this prospectus), all dealers that buy, sell or trade our ordinary shares, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

vii

viii

CONVENTIONS THAT APPLY TO THIS PROSPECTUS

We control and receive the economic benefits and absorb losses of the VIE and its subsidiaries’ business operations through the Contractual Arrangements (defined hereinafter). Based on the Contractual Arrangements, we account for Jiangxi Ruanyun as a VIE. More specifically, we have the power to direct the activities Jiangxi Ruanyun and become the primary beneficiary of Jiangxi Ruanyun for accounting purposes through such Contractual Arrangements, which are less effective than direct ownership. Our power to direct the activities of Jiangxi Ruanyun and our position of being the primary beneficiary of Jiangxi Ruanyun for accounting purposes are limited to the conditions that we met for consolidation of Jiangxi Ruanyun under U.S. GAAP. Such conditions include that (i) we have the power to direct the activities that could most significantly affect the economic performance Jiangxi Ruanyun, and (ii) we are entitled to receive benefits and obligated to absorb losses from Jiangxi Ruanyun that could potentially be significant to Jiangxi Ruanyun. Accordingly, we consolidate the accounts of Jiangxi Ruanyun for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the SEC, and ASC Topic 810-10, Consolidation: Overall. We believe the Contractual Arrangements are in compliance with the current PRC laws and are legally enforceable. However, uncertainties in the interpretation and enforcement of the PRC laws, regulations and policies could affect the validity of the Contractual Arrangements or limit our ability to enforce the Contractual Arrangements. Furthermore, the Contractual Arrangements have not been tested in a court of law. As a result, we may be unable to consolidate the VIE and its subsidiaries in the consolidated financial statements. Our position of being the primary beneficiary of the VIE and its subsidiaries also depends on the authorization by the shareholders of the VIE to exercise voting rights on all matters requiring shareholders’ approval in the VIE. As of the date of this prospectus, we believe that the agreements on the authorization to exercise shareholders’ voting power are valid and legally enforceable. See “Risk Factors-Risks Related to our Corporate Structure” for further information.

We are offering ordinary shares of Ruanyun Edai Technology Inc., a holding company incorporated in the Cayman Islands.

“PRC” or “China” refers to the People’s Republic of China, excluding, for the purpose of this prospectus, Taiwan.

"Hong Kong” refers to the special administrative region of the People’s Republic of China.

“RMB” or “Renminbi” refers to the legal currency of China. “HKD” or “HK$” refers to the legal currency of Hong Kong. “$” or “U.S. dollars” refers to the legal currency of the United States.

“PRC laws”, “PRC laws and regulations” refers to the laws and regulations that apply to the mainland of China, excluding, for the purpose of this prospectus, Taiwan, Hong Kong and Macau.

We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option and no exercise of the underwriters’ warrants.

Our reporting currency is U.S. dollars. The functional currency of the Company and its subsidiaries incorporated in Hong Kong is U.S. dollars. The functional currency of the Company’s PRC subsidiaries, the VIE and its subsidiaries is RMB. The determination of the respective functional currency is based on the criteria of Accounting Standards Codification (“ASC”) Topic 830, Foreign Currency Matters. The consolidated financial statements are translated from the functional currency to the reporting currency, USD. We use the average exchange rate for the year and the exchange rate at the balance sheet date to translate the operating results and financial position, except for equity, respectively. For equity items, we used the historical exchange rate to translate the equity items from functional currency to reporting currency. Translation differences are recorded in accumulated other comprehensive income, a component of shareholders’ deficits. Transactions denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are re-measured at the exchange rates prevailing at the balance sheet date. Non-monetary items that are measured in terms of historical costs in foreign currency are re-measured using the exchange rates at the dates of the initial transactions. Exchange gains and losses are included in the consolidated statements of operations and comprehensive income (loss). The consolidated balance sheet amounts, with the exception of equity, at March 31, 2022 and 2021 were translated RMB 6.3393 to $1.00 and at RMB 6.5518 to $1.00 respectively. Equity accounts were stated at their historical rates. The average translation rates applied to consolidated statements of operations and cash flows for the years ended March 31, 2022 and 2021 were RMB 6.4180 to and $1.00 and RMB 6.7834 to $1.00, respectively.

PROSPECTUS SUMMARY

The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider before investing in our ordinary shares. You should read the entire prospectus carefully, including “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes thereto, in each case included in this prospectus. You should carefully consider, among other things, the matters discussed in the section of this prospectus titled “Business” before making an investment decision.

Overview - What is Ruanyun

We are a data driven artificial intelligence, or A.I., technology company focused on kindergarten through year twelve, or K-12 education in China. We bring technology to schools, and we are committed to reforming the traditional Chinese education and learning model by facilitating schools, teachers and students with new teaching, learning, and assessment methods in the A.I. era.

We believe the road to college should come with directions. Our mission is to help each K-12 student understand their specialty and find their way to higher education and future success. We believe we have one of the most comprehensive online learning ecosystems covering all K-12 subject fields and grade levels, one of the largest academic exercise question banks that is designed and built for interactive learning, and one of the most advanced A.I. algorithms that power such questions, all of which are accessible online and on demand.

As of November 30, 2022, our online academic exercise question bank has accumulated more than 10 billion test data generated by approximately 14.26 million students from more than 27,000 schools and we have issued over 298 million evaluation reports. With the continuous collection and analyzing of students’ online learning data, our A.I. algorithms are constantly expanding and upgrading, reaching an evaluation accuracy rate of 97% (based on our own calculations), allowing us to provide students with tailored and effective learning strategies. We believe that, in time, our online learning platform will be proven revolutionary in affecting the advancement of China’s K-12 education system.

As of November 30, 2022, approximately 14.26 million students use Jiangxi Ruanyun to collect their daily homework exercise data, prepare for a test or attend the Academic Proficiency Assessment, which is an official assessment across all subjects taught in schools, conducted by the Education Testing Authority in China. This allows us to understand each student better and enables us to help them reach the next level of educational success with an effective strategy, every step of the way.

We value our proprietary technologies and strong research and development capabilities, which we believe differentiate us from other companies in our industry. As of the date of this prospectus, we have an intellectual property portfolio consisting of 11 patents (9 of which have been registered and 2 are pending) and 23 trademarks filed with the PRC State Intellectual Property Administration, 50 copyrights registered with the PRC State Copyright Bureau, and 8 domain names.

What We Offer

Over the last decade, our A.I. learning platform has expanded from learning to assessment in school to A.I application, services and hardware. We believe we are a trend-setter in reforming the traditional education model in China using the technological progress brought about by the advent of A.I. technology. We believe we are the only educational A.I. company in China that serves both everyday learning and Academic Proficiency Test in school. We provide computerized testing for China’s Academic Proficiency Test, or ATP, which is equivalent to the SAT in China. Our everyday learning to official assessment model allows us to expand into a range of personalized “online” services and “offline” products for students in high demand.

We currently sell our products and services through two primary product lines, namely our SmartExam® solution and SmartHomework® solution. Our SmartHomework® solution delivers personalized learning solutions for students to study more effectively. Teachers can adjust instructions for students based on their specific needs. In addition, our SmartExam® solution helps deliver China’s Academic Proficiency Test, which is required in China for obtaining a high-school diploma, in computer-based format. We also provide self-learning solutions and smart-devices, such as smart printer / smart headset for everyday study and test preparation.

Everyday Teaching and Learning

Our SmartHomework® system is a digital teaching and learning decision platform, which collects paper-based homework data with our intelligent scanning machine. During collection, the system can evaluate the grasp of knowledge for each student, and the teacher can adjust instructions for students based on their specific needs. Items that should be reviewed in the next class and AI generated instructions are provided to the teacher immediately.

As the homework data is collected, the system generates a personalized exercise book, or P.E. Book, with analogy questions personalized for each student. Our professional “Personalized Publishing” service delivers the P.E. Book in print within 24 hours. This helps each student study more effectively without changing their normal study habits. The items that students practice would be determined by their own study data, and it is published to them in a personalized and timely style.

In addition, our A.I. learning platform provides teachers and students with additional online services. Based on the homework data collected, the system helps teachers adjust their instructions for students who are either ahead or behind in their studies. The students, on the other hand, have access to their historic study data. Personalized online courses and adaptive online practices are also provided on demand. While practicing online, the system provides consistent feedback to help students stay on course in their studies. We believe this is a revolutionary tool for students to learn and that it can significantly improve their academic performance. We continuously accumulate students’ learning data during their learning process, analyzing students’ logical thinking, spatial imagination, language skills, analytical reasoning and other specific characteristics. This allows us to provide both scientific and empirical assessments to each student and recommend solutions based on his/her individual learning needs.

In July 2021, the China central government officially released the “Opinions on Further Reducing the Burden of Excessive Homework and Off-Campus Tutoring for Students Undergoing Compulsory Education”, or the Opinions, policy, seeking to decrease workloads for students and overhaul the private tutoring sector. In the policy, it states that elementary students must finish homework in-school, and junior high school students finish most of their homework in-school. Our SmartHomework® solution provides in-school service aiming to help students to study more efficiently. Under the background of the Opinions, local governments have quickly chosen our SmartHomework® solution to push new reforms into effect throughout Jiangxi Province.

Academic Proficiency Test

China’s Academic Proficiency Test is an official assessment across all subjects taught in school. There are eleven subject assessments which include Chinese, Math, English, Physics, Chemistry, Biology, Political Science, History, Geography, Information Technology and General Technology. APT assessments covering these 11 subjects need to be taken both during the secondary and high school periods. The secondary school APT assessments would be included as part of the high school admission process, while the high school APT is a pre-requisite for obtaining one’s high school diploma.

We began providing computer-based APT services for the subject of Biology in 2013 and expanded to all eleven subjects in 2017. Today, our SmartExam® platform covers all aspects of the APT test, from attesting and management of systems, to building test contents, and constructing certified test centers. We also provide services to help testing Authorities with staff training, onsite management to academic proficiency evaluations. As of November 30, 2022, we believe we are the only computer-based educational APT assessment vendor in China for all subjects.

China’s education ministry promoted local education authorities to adopt computer-based APT to replace traditional paper-based exam gradually. Influenced by the “Opinions on Further Reducing the Burden of Excessive Homework and Off-Campus Tutoring for Students Undergoing Compulsory Education”, or the Opinions, policy, high school and college admission decisions will take APT grades and multi-dimensional assessment into consideration. In such, for junior or senior high school students, APT scores are required for higher level education admissions. For senior high school graduates seeking to study overseas, official APT grades are widely accepted by institutions around the world.

Test Preparation

Building on the APT assessment services, we have introduced test-preparation books and adaptive practice applications and began to invest in building smart devices that further enhance students’ learning experience and efficiency. This is how we developed APT practices books for each subject and invented Jiangxi Ruanyun Smart-Headset for English assessments. Students who take any mock test in our online practice application have access to video lessons and will receive personalized study resources based on their test results.

Industry Background

China’s National People’s Congress enacted the PRC Educational Law which sets forth provisions relating to the fundamental education system in China. This includes the school system of preschool, elementary school, middle, or secondary, school and high school (namely, K-12), with grades from one through twelve being compulsory education. The law also stipulates a system of educational certificates, which require taking a series of tests and pass certain exams. The pinnacle of such exams is the National College Entrance Exam, or NCEE, also known as Gao Kao.

Today, China has the largest K-12 education system in the world. According to Ministry of Education of the People’s Republic of China, as of December 2021, China’s K-12 system had over 184 million students, including approximately 108 million primary school students, 50 million secondary school students and 26 million high school students across over 221,800 schools.

Over the past 40 years, particularly since China resumed the NCEE in 1977, China’s K-12 educational system has been shouldering the responsibility of both providing public education to the masses as well as training and selecting a large number of qualified professionals. In July of each year, millions of Chinese high school graduates take the NCEE. Their NCEE scores will determine whether the students have the option to continue with their more advanced studies in colleges and universities, or enter into the general workforce, most occupations of which do not have college degree requirements and therefore inadvertently sustain a lesser social and economic status. Hence, the term “one test for life” describes Gao Kao as an existential turning point in millions of young people’s lives each year in China.

From 2019 to 2020, according to the China National Bureau of Statistics as of Ministry of Education of the People’s Republic of China, China’s national education expenditure was 4.22% of GDP, which represented a higher level of such spending among developing and developed countries alike. In 2020, China’s educational spending was 4.2 trillion RMB (approximately $640 billion), a year-over-year growth of 7.10%. Since 2016, the Education Ministry of China has made various attempts to reform China’s educational system, aiming to rid the “one test for life” reality and to evaluate students’ performance and potentials on a more comprehensive basis. This is a reform of tremendous undertaking and is expected to be carried out to each provincial and municipal level within China. However, in its early stage, China’s well-intended and sometimes heavy-handed approach to such a reform has not been without adverse consequences, which we believe mainly stem from the following issues:

●	The distribution of educational resources is uneven in China.

●	In a modern and fast-paced society, the traditional ways of teaching, learning and academic evaluation are proven less efficient, effective and fair.

●	Without a new and more holistic approach in place, standardized test-taking still dominates students’ performance evaluation.

According to Duojing Caiptal as of December 2019, the traditional K-12 student homework book market alone reached over RMB102.3 billion (approximately $16 billion) in 2019. With the recent digital transformation ongoing in China’s school system and advanced AI technologies, personalized homework books are introduced to help students study efficiently. Personalized homework books can be in both digital and paper-based format. Such books contain custom-made learning and practice content for each student by classification according to students’ current learning situations and learning abilities. They can be delivered to students online or published and delivered in paper by demand. We believe this new form of publishing is becoming one of the most sought after models with an expected RMB80 billion (approximately $12 billion) in market size in 2026 according to the Company estimates and calculations.

In addition, the computer-based APT is also setting a new trend for the test-preparation market. As the assessment is changing from paper-based to computerized format, the test preparation solutions and smart devices markets is experiencing rapid growth. The computer-based assessment is currently being implemented in one province (Jiangxi) as the pilot project for the China Education Department. According to iResearch, as of September 2022, the smart learning device market reached RMB35.3 billion (approximately $5.4 billion) in 2020 and is expected to grow to over RMB 66 billion (approximately $10.25 billion) as the computer-based test format becomes mainstream.

Our Strengths - What Sets Us Apart

We believe the following competitive strengths differentiate us from our competitors and have contributed to our success:

	●	Integration with Schools: We strongly believe that students should do most of their learning in schools, therefore we bring our technology to them there. We deliver online academic exercise content, build A.I. Study Rooms on campuses, and integrate our SmartHomework® platform with students’ daily learning.

	●	Leading Technologies: Since inception, we have continued to develop our proprietary big data analytic and online A.I. algorithms; they underpin the delivery of our products and services for the benefit of improving students’ learning efficiency and academic performance. We have invested significant resources in research and development, and we have built a strong research and development team.

	●	Big Data: Since establishment, our database has accumulated more than 10 billion study data generated by over 14.26 million users in more than 27,000 schools, and we have issued over 298 million evaluation report reports.

	●	High Quality Content: We believe the academic exercise question bank that we have created is a leader in the market. It covers all grades and subjects and has over 15,064 high-quality knowledge points as of November 30, 2022. It is in high demand by schools, other educational service providers, and testing authorities.

	●	Customer Loyalty: We have built our user base by serving our users’ learning journeys, which we believe leads to a high degree of loyalty to our brand. Our customer base also enables us to continually cross-sell and upsell our products and services and to expand our market share.

	●	Scalable Business Model: Capitalizing on our proprietary technology infrastructure, our consumer, or 2C, and government procurement, or 2G, businesses can be expanded and replicated with consistency very quickly, which, in the foreseeable future, we believe will help us achieve economy of scale and profitability and enable us to efficiently address the needs of our customers.

	●	Visionary and Experienced management team. We have a visionary and experienced management team with strong execution capability. We believe that the extensive experience, service and product knowledge, strategic vision and execution capabilities of our management team will allow us to continue to execute our growth strategies to achieve a high level of success.

Our Strategies - How We Approach the Future

We seek to be a major technological solution provider with respect to China’s education reform and to lead the development of the A.I. learning industry. Our primary goal is to establish ourselves as a dominant A.I. educational technology company in China. We plan to pursue the following growth strategies to achieve our goals:

	●	Further develop and pursue existing marketing channels;
	●	Expand service offerings on our learning platform;
	●	Continue to offer ancillary products and services;
	●	Utilize a top-down marketing approach for school integration;
	●	Develop new products and services for enhancing the online learning experience:
	●	Promote our Personalized Exercise Book service to active users:
	●	Accelerate the market expansion of SmartExam® services: and
	●	Strengthen the construction of our exercise bank.

Corporate History and Structure

We are a holding company incorporated in the Cayman Islands. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through the VIE and its subsidiaries in China. We control and receive the economic benefits and absorb losses of the VIE and its subsidiaries’ business operations through certain contractual arrangements with Jiangxi Ruanyun and its shareholders, or the Contractual Arrangements. The ordinary shares offered in this offering are shares of our offshore holding company, Ruanyun Edai Technology Inc., instead of shares of the VIE or its subsidiaries in China. For a description of the Contractual Arrangements, see “Corporate History and Structure—Contractual Arrangements.” Based on the Contractual Arrangements, we account for Jiangxi Ruanyun as a VIE. More specifically, we have the power to direct the activities of Jiangxi Ruanyun and become the primary beneficiary of Jiangxi Ruanyun for accounting purposes through such Contractual Arrangements, which are less effective than direct ownership. Our power to direct the activities of Jiangxi Ruanyun and our position of being the primary beneficiary of Jiangxi Ruanyun for accounting purposes are limited to the conditions that we met for consolidation of Jiangxi Ruanyun under U.S. GAAP. Such conditions include that (i) we have the power to direct the activities that could most significantly affect the economic performance of Jiangxi Ruanyun, and (ii) we are entitled to receive benefits and obligated to absorb losses from Jiangxi Ruanyun that could potentially be significant to Jiangxi Ruanyun. Accordingly, we consolidate the accounts of Jiangxi Ruanyun for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the SEC, and ASC Topic 810-10, Consolidation: Overall. Only if we meet the aforementioned conditions to be the primary beneficiary of Jiangxi Ruanyun under U.S. GAAP, we will consolidate Jianxi Ruanyun and Jiangxi Ruanyun will be treated as our consolidated affiliated entities for accounting purposes. We believe the Contractual Arrangements are in compliance with the current PRC laws and are legally enforceable. However, uncertainties in the interpretation and enforcement of the PRC laws, regulations and policies could affect the validity of the Contractual Arrangements or limit our ability to enforce the Contractual Arrangements. Furthermore, the Contractual Arrangements have not been tested in a court of law. As a result, we may be unable to consolidate the VIE and its subsidiaries in the consolidated financial statements. Our position of being the primary beneficiary of the VIE and its subsidiaries also depends on the authorization by the shareholders of the VIE to exercise voting rights on all matters requiring shareholders’ approval in the VIE. As of the date of this prospectus, we believe that the agreements on the authorization to exercise shareholders’ voting power are valid and legally enforceable. See “Risk Factors-Risks Related to our Corporate Structure” for further information.

Reorganization

On March 11, 2021, Ruanyun was incorporated with limited liability under the laws of the Cayman Islands. On December 24, 2020, Soft Cloud Technology Limited, or Soft Cloud, was established in accordance with the law and regulations of Hong Kong and subsequently became the wholly owned subsidiary of Ruanyun. Soft Cloud is a holding company and holds all the equity interests of Rollingthunder Technology (Jiangxi) Co., Ltd, or WFOE, which was established in the PRC on January 19, 2021. Jiangxi Ruanyun Technology Co., Ltd., or Jiangxi Ruanyun, or the VIE, was established on March 27, 2012 under the laws of the PRC. The main operation of Jiangxi Ruanyun includes a focus on A.I. database and testing center development. Jiangxi Ruanyun formed the following subsidiaries subsequent to its establishment:

	●	Jiangxi Ruanyun Technology Co., Ltd. (Shenzhen Branch), or Shenzhen Ruanyun, a company incorporated on March 27, 2017 in the PRC. It is a branch office of Jiangxi Ruanyun and mainly operating an A.I. database.

	●	Jiangxi Alphabet Technology Co., Ltd., or Jiangxi Alphabet, a company incorporated on February 21, 2017 in the PRC. It is a 70% subsidiary of Jiangxi Ruanyun and mainly operates in paperless testing center development.

	●	Jiangxi Jiaotou Technology Co., Ltd., or Jiangxi Jiaotuo, a company incorporated on December 31, 2020 in the PRC. Jiangxi Ruanyun has 65% equity interest in Jiangxi Jiaotuo, which mainly operates in personalized homework book development.

	●	Jiangxi Huizuoye Technology Co., Ltd., or Jiangxi Huizuoye, a company incorporated on April 8, 2021 in the PRC. Jiangxi Ruanyun has 51% equity interest in Jiangxi Huizuoye, which mainly operates in electronic publications.

On April 8, 2021, WFOE entered into a series of contractual arrangements with Jiangxi Ruanyun and its shareholders, which allow Ruanyun to have controlling financial interest in Jiangxi Ruanyun, or the VIE. Subject to the conditions that we have satisfied for consolidation of Jiangxi Ruanyun under U.S. GAAP. Such conditions include that (i) we have the power to direct the activities that could most significantly affect the economic performance of Jiangxi Ruanyun, and (ii) we are entitled to receive benefits and obligated to absorb losses from Jiangxi Ruanyun that could potentially be significant to Jiangxi Ruanyun. Under the United States generally accepted accounting principle, or US GAAP, Ruanyun was deemed to be the primary beneficiary of the VIE for accounting purposes and must consolidate the VIE. These Contractual Arrangements include an Exclusive Equity Interest Purchase Agreement, an Equity Interest Pledge Agreement, Powers of Attorney, an Exclusive Technical Consulting and Service Agreement and Supplementary Agreements to the Exclusive Technical Consulting and Service Agreement. Ruanyun together with its wholly-owned subsidiary Soft Cloud, and its subsidiary, WFOE and the VIE and its subsidiaries were effectively controlled by the same shareholders before and after the reorganization. The consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of the Company.

The charts below summarize our corporate legal structure and identify our subsidiaries, the VIE and its subsidiaries as of the date of this prospectus and upon closing of this offering:

VIE??????

Name	Background	Ownership
Soft Cloud Technology Limited	A Hong Kong company formed on December 24, 2020	100% owned by Ruanyun Edai Technology Inc.
Rollingthunder Technology (Jiangxi) Co., Ltd	A PRC company formed on January 19, 2021	100% owned by Soft Cloud Technology Limited
Jiangxi Ruanyun Technology Co., Ltd.	A PRC company formed on March 27, 2012	VIE of Rollingthunder Technology (Jiangxi) Co., Ltd
Jiangxi Ruanyun Technology Co., Ltd. ( Shenzhen Branch)	A PRC company formed on March 27, 2017	100% owned by Jiangxi Ruanyun Technology Co., Ltd.

Jiangxi Alphabet Technology Co., Ltd.	A PRC company formed on February 21, 2017	70% owned by Jiangxi Ruanyun Technology Co., Ltd.
Jiangxi Jiaotou Technology Co., Ltd.	A PRC company formed on December 31, 2020	65% owned by Jiangxi Ruanyun Technology Co., Ltd.
Jiangxi Huizuoye Technology Co., Ltd.	A PRC company formed on April 8, 2021	51% owned by Jiangxi Ruanyun Technology Co., Ltd.

Share Consolidation

On October 17, 2022, Ruanyun, with the approval of its board of directors and shareholders, effected a 1-for-2 share consolidation of all of its issued and unissued ordinary shares, or the share consolidation, whereby each two ordinary shares of par value of $0.0001 each were consolidated into one ordinary share of par value of $0.0002 each, following which the share capital of Ruanyun was $1,000,000 divided into 5,000,000,000 shares with a par value of $0.0002 each. Any and all fractional shares were rounded up to the nearest whole share. As of the date of this prospectus, 30,000,004 ordinary shares of Ruanyun are issued and outstanding. Unless otherwise stated in this prospectus, we have retroactively restated all share and per share data for all of the periods presented in this prospectus to reflect the share consolidation.

Contractual Arrangements

In order to comply with the PRC laws and regulations which prohibit or restrict foreign control of companies involved in provision of value-added telecommunication services and other restricted businesses, we operate substantially all of our business through certain PRC domestic companies. As such, Jiangxi Ruanyun is controlled through the Contractual Arrangements, in lieu of any direct or indirect equity ownership by Ruanyun or any of its subsidiaries, which were signed on April 8, 2021.

Despite the lack of equity ownership, Ruanyun controls the VIE’s financial interest through the Contractual Arrangements. The equity interests of the VIE are legally held by PRC individuals, or the Nominee Shareholders. The Nominee Shareholders who individually hold more than 5% equity interests of the VIE, including Fu Yan, Zhao Cong, Li Baihua, Wang Bin, and Shanghai Yuyuan Asset Management Partnership (Limited Partnership), collectively own 71.78% of the VIE. Through the Contractual Arrangements, the Nominee Shareholders effectively assign all their voting rights underlying their equity interests in the VIE to Ruanyun, and therefore, Ruanyun has the power to direct the activities of the VIE that most significantly impact economic performance. Ruanyun also has the right to receive economic benefits and the obligation to absorb losses from the VIE that potentially could be significant to the VIE. Based on the above, Ruanyun consolidates the accounts of the VIE in accordance with Regulation S-X-3A-02 promulgated by the SEC and Accounting Standards Codification, or ASC, Topic 810-10, Consolidation: Overall.

The significant terms of the Contractual Arrangements are as follows:

Exclusive Equity Interest Purchase Agreement

Pursuant to the Exclusive Equity Interest Purchase Agreement entered into amongst Jiangxi Ruanyun, the Nominee Shareholders and the WFOE, the Nominee Shareholders granted the WFOE or its designated party, an irrevocable and exclusive right to purchase all or part of the equity interests held by the Nominee Shareholders in Jiangxi Ruanyun at its sole discretion, to the extent permitted under the PRC laws, at an amount equal to the minimum consideration permitted under the applicable PRC law and administrative regulations. Any proceeds received by the Nominee Shareholders from the exercise of the options shall be remitted to the WFOE to the extent permitted under PRC laws. In addition, Jiangxi Ruanyun and the Nominee Shareholders have agreed that without prior written consent of the WFOE, they will not create any pledge or encumbrance on their equity interests in the VIE, or transfer or otherwise dispose of their equity interests in Jiangxi Ruanyun. The term of the agreement is ten years and can be extended by another ten years by the WFOE.

Equity Interest Pledge Agreement

Pursuant to the Equity Interest Pledge Agreement entered into amongst the WFOE and the Nominee Shareholders, the Nominee Shareholders pledged all of their equity interests in Jiangxi Ruanyun to the WFOE as collateral to secure their obligations. If the Nominee Shareholders breach their respective contractual obligations under the share pledge agreement, the WFOE, as pledgee, will be entitled to rights, including the right to dispose the pledged equity interests entirely or partially. The Nominee Shareholders agreed not to transfer or otherwise create any encumbrance on their equity interests in Jiangxi Ruanyun without prior consent of the WFOE. The Equity Interest Pledge Agreement will remain effective until all the obligations have been satisfied in full. Ruanyun has completed the registration of the pledge of equity interests in the VIE with the relevant office of Administration for Market Regulation in accordance with the PRC Property Rights Law.

Powers of Attorney

Pursuant to the Powers of Attorney entered into by the Nominee Shareholders, each Nominee Shareholder appointed the WFOE to act on behalf of the Nominee Shareholder as exclusive agent and attorney with respect to all matters concerning the shareholding including, but not limited to, (1) calling and attending shareholders’ meetings of Jiangxi Ruanyun; (2) exercising all the shareholders’ rights, including voting rights; and (3) appointing at its sole discretion a substitute or substitutes to perform any or all of its rights. The powers of attorney remain irrevocable and continuously valid from the date of execution so long as each Nominee Shareholder remains a shareholder of Jiangxi Ruanyun unless the WFOE issues adverse instructions in writing.

Exclusive Technical Consulting and Service Agreement

Pursuant to the Exclusive Technical Consulting and Service Agreement entered between the WFOE and Jiangxi Ruanyun, the WFOE or its designated entities affiliated with it has the exclusive right to provide Jiangxi Ruanyun with technical support and business support services in return for fees equal to 100% of the consolidated net profits of Jiangxi Ruanyun. The WFOE has sole discretion in determining the service fee charged under this agreement. Without the WFOE’s prior written consent, Jiangxi Ruanyun shall not, directly or indirectly, obtain the same or similar services as provided under this agreement from any third party, or enter into any similar agreement with any third party. The WFOE will have the exclusive ownership of all intellectual property rights developed by performance of this agreement. This agreement will remain effective until it is terminated at the discretion of the WFOE or upon the transfer of all the shares of Jiangxi Ruanyun to the WFOE and/or a third party designated by the WFOE.

On April 2, 2022, Jiangxi Ruanyun and the WFOE signed the Supplementary Agreement to the Exclusive Technical Consulting and Service Agreement, or the Supplementary Agreement. Pursuant to the Supplementary Agreement, consulting fees can be 100% of Jiangxi Ruanyun's annual profits, and Jiangxi Ruanyun shall provide the WFOE with a report in relation to such consulting fees within three business days after each year in accordance with the Supplementary Agreement.

On October 18, 2022, Jiangxi Ruanyun and the WFOE signed an additional Supplementary Agreement to the Exclusive Technical Consulting and Service Agreement, or the Second Supplementary Agreement. Pursuant to the Second Supplementary Agreement, the WFOE shall be obligated to provide financial support to Jiangxi Ruanyun to ensure it meets the cash flow requirements in daily operation and/or offsets any losses incurred during its operation.

Based on the foregoing Contractual Arrangements, we account for Jiangxi Ruanyun as a VIE. We have the power to direct the activities of Jiangxi Ruanyun and become the primary beneficiary of Jiangxi Ruanyun for accounting purposes through such Contractual Arrangements, which are less effective than direct ownership. Our power to direct the activities of Jiangxi Ruanyun and our position of being the primary beneficiary of Jiangxi Ruanyun for accounting purposes are limited to the conditions that we met for consolidation of Jiangxi Ruanyun under U.S. GAAP. Such conditions include that (i) we have the power to direct the activities that could most significantly affect the economic performance of Jiangxi Ruanyun, and (ii) we are entitled to receive benefits and obligated to absorb losses from Jiangxi Ruanyun that could potentially be significant to Jiangxi Ruanyun. Accordingly, we consolidate the accounts of Jiangxi Ruanyun for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the SEC, and ASC Topic 810-10, Consolidation: Overall. Only if we meet the aforementioned conditions to be the primary beneficiary of Jiangxi Ruanyun under U.S. GAAP, we will consolidate Jianxi Ruanyun and Jiangxi Ruanyun will be treated as our consolidated affiliated entities for accounting purposes.

We do not hold any equity interests in the VIE, we control the VIE through the Contractual Arrangements, the Contractual Arrangement may not be effective in providing control over the VIE, and which may involve inherent risks and uncertainties including but not limited to: i) the uncertainty of the interpretation and the application of the PRC laws and regulations or any future actions of the PRC government in this regard that could disallow the VIE structure, which may cause the Contractual Arrangements to be invalid and unenforceable, and as a result, we may not be able to consolidate the VIE nor be entitled to treat the VIE’s assets, revenue and results of operations as our assets, which would likely result in a material change in our operations and the value of our ordinary shares may depreciate significantly or become worthless; ii) there are uncertainties regarding the status of the rights of Ruanyun with respect to its Contractual Arrangements amongst Jiangxi Ruanyun, the Nominee Shareholders and the WFOE. We may face difficulties in enforcing the Contractual Arrangements due to legal uncertainties and jurisdictional limits, as all of our Contractual Arrangements are governed by the PRC laws and any disputes arising from the Contractual Arrangements will be solved through arbitration in the PRC, the relevant PRC authorities and PRC courts may have broad discretion in dealing with the validity and enforceability of the Contractual Arrangements and the disputes thereunder, requiring us to restructure our current ownership structure or operations, imposing conditions or requirements that we or the VIE may not be able to comply, imposing fines or penalties on us or the VIE, which may severely affect our business operations and financial conditions, and may significantly impair the rights of the holders of our ordinary shares; iii) If we had equity interests in the VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level, however, we rely on the performance of the VIE and its shareholders to fulfill their obligations under the Contractual Arrangements for us to exert control over and act as the primary beneficiary of the VIE; although Jiangxi Ruanyun does not have termination rights pursuant to the Contractual Arrangements, it could terminate, or refuse to perform its obligations under, the Contractual Arrangements, and the shareholders of the VIE may not act in the best interests of our Company and may also refuse to perform their obligations under the Contractual Arrangements, which would result in the distractions of our management team and incur substantial cost for us to seek for any possible legal remedies to enforce the Contractual Arrangements, and our business operations, financial conditions and future prospects may be materially and adversely affected, and the value of your ordinary shares may significantly decline or become worthless.

See “Risk Factors- We conduct our business through Jiangxi Ruanyun by means of Contractual Arrangements. If the PRC courts or administrative authorities determine that these contractual arrangements do not comply with applicable laws and regulations, we could be subject to severe penalties and our business could be adversely affected. In addition, changes in such PRC laws and regulations may materially and adversely affect our business.”

Furthermore, we have been advised by our PRC counsel, Jingtian & Gongcheng, based on their understanding of the current PRC laws, rules and regulations, that (i) the structure for operating our business in China (including our corporate structure and Contractual Arrangements between the WFOE, Jiangxi Ruanyun and its shareholders) will not result in any violation of PRC laws or regulations currently in effect; and (ii) the Contractual Arrangements among the WFOE and Jiangxi Ruanyun and its shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect. However, the Contractual Arrangements may be determined by PRC authorities to be inconsistent with the laws and regulations of the PRC, including those related to foreign investment in certain industries. If any of the VIE and its subsidiaries or their ownership structure or the Contractual Arrangements are determined to be in violation of any existing or future PRC laws, rules or regulations, or any of our PRC subsidiary and the VIE and its subsidiaries fail to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including:

●

revoking the business and operating licenses;

●

discontinuing or restricting the operations;

●

imposing conditions or requirements with which we or the VIE and its subsidiaries may not be able to comply;

●

requiring us and the VIE and its subsidiaries to restructure the relevant ownership structure or operations, including termination of the Contractual Arrangements with the VIE and deregistering the equity pledge of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or exert financial control over the VIE;

●

restricting or prohibiting our use of the proceeds from this offering to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business; or

●

imposing fines or confiscating the income from the VIE and its subsidiaries.

The imposition of any penalties would severely disrupt our ability to conduct business and have a material adverse effect on our financial condition, results of operations and prospects, and the value of your Class A ordinary shares may depreciate significantly or become worthless. See “Risk Factors- We conduct our business through Jiangxi Ruanyun by means of Contractual Arrangements. If the PRC courts or administrative authorities determine that these contractual arrangements do not comply with applicable laws and regulations, we could be subject to severe penalties and our business could be adversely affected. In addition, changes in such PRC laws and regulations may materially and adversely affect our business.”

How Cash Is Transferred Through our Organization

Under the Contractual Arrangements, cash is transferred among the Company, Soft Cloud, our WFOE, and the VIE, in the following manners: (i) dividends or other distributions may be paid by Rollingthunder Jiangxi, or our WFOE, to the Company through Soft Cloud Technology Limited, or Soft Cloud; (ii) Ruanyun Edai Technology Inc., or Ruanyun (the Cayman Islands holding company) transfers proceeds raised through this offering or any other offering we conduct at this level to our wholly owned subsidiary, Soft Cloud Technology Limited, or Soft Cloud, which in turn transfers such proceeds down to its wholly owned subsidiary Rollingthunder Jiangxi, or the WFOE, in the form of capital contributions or shareholder loans, as the case may be, which in turn transfers such proceeds in the form of loans to the VIE pursuant to the Contractual Arrangements for the purpose of conducting business operations; and (iii) funds may be paid by Jiangxi Ruanyun, to our WFOE, as service fees according to the Contractual Arrangements.

As of the date of this prospectus, there were no cash flows among the Company, Soft Cloud, Rollingthunder Jiangxi, or our WFOE, and Jiangxi Ruanyun, or the VIE. As of the date of this prospectus, no dividends or distributions have been made to the respective shareholders of such entities.

For the foreseeable future, the VIE intends to keep any future earnings to re-invest in and finance the expansion of our business. As a result, we do not expect to pay any cash dividends in the near future.

We currently do not maintain any cash management policies that dictate the purpose, amount and procedure of cash transfers among the Company, Soft Cloud, our WFOE, the VIE, or investors. Rather, the funds can be transferred in accordance with applicable PRC laws and regulations. For more details, see “Regulations-Regulations Relating to Foreign Exchange Registration of Overseas Investment by PRC Residents.”

Compliance issues regarding the transfer of foreign exchange between China’s overseas and China

There are no foreign exchange controls or foreign exchange regulations under the currently applicable laws of the Cayman Islands and Hong Kong restricting the Company’s ability to transfer cash between entities, across borders and to U.S. investors.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. In the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, have 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 the VIE 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. Furthermore, if our subsidiary in the PRC incurs debt on its own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. See “Regulations-Regulations Relating to Foreign Exchange Registration of Overseas Investment by PRC Residents” for more information.

Under our current corporate structure, to fund any cash and financing requirements we may have, the Company may rely on payments from the VIE under the Contractual Arrangements, and the distribution of dividends to Soft Cloud from WFOE, Rollingthunder Technology (Jiangxi) Co., Ltd. Certain payments from the VIE to WFOE are subject to PRC taxes, including VAT. According to the Contractual Arrangements, WFOE is entitled to 100% of the VIE’s yearly profit by providing exclusive technical consulting services to the VIE. The VIE shall pay the corresponding amount according to the agreement for a period of 10 years from April 8, 2021. Current PRC regulations permit our PRC subsidiary to pay dividends to its shareholders only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. Therefore, WFOE can distribute the income obtained under the Contractual Arrangements to Soft Cloud in the form of dividends, with Soft Cloud in turn distributing such revenues to Ruanyun in the form of dividends.

The Cayman Companies Act (as amended) (the Companies Act) permits dividend distributions, subject to the provisions of the Company’s amended and restated memorandum and articles of association, the payment of distributions or dividends to members may be made out of the share premium account provided that the Company is able to pay its debts as they fall due in the ordinary course of business immediately following the date on which the distribution or dividend is proposed to be paid. With the exception of the foregoing, there are no statutory provisions relating to the payment of dividends or distributions. Based upon English case law, which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of profits. The distributions or dividends of the Company could be distributed to all shareholders respectively in proportion to the shares they held, regardless whether the shareholders are U.S. investors or investors in other countries or regions.

Tax liability of VIE’s profit distribution to overseas (non-China) companies

Income of the WFOE comes from the exclusive technical consulting service fee paid by the VIE. According to the “VAT Law of the People’s Republic of China”, the WFOE shall pay 6% value-added tax of this income.

Also, according to the current effective laws in Cayman Islands, dividends from its companies are exempt from tax.

However, in accordance with the laws and regulations of the United States, U.S. investors shall pay taxes and fees on dividend income according to regulations after receiving the dividends paid in accordance with the law.

Risks Associated with Our Business

Our business is subject to a number of risks and uncertainties, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects that you should consider before making a decision to invest in our ordinary shares. These risks are discussed more fully in “Risk Factors” beginning on page 22. These risks include, but are not limited to, the following:

●

We face risks related to natural disasters, health epidemics and other outbreaks, specifically the coronavirus, which could significantly disrupt our operations.

	●	We have a limited operating history. There is no assurance that our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations.

	●	We face competition which could lead to pricing pressure and loss of market share and materially and adversely affect our business, financial condition and results of operations.

	●	Our future growth depends in part on new products and new technology innovation, and failure to invent and innovate could adversely impact our business prospects.

	●	Our directors, officers and principal shareholders have significant voting power and may take actions that may not be in the best interests of our other shareholders.

	●	If we are not able to adequately protect our proprietary intellectual property and information, and protect against third party claims that we are infringing on their intellectual property rights, our results of operations could be adversely affected.

	●	If we fail to develop and apply our technologies to support and expand our product and service offerings or if we fail to timely respond to the rapid changes in industry trends and users’ preference, we may lose market share and our business may be materially and adversely affected.

	●	We may not be effective in broadening our monetization channels.

	●	We are subject to a variety of laws and other obligations regarding data protection, any failure to comply with applicable laws and obligations could have a material adverse effect on our business, financial condition and results of operations.
	●	The success and future growth of our business will be affected by the user acceptance and market trend of integration of technology and learning.

	●	We may not be able to improve or expand our product and service offerings in a timely and cost-effective manner.

Risks Related to Our Corporate Structure

	●	We depend upon the Contractual Arrangements in conducting our business in China, which may not be effective in providing operational control.

	●	We conduct our business through the VIE, or Jiangxi Ruanyun, and its subsidiaries, all of which are PRC entities, by means of the Contractual Arrangements. If the PRC courts or administrative authorities determine that these contractual arrangements do not comply with applicable regulations, we could be subject to severe penalties and our business could be adversely affected. In addition, changes in such PRC laws and regulations may materially and adversely affect our business. If the PRC government determines that the Contractual Arrangements constituting part of the VIE structure do not comply with PRC laws and regulations, or if these laws and regulations change or are interpreted differently in the future, our shares may decline in value or become worthless if we are unable to assert our contractual control rights over the assets of our PRC subsidiaries that conduct substantially all of our operations.

Risks Related to Doing Business in China

	●	Uncertainties with respect to the PRC legal system could have a material adverse effect on us. The legal system in mainland China is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. Since the legal system in mainland China continues to rapidly evolve, and PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, the legal system in mainland China, including risks and uncertainties regarding the enforcement of PRC laws and that PRC laws and regulations can change quickly with little advance notice, and the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties. See “Risk Factors – Risks Related to Doing Business in China –Uncertainties with respect to China’s legal system could adversely affect us” on page 27 of this prospectus.

	●	We operate in the education industry, which is subject to extensive regulations in China. See “Risk Factors – Risks Related to Our Business and Industry – Failure to adhere to the regulations that govern our business could result in our being unable to effectively perform our services” on page 41 of this prospectus, and “Risk Factors – Risks Related to Our Business and Industry – If we are qualified as a tutoring institution under the Opinions on Further Reducing the Burden of Excessive Homework and Off-Campus Tutoring for Students Undergoing Compulsory Education, or the Opinions, in the future, our business, financial condition and results of operations could be adversely affected due to the great uncertainties about how the policy will be implemented” on page 43 of this prospectus.

	●	The Chinese government may interfere in our operations at any time. See “Risk Factors – Risks Related to Doing Business in China -- Substantially all of our operations are located in China. Our ability to operate in China may be impaired by changes in Chinese laws and regulations, including those relating to taxation, environmental regulation, restrictions on foreign investment, and other matters” on page 25 of this prospectus.

	●	Trade issues in China and internationally may have a material adverse effect on our business. See “Risk Factors -- Risks Related to Doing Business in China – Changes in international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in China and may have a material adverse effect on our business” on page 28 of this prospectus.

	●	The Company’s auditor, Friedman LLP, is PCAOB registered and based in New York, New York. Under the HFCAA, the PCAOB is permitted to inspect the Company’s independent public accounting firm. However, if the PCAOB later determined that it cannot inspect or fully investigate our auditor, trading in our securities may be prohibited under the HFCAA, and, as a result, Nasdaq may determine to delist our securities. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, or the AHFCAA. See “Risk Factors – Risks Related to Doing Business in China – The recent joint statement by the SEC and the Public Company Accounting Oversight Board, or the PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering” on page 34 of this prospectus.

	●	The Chinese government may interfere in our operations at any time or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of our securities. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers 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 be worthless. See “Risk Factors –Risks Related to Our Business and Industry – We are subject to a variety of laws and other obligations regarding data protection, any failure to comply with applicable laws and obligations could have a material adverse effect on our business, financial condition and results of operations” on page 42 of this prospectus.

	●	The transfer of funds and assets between Ruanyun, its Hong Kong subsidiary, WFOE and the VIE and its subsidiaries is subject to risks. To the extent the funds or assets of a PRC subsidiary are in the PRC, the funds or assets may not be available to fund operations or for other use outside of the PRC, due to the controls imposed by PRC governments which may limit our ability to transfer funds, pay dividends or make distribution to Ruanyun. Based on Hong Kong laws and regulations, as at the date of this prospectus, there is no restriction imposed by the Hong Kong government on the transfer of capital within and out of Hong Kong (including funds from Hong Kong to the PRC), except transfer of funds involving money laundering and criminal activities. See “Risk Factors — Risks Related to Doing Business in China — Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.” on page 31 of this prospectus.

	●	PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business. See “Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” on page 29 of this prospectus.

	●	We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material and adverse effect on our ability to conduct our business. See “Risk Factors — Risks Related to Doing Business in China — We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material and adverse effect on our ability to conduct our business.” on page 29 of this prospectus.

Risks Related to This Offering

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

	●	The Chinese government may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in the value of our ordinary shares and could have a material adverse effect on our results of operations.

	●	Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers 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 be worthless. If it is determined in the future that any approval from the CSRC, the CAC or other PRC regulatory agencies were required for this offering, we cannot assure you that such approval could be obtained in a timely manner, or at all, which may subject us to sanctions imposed by these regulatory agencies.

Permissions Required from the PRC Authorities for the VIE’s Operation and This Offering

Jiangxi Ruanyun and Jiangxi Huizuoye are the only entities in our organization that are required to obtain permissions from Chinese authorities (other than business licenses as an incorporation permission for every company) to operate, and they currently hold all requisite permissions to operate.

Jiangxi Ruanyun currently holds the Business License (No. 91360106591844810W), the Qualification Certificate for Integration of Classified Information Systems (No. JC242100324) issued by Secrecy Administration Bureau of Jiangxi Province on August 16, 2021; PRC Publication Business License issued by Bureau of Press and Publication of Jiangxi Province on August 13, 2020; High-Tech Enterprise Certificate issued by Science and Technology Department of Jiangxi Province, Department of Finance of Jiangxi Province and Jiangxi Provincial Tax Service on December 15, 2021; Radio and Television Program Production Business License issued by Jiangxi Radio and TV Bureau on December 2, 2020; the ICP License (No. Gan B2-20150022) issued by Communications Administration of Jiangxi Province on April 15, 2020; the ISP License (No. B2-20195326) issued by Ministry of Industry and Information Technology of PRC on September 26, 2019; Software Enterprise Certificate issued by Software Industry Association of Jiangxi Province on December 23, 2020.

Jiangxi Huizuoye currently holds the Business License (No. 91360106MA3AC0N38H) and PRC Publication Business License issued by Bureau of Press and Publication of Jiangxi Province on June 8, 2021.

No entity in the VIE and its subsidiaries is currently required to obtain permission from any of the PRC authorities for Ruanyun to issue our ordinary shares to foreign investors. However, Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors of China, or the M&A Rules, require an overseas special purpose vehicle that is controlled by a PRC company or individual formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies using shares of such special purpose vehicle or held by its shareholders as consideration to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The application of the M&A Rules remains unclear. If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval. Any failure to obtain or delay in obtaining CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies. Based on our understanding of the current PRC law, rules, and regulations that CSRC approval is not required for the listing in the context of this offering, because (1) the CSRC currently has not issued any definitive rule or interpretation concerning whether this offering in this prospectus is subject to the M&A Rules; and (2) we established the WFOE by means of direct investment rather than by a merger with or acquisition of PRC domestic companies.

Further, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the Opinions, which were made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters. The Opinions and any related implementing rules to be enacted may subject us to compliance requirements in the future.

In addition, on December 28, 2021, the Office of the Central Cyberspace Affairs Commission and the Office of Cybersecurity Review under the Cyberspace Administration of China, or the CAC, released the Measures for Cybersecurity Review which took effect on February 15, 2022 which require any online platform with more than 1 million users’ personal information data to apply for a mandatory cybersecurity review with the Cybersecurity Review Office prior to its listing in a “foreign country.” CAC also released the Regulations on the Administration of Network Data Security (Draft for Comments) on November 14, 2021, which reaffirmed such requirement. As of the date of this prospectus, the actual number of users’ personal information used by Jiangxi Ruanyun and its subsidiaries is well below one million. The users’ personal information used by the VIE and its subsidiaries is authorized by the entity that owns and controls it. Jiangxi Ruanyun has signed authorization agreements with the Jiangxi Education Technology and Equipment Development Center and the Nanchang Education Examination Institute, two legal owners of students’ personal information. Through the authorization agreements, Jiangxi Ruanyun can obtain a portion of students’ personal information within the authorization period, and under a series of contractual terms, Jiangxi Ruanyun can use the authorized students’ personal information to provide more accurate SmartExam® solution and SmartHomework® solution. Therefore, Jiangxi Ruanyun is not an “online platform with personal information”, but rather a “user” of personal information, which is not subject to this review.

Notwithstanding the foregoing, on December 24, 2021, the CSRC, issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Administrative Provisions, and the Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), or the Draft Filing Measures, collectively, the Draft Rules Regarding Overseas Listings. According to the Draft Rules Regarding Overseas Listings, among other things, after making initial applications with overseas stock markets for initial public offerings or listings, all China-based companies shall file with the CSRC within three working days. The required filing materials with the CSRC include (without limitation): (i) record-filing reports and related undertakings, (ii) compliance certificates, filing or approval documents from the primary regulator of the applicants’ businesses (if applicable), (iii) security assessment opinions issued by related departments (if applicable), (iv) PRC legal opinions, and (v) prospectus. In addition, overseas offerings and listings may be prohibited for such China-based companies when any of the following applies: (1) if the intended securities offerings and listings are specifically prohibited by the laws, regulations or provision of the PRC; (2) if the intended securities offerings and listings may constitute a threat to, or endanger national security as reviewed and determined by competent authorities under the State Council in accordance with laws; (3) if there are material ownership disputes over applicants’ equity interests, major assets, core technologies, or the others; (4) if, in the past three years, applicants’ domestic enterprises or controlling shareholders, de facto controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (5) if in the past three years, any directors, supervisors, or senior executives of applicants have been subject to administrative punishments for severe violations, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (6) other circumstances as prescribed by the State Council. The Draft Administrative Provisions further stipulate that a fine between RMB 1 million and RMB 10 million may be imposed if an applicant fails to fulfill the filing requirements with the CSRC or conducts an overseas offering or listing in violation of the Draft Rules Regarding Overseas Listings, and in cases of severe violations, a parallel order to suspend relevant businesses or halt operations for rectification may be issued, and relevant business permits or operational license revoked. The Draft Rules Regarding Overseas Listings, if enacted, may subject us to additional compliance requirements in the future, and though we believe that none of the situations that would clearly prohibit overseas listing and offering applies to us, we cannot assure you that we will be able to receive clearance of such filing requirements in a timely manner, or at all.

If the CSRC requires that we obtain its approval prior to the completion of this offering, the offering will be delayed until we have obtained CSRC approval, which may take several months. There is also the possibility that we may not be able to obtain or maintain such approval or that we inadvertently concluded that such approval was not required. If prior CSRC approval was required while we inadvertently concluded that such approval was not required or if applicable laws and regulations or the interpretation of such were modified to require us to obtain the CSRC approval in the future, we may face regulatory actions or other sanctions from the CSRC or other Chinese regulatory authorities. These authorities may impose fines and penalties upon our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into China, or take other actions that could have a material adverse effect upon our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our Ordinary Shares. The CSRC or other Chinese regulatory agencies may also take actions requiring us, or making it advisable for us, to terminate this offering prior to closing. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer the Ordinary Shares, causing significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause the Ordinary Shares to significantly decline in value or become worthless.

In conclusion, the Company, our PRC subsidiary and the VIE and its subsidiaries have received all required permissions from PRC authorities and there is no permission which has been denied. But given the current regulatory environment in the PRC, we are still subject to the uncertainty of interpretation and enforcement of the rules and regulations in the PRC, which can change quickly with little advance notice, and any future actions of the PRC authorities. If it is determined in the future that any approval from the CSRC, the CAC or other PRC regulatory agencies were required for this offering, we cannot assure you that such approval could be obtained in a timely manner, or at all, which may subject us to sanctions imposed by these regulatory agencies. The regulatory agencies may impose fines or penalties on our operation in China, limit our ability to pay dividends outside of China, delay or restrict the transfer of the proceeds from this offering into China or take any other action that could have a material adverse effect on our business and financial condition. In addition, the permission requirement 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 be worthless. If you engage in market trading or other activities of this offering in anticipation of and prior to settlement and delivery, you do so at the risk that such settlement and delivery may not occur

Implications of Being an Emerging Growth Company and a Foreign Private Issuer

As a company with less than $1.235 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

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

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

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

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

We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the date of the first sale of our ordinary shares pursuant to this offering. However, if certain events occur before the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period.

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

We are a “foreign private issuer,” as defined by the SEC. As a result, in accordance with the rules and regulations of The Nasdaq Stock Market LLC, or Nasdaq, we may comply with home country governance requirements and certain exemptions thereunder rather than complying with Nasdaq corporate governance standards. We may choose to take advantage of the following exemptions afforded to foreign private issuers:

	●	Exemption from filing quarterly reports on Form 10-Q, from filing proxy solicitation materials on Schedule 14A or 14C in connection with annual or special meetings of shareholders, from providing current reports on Form 8-K disclosing significant events within four days of their occurrence, and from the disclosure requirements of Regulation FD.

	●	Exemption from Section 16 rules regarding sales of ordinary shares by insiders, which will provide less data in this regard than shareholders of U.S. companies that are subject to the Exchange Act.

	●	Exemption from the Nasdaq rules applicable to domestic issuers requiring disclosure within four business days of any determination to grant a waiver of the code of business conduct and ethics to directors and officers. Although we will require board approval of any such waiver, we may choose not to disclose the waiver in the manner set forth in the Nasdaq rules, as permitted by the foreign private issuer exemption.

	●	Exemption from the requirement that our board of directors have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

	●	Exemption from the requirements that director nominees are selected, or recommended for selection by our board of directors, either by (1) independent directors constituting a majority of our board of directors’ independent directors in a vote in which only independent directors participate, or (2) a committee comprised solely of independent directors, and that a formal written charter or board resolution, as applicable, addressing the nominations process is adopted.

Furthermore, Nasdaq Rule 5615(a)(3) provides that a foreign private issuer, such as us, may rely on our home country corporate governance practices in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d), provided that we nevertheless comply with Nasdaq’s Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640) and that we have an audit committee that satisfies Rule 5605(c)(3), consisting of committee members that meet the independence requirements of Rule 5605(c)(2)(A)(ii). If we rely on our home country corporate governance practices in lieu of certain of the rules of Nasdaq, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. If we choose to do so, we may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.

Although we are permitted to follow certain corporate governance rules that conform to Cayman Islands requirements in lieu of many of the Nasdaq corporate governance rules, we intend to comply with the Nasdaq corporate governance rules applicable to foreign private issuers, including the requirement to hold annual meetings of shareholders.

Corporate Information

Our principal executive office is located at No. 698 Jing Dong Avenue, ZheJiang University HighTech Campus, Nanchang, Jiangxi, China 330096. Our telephone number is 0791-88567739. Our registered office in the Cayman Islands is located at the offices of WB Corporate Services (Cayman) Ltd., of PO Box 2775, Artemis House, 67 Fort Street, Grand Cayman KY1-1111, Cayman Islands.

Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Ave., Suite 204, Newark, DE 19711. Our website is located at http://www.ruanyun.net. Information contained on, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this prospectus.

The Offering⁽¹⁾

Securities being offered		5,000,000 ordinary shares on a firm commitment basis.

Initial public offering price		We estimate the initial public offering price will be between $5.00 and $6.00 per ordinary share.

Number of ordinary shares outstanding before this offering		30,000,004 ordinary shares.

Number of ordinary shares outstanding after this offering		35,000,004 ordinary shares.

Underwriters’ over-allotment option		We have granted the underwriters an option for a period of up to 45 days after the date of this prospectus to purchase up to 750,000 additional ordinary shares.

Use of proceeds		We intend to use approximately 30% of the net proceeds of this offering for research and development of new products and services, approximately 25% for marketing and customer services, approximately 25% for new content creation, approximately 5% for cash reserves and approximately 15% for working capital and general corporate purposes, including, without limitation, costs to set up two additional regional offices. For more information on the use of proceeds, see “Use of Proceeds”.

Lock-up		All of our directors, officers and principal shareholders (defined as owners of 5% or more of our ordinary shares) have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our ordinary shares or securities convertible into or exercisable or exchangeable for our ordinary shares for a period of six months after the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting” for more information.

Underwriters’ warrants		Upon the closing of this offering, we will issue to Univest Securities, LLC and AC Sunshine Securities LLC, as the underwriters, underwriters’ warrants in an aggregate amount equal to 1% of the aggregate number of ordinary shares sold by us in this offering, inclusive of the underwriters’ over-allotment option. Univest Securities, LLC and AC Sunshine Securities LLC will each receive underwriters’ warrants to purchase a number of ordinary shares equal to 0.5% of the total number of ordinary shares sold in this offering, inclusive of the underwriters’ over-allotment option.

Listing		We have applied to have our ordinary shares listed on the Nasdaq Capital Market. At this time, Nasdaq has not yet approved our application to list our ordinary shares. The closing of this offering is conditioned upon Nasdaq’s final approval of our listing application, and there is no guarantee or assurance that our ordinary shares will be approved for listing on Nasdaq.

Proposed Nasdaq symbol		We have applied to have our ordinary shares listed on the Nasdaq Capital Market under the symbol “RYET”.

Risk factors		Investing in our ordinary shares is highly speculative and involves a high degree of risk. As an investor you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 22.

(1) Unless otherwise indicated, all information contained in this prospectus assumes no exercise of the underwriters’ over-allotment option or the underwriters’ warrants and is based on 30,000,004 ordinary shares outstanding as of March 31, 2022 and 2021 and as of the date of this prospectus.

The following tables present the selected condensed consolidating financial data of Ruanyun and its subsidiaries and the VIE and its subsidiaries for the years ended March 31, 2022 and 2021 and the balance sheet data as of March 31, 2022 and 2021, which were derived from our audited consolidating financial statements for those years. Ruanyun records its investments in its subsidiaries and its involvement in the VIE and its subsidiaries through the Contractual Arrangements under the equity method of accounting. Such investments are presented in the selected condensed consolidating balance sheets of Ruanyun as “Investment in subsidiaries and equity in VIE and VIE’s subsidiaries” and the profit/loss of the subsidiaries are presented as “Income (loss) from subsidiaries, VIE and VIE’s subsidiaries” in the selected condensed consolidating statement of operations and comprehensive income (loss). Ruanyun records the consulting fees earned from the VIE and its subsidiaries as “Consulting fee income from VIE” in the consolidated statement of operations and comprehensive income (loss). In preparation of the proposed public offering, Ruanyun completed a reorganization of the legal structure on April 8, 2021, including entering into a series of contractual agreements with the shareholders of Jiangxi Ruanyun, or the Contractual Arrangements. Pursuant to the Contractual Arrangements, Ruanyun through its wholly owned subsidiary, WFOE, has the exclusive right to provide to Jiangxi Ruanyun technical support and business support services in return for a consulting fee equal to 100% of the consolidated net profits of Jiangxi Ruanyun. For the year ended March 31, 2022, the WFOE did not recognize any consulting fee income from VIE and VIE’s subsidiaries since the commencement of the Contractual Arrangements as the VIE and VIE’s subsidiaries sustained a consolidated net loss in the respective period. Prior to the execution of the Contractual Arrangements, Ruanyun, its subsidiaries and WFOE were all inactive and therefore the balances for these entities were all 0 as of March 31, 2021 and for the year then ended and the financial positions and operating results for the period only reflected in the VIE column.

The tables below are condensed consolidating schedules summarizing separately the financial position, operations and cash flows of Ruanyun, Subsidiaries and the VIE and its subsidiaries, together with eliminating adjustments:

SELECTED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

				For the Year Ended March 31, 2022
				$
	Ruanyun			Subsidiaries			WFOE			VIE and its subsidiaries			Eliminations		Consolidated Total
Revenue		—			—			—			12,803,123			—		12,803,123
Loss from subsidiaries, VIE and VIE’s subsidiaries		(739,493	)		(739,493	)		(739,451)			—			2,218,437		—
Consulting fee income from VIE and its subsidiaries⁽¹⁾		—			—			—			—			—		—
Net loss		(739,493	)		(739,493	)		(739,493	)		(739,451	)		2,218,437		(739,493	)
Comprehensive loss		(605,160	)		(605,160	)		(605,160	)		(605,118	)		1,815,438		(605,160	)

			For the Year Ended March 31, 2021
			$
	Ruanyun		Subsidiaries		WFOE		Pre-VIE and its subsidiaries		Eliminations		Consolidated Total
Revenue		—		—		—		11,499,442		—		11,499,442
Loss from subsidiaries and Pre-VIE		—		—		—		—		—		—
Consulting fee income from VIE and its subsidiaries⁽¹⁾		—		—		—		—		—		—
Net Income		—		—		—		472,422		—		472,422
Comprehensive income		—		—		—		772,430		—		772,430

SELECTED CONDENSED CONSOLIDATING BALANCE SHEETS

			As of March 31, 2022
			$
	Ruanyun		Subsidiaries		WFOE		VIE and its subsidiaries		Eliminations		Consolidated Total
Cash		—		—		431		1,148,297		—		1,148,728
Total current assets		—		—		431		8,843,362		(473)		8,843,320
Investment in subsidiaries and equity in VIE and VIE’s subsidiaries		3,676,125		3,676,125		3,676,167		—		(11,028,417)		—
Consulting fee receivable due from VIE and its subsidiaries⁽¹⁾		—		—		—		—		—		—
Total non-current assets		3,676,125		3,676,125		3,676,167		2,220,524		(11,028,417)		2,220,524
Total Assets		3,676,125		3,676,125		3,676,598		11,063,886		(11,028,890)		11,063,844
Total Liabilities		—		—		473		7,387,719		(473)		7,387,719
Total Equity		3,676,125		3,676,125		3,676,125		3,676,167		(11,028,417)		3,676,125
Total Liabilities and Equity		3,676,125		3,676,125		3,676,598		11,063,886		(11,028,890)		11,063,844

			As of March 31, 2021
			$
	Ruanyun		Subsidiaries		WFOE		Pre-VIE and its subsidiaries		Eliminations		Consolidated Total
Cash		—		—		—		2,179,628		—		2,179,628
Total current assets		—		—		—		6,855,462		—		6,855,462
Investments in subsidiaries		—		—		—		—		—		—
Consulting fee receivable due from VIE and its subsidiaries⁽¹⁾		—		—		—		—		—		—
Total non-current assets		—		—		—		1,978,469		—		1,978,469
Total Assets		—		—		—		8,833,931		—		8,833,931
Total Liabilities		—		—		—		4,552,646		—		4,552,646
Total Equity		—		—		—		4,281,285		—		4,281,285
Total Liabilities and Equity		—		—		—		8,833,931		—		8,833,931

(1) Ruanyun starts to recognize consulting fee income from the VIE and its subsidiaries after the commencement of the contractual agreements with the VIE on April 8, 2021, which equals to 100% of the consolidated net profits of the VIE. As of March 31, 2022, there were no balances for service fees charged to VIE pursuant to each exclusive business cooperation agreement with the VIE because the VIE and its subsidiaries sustained a consolidated net loss since the commencement of the Contractual Arrangements. Ruanyun will record the consulting fee income once the VIE and its subsidiaries have consolidated net profits.

SELECTED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

			For the Year Ended March 31, 2022
	Ruanyun		Subsidiaries		WFOE			VIE and its subsidiaries			Eliminations		Consolidated Total
Net cash used in operating activities		—		—		(42	)		(2,551,711	)		—		(2,551,753	)
Net cash used in investing activities		—		—		—			(588,968	)		—		(588,968	)
Net cash provided by financing activities		—		—		467			2,049,830			—		2,050,297

			For the Year Ended March 31, 2021
	Ruanyun		Subsidiaries		WFOE		Pre-VIE and its subsidiaries			Eliminations		Consolidated Total
Net cash used in operating activities		—		—		—		(1,619,828	)		—		(1,619,828	)
Net cash used in investing activities		—		—		—		(368,326	)		—		(368,326	)
Net cash provided by financing activities		—		—		—		683,288			—		683,288

The following table represents the roll-forward of the investments in subsidiaries and equity in VIE and VIE’s subsidiaries of Ruanyun:

Balance, April 1, 2019	$	—
Loss from subsidiaries, VIE and VIE’s subsidiaries		—
Other comprehensive loss from foreign currency translation adjustment		—
As of March 31, 2020		—
Loss from subsidiaries, VIE and VIE’s subsidiaries		—
Other comprehensive loss from foreign currency translation adjustment		—
As of March 31, 2021		—
April 8, 2021 initial recognition of equity in the VIE through the Contractual Arrangements		4,281,285
Loss from subsidiaries, VIE and VIE’s subsidiaries		(739,493	)
Other comprehensive gain from foreign currency translation adjustment		134,333
As of March 31, 2022	$	3,676,125

RISK FACTORS

An investment in our ordinary shares involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this prospectus, before deciding to invest in our ordinary shares. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our ordinary shares could decline, and you may lose all or part of your investment.

Risks Related to Our Corporate Structure

We depend upon the Contractual Arrangements in conducting our business in China, which may not be effective in providing control over the VIE as equity ownership.

We do not hold any equity interests in Jiangxi Ruanyun, our affiliation with Jiangxi Ruanyun is managed through the Contractual Arrangements. The Contractual Arrangements allow us to have controlling financial interest in Jiangxi Ruanyun (which often hold the licenses necessary to conduct business in the PRC), which may not be effective in providing us with control over Jiangxi Ruanyun as equity control. The Contractual Arrangements are governed by and would be interpreted in accordance with the laws of the PRC. If Jiangxi Ruanyun fails to perform the obligations under the Contractual Arrangements, we may have to rely on legal remedies under the laws of the PRC, including seeking specific performance or injunctive relief, and claiming damages. There is a risk that we may be unable to obtain any of these remedies. China’s’ rapid development poses many uncertainties, including in the legal system, and such uncertainties could limit our ability to enforce the Contractual Arrangements, or could affect the validity of the Contractual Arrangements.

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

Our business is conducted through Jiangxi Ruanyun, which is considered a VIE for accounting purposes, and we, through the WFOE, are considered the primary beneficiary, thus enabling us to consolidate our financial results in our consolidated financial statements. In the event that in the future a company we hold as a VIE no longer meets the definition of a VIE under applicable accounting rules, or we are deemed not to be the primary beneficiary, we would not be able to consolidate line by line that entity’s financial results in our consolidated financial statements for reporting purposes. Also, if in the future an affiliate company becomes a VIE and we become the primary beneficiary, we would be required to consolidate that entity’s financial results in our consolidated financial statements for accounting purposes. If such entity’s financial results were negative, this would have a corresponding negative impact on our operating results for reporting purposes.

Because we rely on the Contractual Arrangements for our revenue, the termination of these agreements would severely and detrimentally affect our continuing business viability under our current corporate structure.

We are a holding company and all of our business operations are conducted through the Contractual Arrangements. Although Jiangxi Ruanyun does not have termination rights pursuant to the Contractual Arrangements, it could terminate, or refuse to perform under, the Contractual Arrangements. Because neither we, nor our subsidiaries, own equity interests of Jiangxi Ruanyun, the termination or non-performance of the Contractual Arrangements would sever our ability to receive payments from Jiangxi Ruanyun under our current holding company structure. While we are currently not aware of any event or reason that may cause the Contractual Arrangements to terminate, we cannot assure you that such an event or reason will not occur in the future. In the event that the Contractual Arrangements are terminated, this would have a severe and detrimental effect on our continuing business viability under our current corporate structure, which, in turn, would affect the value of your investment.

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

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. We could face material and adverse tax consequences if the PRC tax authorities determine that the Contractual Arrangements were not entered into on an arm’s-length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust the income of the VIE in the form of a transfer pricing adjustment. The PRC tax authorities could effectively disregard the VIE structure, resulting in increased tax liabilities. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by the VIE for PRC tax purposes, which could in turn increase its tax liabilities without reducing our tax expenses. In addition, the PRC tax authorities may impose late payment fees and other penalties on the VIE for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if the VIE’s tax liabilities increase or if it is required to pay late payment fees and other penalties.

We conduct our business through Jiangxi Ruanyun by means of Contractual Arrangements. If the PRC courts or administrative authorities determine that these contractual arrangements do not comply with applicable laws and regulations, we could be subject to severe penalties and our business could be adversely affected. In addition, changes in such PRC laws and regulations may materially and adversely affect our business.

There are uncertainties regarding the interpretation and application of PRC laws, rules and regulations, including the laws, rules and regulations governing the validity and enforcement of the Contractual Arrangements between the WFOE Jiangxi Ruanyun and its shareholders. We have been advised by our PRC counsel, Jingtian & Gongcheng, based on their understanding of the current PRC laws, rules and regulations, that (i) the structure for operating our business in China (including our corporate structure and Contractual Arrangements with the WFOE, Jiangxi Ruanyun and its shareholders) will not result in any violation of PRC laws or regulations currently in effect; and (ii) the Contractual Arrangements among the WFOE and Jiangxi Ruanyun and its shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect. However, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations concerning foreign investment in the PRC, and their application to and effect on the legality, binding effect and enforceability of the Contractual Arrangements. In particular, we cannot rule out the possibility that PRC regulatory authorities, courts or arbitral tribunals may in the future adopt a different or contrary interpretation or take a view that is inconsistent with the opinion of our PRC counsel, Jingtian & Gongcheng. Therefore, the Contractual Arrangements may be determined by PRC authorities to be inconsistent with the laws and regulations of the PRC, including those related to foreign investment in certain industries.

If any of the VIE and its subsidiaries or their ownership structure or the Contractual Arrangements are determined to be in violation of any existing or future PRC laws, rules or regulations, or any of the VIE and its subsidiaries fail to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including:

	●	revoking the business and operating licenses;

	●	discontinuing or restricting the operations;

	●	imposing conditions or requirements with which we or the VIE and its subsidiaries may not be able to comply;

	●	requiring us and the VIE and its subsidiaries to restructure the relevant ownership structure or operations, including termination of the Contractual Arrangements with the VIE and deregistering the equity pledge of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or exert financial control over the VIE;

	●	restricting or prohibiting our use of the proceeds from this offering to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business; or

	●	imposing fines or confiscating the income from our PRC subsidiary or the VIE and its subsidiaries.

The imposition of any of these penalties would severely disrupt our ability to conduct business and have a material adverse effect on our financial condition, results of operations and prospects.

If the PRC government determines that the Contractual Arrangements constituting part of the VIE structure do not comply with PRC laws and regulations, or if these laws and regulations change or are interpreted differently in the future, our shares may decline in value or become worthless if we are unable to assert our contractual control rights over the assets of the VIE that conduct substantially all of our operations.

The shareholders of the VIE may have actual or potential conflicts of interest with us and as a result may refuse to perform, or may breach, the Contractual Arrangements, which may materially and adversely affect our business and financial condition.

The shareholders of the VIE may have actual or potential conflicts of interest with us. These shareholders may refuse to perform or sign or may breach, or cause the VIE to breach, or refuse to renew, the existing Contractual Arrangements, which would have a material and adverse effect on our ability to effectively control the VIE and receive economic benefits and absorb losses from it. As a result, control over, and funds due from, the VIE may be jeopardized if the shareholders of the VIE breach, or refuse to renew, the Contractual Arrangements. For example, the shareholders may be able to cause our agreements with the VIE to be performed in a manner adverse to us by, among other things, failing to remit payments due under the Contractual Arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our Company. If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.

Any failure by the VIE or its shareholders to perform their obligations under the Contractual Arrangements, or any unauthorized use of indicia of corporate power or authority, would have a material adverse effect on our business.

If the VIE or its shareholders fail to perform their respective obligations under the Contractual Arrangements or if any physical instruments, such as chops and seals, or other indicia of corporate power or authority, are used without our authorization, we may have to incur substantial costs and expend additional resources to seek legal remedies under PRC laws, including specific performance or injunctive relief, and/or claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of the VIE were to refuse to transfer their equity interest in the VIE to us or our designee if we exercise the purchase option pursuant to the Contractual Arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal action to compel them to perform their contractual obligations.

The Contractual Arrangements are governed by PRC laws. Accordingly, any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal system could limit our ability to enforce the Contractual Arrangements or could affect the validity of the Contractual Arrangements, and as a result we may not be able to exert financial control over the VIE, and our ability to conduct our business may therefore be materially adversely affected.

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

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020. Along with the Foreign Investment Law, the Implementing Rules of Foreign Investment Law promulgated by the State Council and the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of the Foreign Investment Law promulgated by the Supreme People’s Court became effective on January 1, 2020. Since the Foreign Investment Law and its current implementation and interpretation rules are relatively new, uncertainties still exist in relation to their further application and improvement. The Foreign Investment Law does not explicitly classify whether variable interest entities that are controlled through contractual arrangements would be deemed as foreign-invested enterprises if they are ultimately “controlled” by foreign investors. However, it has a catch-all provision under definition of “foreign investment” that includes investments made by foreign investors in China through other means as provided by laws, administrative regulations or the State Council of the PRC, or the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions of the State Council to provide for contractual arrangements as a form of foreign investment. Therefore, there can be no assurance that our control over the VIE through the Contractual Arrangements will not be deemed as foreign investment in the future.

The Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operate in industries specified as either “restricted” or “prohibited” from foreign investment in a “negative list”. The Foreign Investment Law provides that foreign-invested entities operating in “restricted” or “prohibited” industries will require market entry clearance and other approvals from relevant PRC government authorities. If our control over the VIE through the Contractual Arrangements is deemed as foreign investment in the future, and any business of the VIE is “restricted” or “prohibited” from foreign investment under the “negative list” effective at the time, we may be deemed to be in violation of the Foreign Investment Law, the Contractual Arrangements that allow us to have control over the VIE may be deemed as invalid and illegal, and we may be required to unwind such Contractual Arrangements and/or restructure our business operations, any of which may have a material adverse effect on our business operations.

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

If any of our affiliated entities becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy assets held by such entity, which could materially and adversely affect our business, financial condition and results of operations.

We currently conduct our operations in China through our Contractual Arrangements. As part of these arrangements, substantially all of our assets that are significant to the operation of our business are held by our affiliated entities. If any of these entities becomes bankrupt and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. In addition, if any of our affiliated entities undergoes a voluntary or involuntary liquidation proceeding, its equity owner or unrelated third-party creditors may claim rights relating to some or all of these assets, which would hinder our ability to operate our business and could materially and adversely affect our business, our ability to generate revenue and the market price of our ordinary shares.

Risks Related to Doing Business in China

Substantially all of our operations are located in China. Our ability to operate in China may be impaired by changes in Chinese laws and regulations, including those relating to taxation, environmental regulation, restrictions on foreign investment, and other matters.

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 ability to operate in China may be impaired by changes in laws and regulations in the PRC. The PRC government recently promulgated a series of new statements and actions to regulate business operations in China.

Further, it is uncertain when and whether we will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even if such permission is obtained, whether it will be later denied or rescinded. No entity in our organization is currently required to obtain permission from any Chinese authorities and have not received any notice of denial of permission to list on any U.S. exchange. However, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry, particularly in the event permission to list on U.S. exchanges becomes required, or if such permission may be withheld or rescinded once granted.

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

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 China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally and therefore by the significant discretion of Chinese governmental authorities. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies. The increased global focus on environmental and social issues and China’s potential adoption of more stringent standards in these areas may adversely impact the operations of China-based issuers, including us.

While the Chinese economy has experienced significant growth over past decades, growth has been uneven, 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 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 China, which may adversely affect our business and operating results.

If we become subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed China-based companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, this offering and our reputation and could result in a loss of your investment in our ordinary shares, especially if such matter cannot be addressed and resolved favorably.

Recently, U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in some cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S.-listed China-based companies has decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on us, our business and this offering. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our Company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless, our business operations will be severely hindered and your investment in our ordinary shares could be rendered worthless.

U.S. regulatory bodies may be limited in their ability to conduct investigations or inspections of our operations in China.

Any disclosure of documents or information located in China by foreign agencies may be subject to jurisdiction constraints and must comply with China’s state secrecy laws, which broadly define the scope of “state secrets” to include matters involving economic interests and technologies. There is no guarantee that requests from U.S. federal or state regulators or agencies to investigate or inspect our operations will be honored by us, by entities who provide services to us or with whom we associate, without violating PRC legal requirements, particularly those entities that are located within China. Furthermore, under the current PRC laws, an on-site inspection of our facilities by any of these regulators may be limited or prohibited.

The Company’s auditor, Friedman LLP, is PCAOB registered and based in New York, New York. Under the HFCAA, the PCAOB is permitted to inspect the Company’s independent public accounting firm. However, if the PCAOB later determined that it cannot inspect or fully investigate our auditor, trading in our securities may be prohibited under the HFCAA, and, as a result, Nasdaq may determine to delist our securities.

The increased global focus on environmental and social issues and China’s potential adoption of more stringent standards in these areas may adversely impact the operations of China-based issuers, including us.

Shareholder claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law, which became effective in March 2020, or Article 177, the securities regulatory authority of the State Council may collaborate with securities regulatory authorities of other countries or regions in order to monitor and oversee cross border securities activities. Article 177 further provides that overseas securities regulatory authorities are not allowed to carry out investigation and evidence collection directly within the territory of the PRC, and that any Chinese entities and individuals are not allowed to provide documents or materials related to securities business activities to overseas agencies without prior consent of the securities regulatory authority of the State Council and the competent departments of the State Council.

Our principal business operations are conducted in the PRC. In the event that the U.S. regulators carry out investigations on us and there is a need to conduct investigation or collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the PRC. However, there is no assurance that the U.S. regulators could succeed in establishing such cross-border cooperation in a specific case or could establish the cooperation in a timely manner. If U.S. regulators are unable to conduct such investigations, such U.S. regulators may determine to suspend and ultimately delist our ordinary shares from the Nasdaq Capital Market or choose to suspend or de-register our SEC registration.

Uncertainties with respect to China’s legal system could adversely affect us.

The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. Since the PRC legal system continues to rapidly evolve, and PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, the legal system in China, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in China can change quickly with little advance notice, and the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.

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 three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, PRC law still restricts certain foreign investments in China, and such laws are continually evolving, as more fully described under “Regulation—Regulations Relating to Foreign Investment”. China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual arrangements and rights, including under the Contractual Arrangements, or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.

Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Further, such evolving laws and regulations and the inconsistent enforcement thereof could also lead to failure to obtain or maintain licenses and permits to do business in China, which would adversely affect us.

Changes in international trade policies, trade disputes, barriers to trade, or the emergence of a trade war may dampen growth in China and may have a material adverse effect on our business.

Political events, international trade disputes, and other business interruptions could harm or disrupt international commerce and the global economy, and could have a material adverse effect on us and our customers, service providers, and other partners. International trade disputes could result in tariffs and other protectionist measures that could adversely affect our business. Tariffs could increase the cost of the goods and products which could affect customers’ spending levels. In addition, political uncertainty surrounding international trade disputes and the potential of the escalation to trade war and global recession could have a negative effect on customer confidence, which could adversely affect our business. We may have also access to fewer business opportunities, and our operations may be negatively impacted as a result. In addition, the current and future actions or escalations by either the United States or China that affect trade relations may cause global economic turmoil and potentially have a negative impact on our markets, our business, or our results of operations, and we cannot provide any assurances as to whether such actions will occur or the form that they may take.

We must remit the offering proceeds to China before they may be used to benefit our business in China, and we cannot assure that we can finish all necessary governmental registration processes in a timely manner.

The proceeds of this offering must be sent back to China, and the process for sending such proceeds back to China may take several months after the closing of this offering. In utilizing the proceeds of this offering in the manner described in “Use of Proceeds,” as an offshore holding company of our PRC subsidiary, we may make loans to our PRC subsidiary, or we may make additional capital contributions to our PRC subsidiary. Any shareholder loan or additional capital contribution are subject to PRC regulations. For example, loans by us or making additional capital contribution to our subsidiaries in China, which are FIEs, to finance their activities cannot exceed statutory limits, while the shareholder loan must be also registered with the SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by MOFCOM or its local counterpart and the amount of registered capital of such foreign-invested company, or 2.5 times its net worth.

To remit the proceeds of this offering, we must take the steps legally required under the PRC laws. In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or with respect to future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from this offering and to capitalize or otherwise fund the VIE may be negatively affected, which could materially and adversely affect our liquidity, our ability to fund and expand our business and our ordinary shares.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments, including those obtained in the U.S., or bringing actions in China against us or our management named in the prospectus based on foreign laws.

We are a holding company incorporated under the laws of the Cayman Islands. We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, all our senior employees reside within China for a significant portion of the time and most are PRC residents. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside mainland China, including our management. In addition, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any of these non-PRC jurisdictions, including the U.S., in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. See “Enforcement of Liabilities”.

We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary 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 subsidiary for our cash requirements, including for services of any debt we may incur. Our PRC subsidiary’s ability to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our PRC subsidiary to pay dividends to its shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Our PRC subsidiary as a FIE is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at its discretion. These reserves are not distributable as cash dividends. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiary to distribute dividends or other payments to its shareholders could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.

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

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

Any funds we transfer to our PRC subsidiary, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on FIEs in China, capital contributions to our PRC subsidiary are subject to the approval of the Ministry of Commerce of the PRC, or the MOFCOM, or its local branches and registration with other governmental authorities in China. In addition, (a) any foreign loan procured by our PRC subsidiary is required to be registered with SAFE or its local branches, and (b) our PRC subsidiary may not procure loans which exceed the statutory amount as approved by the MOFCOM or its local branches. Any medium-or long- term loan to be provided by us to our PRC subsidiary must be approved by the National Development and Reform Commission, or NDRC and the SAFE or its local branches. We may not obtain these government approvals or complete such registrations on a timely basis, with respect to future capital contributions or foreign loans by us to our PRC subsidiary. If we fail to receive such approvals or complete such registration, our ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

In 2008, SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142. SAFE Circular 142 regulates the conversion by FIEs of foreign currency into Renminbi by restricting the usage of converted Renminbi. SAFE Circular 142 provides that any Renminbi capital converted from registered capitals in foreign currency of FIEs may only be used for purposes within the business scopes approved by PRC governmental authority and such Renminbi capital may not be used for equity investments within China unless otherwise permitted by PRC law. In addition, the SAFE strengthened its oversight of the flow and use of Renminbi capital converted from registered capital in foreign currency of FIEs. The use of such Renminbi capital may not be changed without SAFE approval, and such Renminbi capital may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been utilized. On July 4, 2014, SAFE issued the Circular of the SAFE on Relevant Issues Concerning the Pilot Reform in Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises, or SAFE Circular 36, which launched the pilot reform of administration regarding conversion of foreign currency registered capitals of FIEs in 16 pilot areas. According to SAFE Circular 36, some of the restrictions under SAFE Circular 142 will not apply to the settlement of the foreign exchange capitals of an ordinary FIE in the pilot areas, and such FIE is permitted to use Renminbi converted from its foreign-currency registered capital to make equity investments in the PRC within and in accordance with the authorized business scope of such FIEs, subject to certain registration and settlement procedure as set forth in SAFE Circular 36. On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19. SAFE Circular 19 took effect as of June 1, 2015 and superseded SAFE Circular 36 and 142 on the same date. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of FIEs and allows FIEs to settle their foreign exchange capital at their discretion, but continues to prohibit FIEs from using the Renminbi fund converted from their foreign exchange capitals for expenditure beyond their business scopes, providing entrusted loans or repaying loans between non-financial enterprises. Violations of these Circulars could result in severe monetary or other penalties. SAFE Circular 19 may significantly limit our ability to use Renminbi converted from the net proceeds of this offering to fund the establishment of new entities in China by our subsidiaries, to invest in or acquire any other PRC companies through our PRC subsidiary, or to establish variable interest entities in the PRC, which may adversely affect our business, financial condition and results of operations. In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary registration or obtain the necessary approval on a timely basis, or at all. If we fail to complete the necessary registration or obtain the necessary approval, our ability to make loans or equity contributions to our PRC subsidiary may be negatively affected, which could materially and adversely affect our PRC subsidiary’s liquidity and its ability to fund its working capital and expansion projects and meet its obligations and commitments.

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

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. On November 30, 2015, the Executive Board of the International Monetary Fund (IMF) completed the regular five-year review of the basket of currencies that make up the Special Drawing Right, or the SDR, and decided that with effect from October 1, 2016, Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a fifth currency, along with the U.S. dollar, the Euro, the Japanese yen and the British pound. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.

Significant revaluation of the Renminbi may have a material and adverse effect on your investment. For example, to the extent that we need to convert U.S. dollars we receive from this offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In addition, appreciation or depreciation in the value of the Renminbi relative to U.S. dollars would affect our financial results reported in U.S. dollar terms regardless of any underlying change in our business or results of operations.

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

Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency into or out of China, which essentially may restrict the ability to transfer funds into or out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiary in China may be used to pay dividends to our Company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiary to pay off its debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions.

Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council in 2008, are triggered. Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the NPC which became effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the MOFCOM before they can be completed. In addition, PRC national security review rules which became effective in September 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval or clearance from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to increase its registered capital or distribute profits to us, or may otherwise adversely affect us.

In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.

Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore SPVs will be required to register such investments with the SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of a SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiary in China. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Circular 13, which became effective on June 1, 2015. Under SAFE Circular 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of the SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of the SAFE.

We cannot assure you that all of our shareholders that may be subject to SAFE regulations have completed all necessary registrations with the local SAFE branch or qualified banks as required by SAFE Circular 37 and SAFE Circular 13, and we cannot assure you that these individuals may continue to make required filings or updates on a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of all PRC residents holding direct or indirect interest in our Company. Any failure or inability by such individuals to comply with the SAFE regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiary’s ability to distribute dividends to, or obtain foreign exchange-denominated loans from, our Company or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

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

On February 3, 2015, the State Administration of Taxation of the PRC, or the SAT, issued the Announcement of the State Administration of Taxation on Several Issues Relating to Enterprise Income Tax on Indirect Transfers of Assets by Non-resident Enterprises, or SAT Bulletin 7, which was partially abolished on December 1, 2017 and December 29, 2017. SAT Bulletin 7 extends its tax jurisdiction to transactions involving transfer of taxable assets through the offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets.

On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which was partially revised. SAT Bulletin 37 came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of withholding of non-resident enterprise income tax.

Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our Company may be subject to filing obligations or taxed if our Company is transferor in such transactions, and may be subject to withholding obligations if our Company is transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our Company by investors who are non-PRC resident enterprises, our PRC subsidiary may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our Company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

Under the PRC Enterprise Income Tax Law, or EIT Law, if we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

The PRC Enterprise Income Tax Law and its implementation rules provide that an enterprise established outside of the PRC with “de facto management body” within China is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the SAT, issued the Circular of the State Administration of Taxation on Issues Relating to Identification of PRC-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance With the De Facto Standards of Organizational Management, or SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in China; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in China; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in China; and (iv) at least 50% of voting board members or senior executives habitually reside in China.

We believe that we are not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we could be subject to PRC tax at a rate of 25% on our worldwide income, which could materially reduce our net income, and we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises. In addition, non-resident enterprise shareholders may be subject to PRC tax on gains realized on the sale or other disposition of ordinary shares, if such income is treated as sourced from within China. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual shareholders and any gain realized on the transfer of ordinary shares by such shareholders may be subject to PRC tax at a rate of 10% in the case of non-PRC enterprises or a rate of 20% in the case of non-PRC individuals unless a reduced rate is available under an applicable tax treaty. It is unclear whether non-PRC shareholders of our Company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ordinary shares.

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

Under the PRC EIT Law and its implementation rules, the profits of a foreign invested enterprise generated through operations, which are distributed to its immediate holding company outside the PRC, will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement between Hong Kong and the PRC, such rate may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. Our PRC subsidiary is wholly-owned by our Hong Kong subsidiary. Moreover, under the Notice of the State Administration of Taxation on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the tax payer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include: (1) the taxpayer must be the beneficial owner of the relevant dividends, and (2) the corporate shareholder to receive dividends from the PRC subsidiary must have continuously met the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, the State Administration of Taxation promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties on October 27, 2009, which limits the “beneficial owner” to individuals, projects or other organizations normally engaged in substantive operations, and sets forth certain detailed factors in determining the “beneficial owner” status. In current practice, a Hong Kong enterprise must obtain a tax resident certificate from the relevant Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority. As of the date of this prospectus, we have not commenced the application process for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance that we will be granted such a Hong Kong tax resident certificate.

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

Additional factors outside of our control related to doing business in China could negatively affect our business.

Additional factors that could negatively affect our business include a potential significant revaluation of the Renminbi, which may result in an increase in the cost of producing products in China, labor shortages and increases in labor costs in China as well as difficulties in moving products manufactured in China out of the country, whether due to port congestion, labor disputes, slowdowns, product regulations and/or inspections or other factors. Prolonged disputes or slowdowns can negatively impact both the time and cost of transporting goods. Natural disasters or health pandemics impacting China can also have a significant negative impact on our business. Further, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of “normal trade relations” status with, China, could significantly increase our cost of products exported outside of China and harm our business.

The recent joint statement by the SEC and the Public Company Accounting Oversight Board, or the PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets. On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors. On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law.

On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the Holding Foreign Companies Accountable Act.

On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, or the AHFCAA. If signed into law, the AHFCAA would decrease the number of non-inspection years under the Holding Foreign Companies Accountable Act from three years to two, thus reducing the time period before an issuer’s securities may be prohibited from trading or may be delisted.

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

On December 2, 2021, the SEC adopted final amendments to its rules implementing the Holding Foreign Companies Accountable Act. These amendments include the following:

	●	The SEC now has the power to identify issuers whose auditors the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in a foreign jurisdiction, or a PCAOB-Identified Firm. The SEC will provisionally identify any such issuer as a “Commission-Identified Issuer” on the SEC’s website. If such issuer does not dispute the identification within 15 business days, the SEC’s determination will be conclusive.

	●	The SEC will impose an initial trading prohibition on Commission-Identified Issuers trading on national securities exchanges and over-the-counter markets. If the SEC ends the initial trading prohibition and, thereafter, the issuer is again determined to be a Commission-Identified Issuer, the SEC will impose a subsequent trading prohibition on the issuer for a minimum of five years. To end an initial or subsequent trading prohibition, a Commission-Identified Issuer must certify that it has retained or will retain a non-PCAOB-Identified Firm.

	●	A Commission-Identified Issuer that is not owned or controlled by a governmental entity in the foreign jurisdiction of its PCAOB-Identified Firm must submit to the SEC documentation establishing that the issuer is not so owned or controlled.

	●	A Commission-Identified Issuer that is also a foreign issuer will be required to include additional disclosures in its annual report for each year in which it is Commission-Identified Issuer, including naming its PCAOB-Identified Firm, percentage ownership by foreign governmental entities, the name of each official of the Chinese Communist Party who is a member of the issuer’s board of directors or the operating entity with respect to the entity, and whether the issuer’s articles of incorporation contain any charter of the Chinese Communist Party.

	●	In addition to providing the required disclosures for the Commission-Identified Issuer, the issuer must look through any VIE or similar structure that results in additional foreign entities being consolidated in its financial statements, and provide the required disclosures about any such consolidated operating company in the relevant jurisdiction.

On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by PRC and Hong Kong authorities in those jurisdictions, which determinations were vacated on December 15, 2022.

If the PCAOB in the future again determines that it is unable to inspect and investigate completely auditors in mainland China and Hong Kong, then the lack of access to the PCAOB inspection in China would prevent the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, investors could be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China would make it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures, which could cause existing and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements. Moreover, if we are identified as a Commission-Identified Issuer by the SEC pursuant to its rules implementing the Holding Foreign Companies Accountable Act, we may be subject to restrictions under such rules including prohibitions on the trading of our shares, either temporarily or indefinitely.

Our auditor, Friedman LLP, the independent registered public accounting firm that issues the audit report included elsewhere in this prospectus, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. Our auditor is headquartered in Manhattan, New York, and has been inspected by the PCAOB on a regular basis. The PCAOB currently has access to inspect the working papers of our auditor and our auditor was not subject to the determinations announced by the PCAOB on December 16, 2021, which determinations were vacated on December 15, 2022. However, the recent developments would add uncertainties to our offering and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.

Risks Related to Our Business and Industry

We have a limited operating history. There is no assurance that our future operations will be profitable. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations.

Given our limited operating history, there can be no assurance that we can build our business such that we can continuously earn a significant profit or any profit at all. The future of our business will depend upon our ability to obtain and retain customers and when needed, obtain sufficient financing and support from creditors, while we strive to achieve and maintain profitable operations. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the operations that we undertake. There is no history upon which to base any assumption that our business will prove to be successful, and there is significant risk that we will not be able to generate the sales volumes and revenues necessary to achieve profitable operations. To the extent that we cannot achieve our plans and generate revenues which exceed expenses on a consistent basis, our business, results of operations, financial condition and prospects will be materially adversely affected.

Our management team has limited public company experience. We have never operated as a public company in the United States and several of our senior management positions are currently held by employees who have been with us for a short period of time. Our entire management team, as well as other company personnel, will need to devote substantial time to compliance, and may not effectively or efficiently manage our transition into a public company. If we are unable to effectively comply with the regulations applicable to public companies or if we are unable to produce accurate and timely financial statements, which may result in material misstatements in our consolidated financial statements or possible restatement of financial results, our stock price may be materially adversely affected, and we may be unable to maintain compliance with the listing requirements of Nasdaq. Any such failures could also result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities, harm to our reputation and diversion of financial and management resources from the operation of our business, any of which could materially adversely affect our business, financial condition, results of operations and growth prospects. Additionally, the failure of a key employee to perform in his or her current position could result in our inability to continue to grow our business or to implement our business strategy.

The growth and success of our business depends on our ability to develop new services and products and enhance existing services and products in order to keep pace with rapid changes in technology.

The market for our services and products is characterized by rapid technological change, evolving industry standards, changing customer preferences and new product and service introductions. Our future growth and success depends significantly on our ability to anticipate developments in technologies, and develop and offer new services and products to meet our customers’ evolving needs. We may not be successful in anticipating or responding to these developments in a timely manner, or if we do respond, the services or products we develop may not be successful in the marketplace. The development of some of the services and products may involve significant upfront investments and the failure of these services and products may result in our being unable to recover these investments, in part or in full. Further, services or products that are developed by our competitors may render our services or products uncompetitive or obsolete. Should we fail to adapt to the rapidly changing technologies or if we fail to develop suitable services and products to meet the evolving and increasingly sophisticated requirements of our customers in a timely manner, our business and results of operations could be materially and adversely affected.

The success and future growth of our business will be affected by the user acceptance and market trend of integration of technology and learning.

We operate in the intelligent learning industry, and our business model features integrating technology closely with learning to provide a more efficient and engaging learning experience. However, intelligent learning remains a relatively new concept in China, and there are limited proven methods to project user demand or preference or available industry standards on which we can rely. For example, there is no guarantee that our technology will continue to be well received by the broader user and student community. We cannot assure you that our products and services will continue to be attractive to our users in the future. If our AI-powered learning products and services become less appealing to our users, our business, financial condition and results of operations could be materially and adversely affected.

If we fail to develop and apply our technologies to support and expand our product and service offerings or if we fail to timely respond to the rapid changes in industry trends and users’ preference, we may lose market share and our business may be materially and adversely affected.

We believe our technologies are critical to our business. Over the years, we have developed a number of core technologies to support our comprehensive suite of products and services. We also rely on technologies to build and maintain our IT infrastructure. The intelligent learning industry is subject to rapid technological changes and innovations and is affected by unpredictable product lifecycles and user preferences. Our technologies may become obsolete or insufficient, and we may have difficulties in following and adapting to technological changes in the intelligent learning industry in a timely and cost-effective manner. New technologies and solutions developed and introduced by our competitors could render our offerings less attractive or obsolete thus materially affecting our business and prospects. In addition, our substantial investments in technology may not produce expected results. If we fail to continue to develop, innovate and utilize our technologies or if our competitors develop or apply more advanced technologies, our business, financial condition and results of operations could be materially and adversely affected.

We may not be effective in broadening our monetization channels.

We have developed a diversified monetization model and plan to explore additional opportunities to monetize our user base, content and technologies by, for example, offering additional technology solutions to our business customers and providing additional subscription options to users to increase their spending with us. If these efforts fail to achieve our anticipated results, we may not be able to increase or maintain our revenue growth. Specifically, in order to increase the number of our users and students and their levels of spending, we will need to address a number of challenges, including providing consistently high-quality and effective learning content, products and services; continuing to innovate and stay ahead of our competitors; and improving the effectiveness and efficiency of our sales and marketing efforts. If we fail to address any of these challenges, especially if we fail to offer high-quality learning content, products and services to meet user preferences and demands, we may not be successful in increasing the number of our users and increasing their spending, which could have a material adverse impact on our business, financial condition and results of operations.

We may not be able to improve or expand our product and service offerings in a timely and cost-effective manner.

We regularly and constantly update our existing product and service offerings and develop new products, services and content to meet our users’ demands and evolving market trends. New products, services and content may not be accepted by our users as we expect, and we may not be able to introduce them as quickly as our competitors introduce competing offerings. The development of new products, services and content could be costly and time-consuming and require us to make significant investments in research and product development, develop new technologies, and increase sales and marketing efforts, all of which may not be successful. If we are unsuccessful in improving or expanding our product and service offerings due to financial constraints, failure to attract qualified personnel or other reasons, our business, financial condition and results of operations could suffer.

We may be forced to reduce the prices of our services and products due to increased competition and reduced bargaining power with our customers, which could lead to reduced revenues and profitability.

Our industry in China is developing rapidly and related technology trends are constantly evolving. This results in the frequent introduction of new services and products and price competition from our competitors. We may be unable to offset the effect of declining average sales prices through increased sales volumes and or reductions in our costs. Furthermore, we may be forced to reduce the prices of our services and products in response to offerings made by our competitors. Finally, we may not have the same level of bargaining power we have enjoyed in the past when it comes to negotiating for the prices of our services and products, all of which could lead to reduced revenues and profitability.

We generate a significant portion of our revenues from a limited number of major customers and loss of business from these customers could reduce our revenues and significantly harm our business.

For the year ended March 31, 2022, three major customers accounted for 42%, 22% and 12% of our total revenues. For the year ended March 31, 2021, Jiangxi Xinhua Publishing Group accounted for 32% of our total revenues. As of March 31, 2022, three major customers accounted for 73% of accounts receivable due from third parties, with each customer representing 30%, 23% and 21% of the accounts receivable balance, respectively. As of March 31, 2021, two major customers accounted for 68% of accounts receivable due from third parties, with each customer representing 45% and 23% of the accounts receivable balance, respectively. We believe that in the foreseeable future we will continue to derive a significant portion of our revenues from a number of major customers.

Our ability to maintain close relationships with major customers is essential to the growth and profitability of our business. However, the volume of work performed for a specific customer is likely to vary from year to year, especially since we are generally not our customers’ exclusive technology services provider and we do not have long-term commitments from any of our customers to purchase our services. A major customer in one year may not provide the same level of revenues for us in any subsequent year. The services and products we provide to our customers, and the revenues and income from those services and products, may decline or vary as the type and quantity of services and products we provide changes over time. In addition, our reliance on any individual customer for a significant portion of our revenues may give that customer a certain degree of pricing leverage against us when negotiating contracts and terms of service. In addition, a number of factors other than our performance could cause the loss of or reduction in business or revenues from a customer, and these factors are not predictable. These factors may include organization restructuring, pricing pressure, changes to its technology strategy, switching to another services provider or returning work in-house. The loss of any of our major customers could adversely affect our financial condition and results of operations.

We primarily rely on a limited number of vendors, and the loss of any such vendor could harm our business.

For the year ended March 31, 2022, one vendor accounted for 11% of our total purchases. For the year ended March 31, 2021, no vendor accounted for more than 10% of our total purchases. As of March 31, 2022, three vendors accounted for 15%, 15% and 11% of our accounts payable, respectively. As of March 31, 2021, three vendors accounted for 49%, 19% and 15% of our accounts payable, respectively. Any difficulty in replacing such vendors could negatively affect our performance. If we are prevented or delayed in obtaining products, or components for products, due to political, civil, labor or other factors beyond our control that affect our vendors, including natural disasters or pandemics, our operations may be substantially disrupted, potentially for a significant period of time. Such delays could significantly reduce our revenues and profitability and harm our business while alternative sources of supply are secured.

Users may decide not to use our products and services for a number of reasons, including a perceived lack of improvement in their academic performance or general dissatisfaction with our offerings, which may adversely affect our business, financial condition and results of operation.

The success of our business depends on our ability to deliver a high-quality learning experiences and help users and students achieve their learning objectives. We may not always be able to meet our users’ and students’ expectations i due to a variety of reasons, many of which are outside of our control. We may face increased user dissatisfaction due to our users’ perceptions of our failure to help them achieve their anticipated goals, their overall dissatisfaction with the quality of our offerings. These factors may contribute to reduced user engagement and increased challenges in attracting prospective users and students, all of which may materially and adversely affect our business, financial condition and results of operations.

We cannot assure you that we will not be subject to liability claims or legal or regulatory liability for any inappropriate or illegal content, which could subject us to liabilities and cause damages to our reputation.

Although we implement various monitoring procedures to identify and remove inappropriate or illegal content, we cannot assure you that there will be no inappropriate or illegal content included in our content offerings including, for example, our quiz banks and content generated and uploaded to our online platforms by our users and students. We may face civil, administrative or criminal liability or legal or regulatory sanctions, such as requiring us to restrict or discontinue our content, products or services, if an individual or corporate, governmental or other entity believes that any of the content offerings violates any laws, regulations or governmental policies or infringes upon its legal rights. Even if such a claim were not successful, defending such a claim may cause us to incur substantial costs. Moreover, any accusation of inappropriate or illegal content in our content offerings could lead to significant negative publicity, which could harm our reputation, business, financial condition and results of operations.

We face competition which could lead to pricing pressure and loss of market share and materially and adversely affect our business, financial condition and results of operations.

We operate in the competitive intelligent learning industry and are faced with competition in our business, including competition for users, technology and talent. Competition may result in pricing pressures, reduced profit margins or lost market share, or a failure to grow our market share, any of which could substantially harm its business and results of operations. We compete for customers primarily on the basis of our brand name, price and the range of products and services that we offer. Across our business, we face competitors who are constantly seeking ideas which will appeal to customers and introducing new products and services that compete with our products and services. Many of our competitors may have competitive advantages, including longer operating histories, larger and broader customer bases, less-costly production, more established relationships with a broader set of suppliers and customers, greater brand recognition and greater financial, research and development, marketing, distribution and other resources than we do. We cannot assure that we will be able to successfully compete against new or existing competitors. If we fail to maintain our reputation and competitiveness, customers demand for our products could decline.

In addition to existing competitors, new participants with a popular product or service idea could gain access to customers and become a significant source of competition in a short period of time. These existing and new competitors may be able to respond more rapidly than us to changes in customer preferences. Our competitors’ products may achieve greater market acceptance than our products and potentially reduce demand for our products, lower our revenues and lower our profitability. We face competition from state-owned enterprises.

If we fail to increase our brand recognition, we may face difficulty in obtaining new customers.

Although we believe our brand is recognized in the PRC, we still believe that maintaining and enhancing our brand recognition (especially with respect to recognition from regional educational authorities) in a cost-effective manner outside of that market is critical to achieving widespread acceptance of our current and future products and services and is an important element in our effort to increase our customer base. Successful promotion of our brand will depend largely on our ability to maintain a sizeable and active customer base, our marketing efforts and ability to provide reliable and useful products and services at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we will incur in building our brand. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, in which case our business, operating results and financial condition, would be materially adversely affected.

Our revenues and results of operations are affected by seasonal trends.

Our business is affected by seasonal trends. The Company’s government procurement businesses (such as SmartExam® platform, SmartHomework® platform) are affected by seasonality, mainly in that the government usually purchases in the third and fourth quarters. Other factors that may cause our quarterly operating results to fluctuate include, among others, changes in general economic conditions in China and the impact of unforeseen events. We believe that our revenues will continue to be affected in the future by seasonal trends. As a result, you may not be able to rely on period to period comparisons of our operating results as an indication of our future performance, and we believe it is more meaningful to evaluate our business on an annual basis.

Any failure to offer high-quality customer support may adversely affect our relationships with our customers.

Our ability to retain existing customers and attract new customers depends on our ability to maintain a consistently high level of customer service and technical support. Our customers depend on our service support team to assist them in utilizing our services effectively and to help them to resolve issues quickly and to provide ongoing support. If we are unable to hire and train sufficient support resources or are otherwise unsuccessful in assisting our customers effectively, it could adversely affect our ability to retain existing customers and could prevent prospective customers from adopting to our services. We may be unable to respond quickly enough to accommodate short-term increases in demand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support to compete with changes in the support services provided by our competitors. Increased demand for customer support, without corresponding revenue, could increase our costs and adversely affect our business, results of operations and financial condition. Our sales are highly dependent on our business reputation and on positive recommendations from customers. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality customer support, could adversely affect our reputation, business, results of operations and financial condition.

Any significant disruption in our technology infrastructure or our failure to maintain the satisfactory performance, security and integrity of our technology infrastructure would reduce visitor traffic and may materially and adversely affect our business, reputation, financial condition and results of operations.

The proper functioning of our technology infrastructure is essential to our business. We heavily rely on our technology infrastructure to operate our business. We may encounter problems when upgrading our technology infrastructure including our online platform, systems and software. The development, upgrades and implementation of our technology infrastructure are complex processes. Issues not identified during pre-launch testing of new services may only become evident when such services are made available to our entire customer base. Therefore, our technology infrastructure may not function properly if we fail to detect or solve technical errors in a timely manner. In addition, our systems are potentially vulnerable to damage or interruption as a result of natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts and similar events. These and other events may lead to the unavailability of the interruption of online course delivery, the availability of our tools and services, or other events which would affect our operations. If we experience frequent or persistent service disruptions, our reputation may be damaged and our students or users may switch to our competitors, which may have a material adverse effect on our business, financial condition and results of operations.

Incorrect or improper implementation or use of our services and products could result in customer dissatisfaction and negatively affect our business, results of operations, financial condition, and growth prospects.

We must often assist our customers in achieving successful implementations of our services and products, which we do through our technical support services. If our customers are unable to implement our services and products successfully, or unable to do so in a timely manner, customer perceptions of our services and products may be harmed, our reputation and brand may suffer, and customers may choose to cease usage of our services and products or not to expand their use of our services and products. Our customers may need training in the proper use of and the variety of benefits that can be derived from our services and products to maximize their benefits. If our services and products are not effectively implemented or used correctly or as intended, or if we fail to adequately train on how to efficiently and effectively use our services and products, our customers may not be able to achieve satisfactory outcomes. This could result in negative publicity and legal claims against us, which may cause us to generate fewer sales to new customers and reductions in renewals or expansions of the use of our services with existing customers, any of which would harm our business and results of operations.

Failure to adhere to the regulations that govern our business could result in our being unable to effectively perform our services.

We are required under various Chinese laws to obtain and maintain permits and licenses to conduct our business. If we do not maintain our licenses (such as Publication Business License (License No. 20477), Qualification Certificate for Confidential Information System Integration, and Value-Added Telecommunications Business License of the People’s Republic of China) or other qualifications to provide our services and products, we may not be able to provide services and products to existing customers or be able to attract new customers and could lose revenues, which could have a material adverse effect on our business and results of operations.

If our new enhancements to our services and products do not achieve sufficient market acceptance, our financial results and competitive position will suffer.

We spend substantial amounts of time and money to research and develop new enhancements of our services and products to incorporate additional features, improve functionality or other enhancements in order to meet rapidly evolving demands. When we develop an enhancement to our services and products, we typically incur expenses and expend resources upfront to develop, market and promote the new enhancements. Therefore, when we develop and introduce new enhancements to our services and products, they must achieve high levels of market acceptance in order to justify the amount of our investment in developing and bringing them to market. If our new enhancements to our services and products do not garner widespread market adoption and implementation, our growth prospects, future financial results and competitive position could suffer.

Interruptions or performance problems associated with our technology and infrastructure may adversely affect our business, results of operations, and financial condition.

Our continued growth depends in part on the ability of our existing customers and new customers to access our services and products at any time and within an acceptable amount of time. We may in the future experience service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors or capacity constraints. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. It may become increasingly difficult to maintain and improve our performance as our services and products become more complex. If our services and products are unavailable or if our customers are unable to access features of our services within a reasonable amount of time or at all, our business would be negatively affected.

We may experience interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions and capacity constraints. Capacity constraints could be due to a number of potential causes including technical failures, natural disasters, fraud or security attacks. In addition, if our security, or that of our data center providers, is compromised, our services are unavailable or our customers are unable to use our services within a reasonable amount of time or at all, then our business, results of operations and financial condition could be adversely affected. In some instances, we expect that we may not be able to identify the cause or causes of these performance problems within a period of time acceptable to our customers. It may become increasingly difficult to maintain and improve our service performance, especially during peak usage times, as the features of our services become more complex and the usage of our services increases. Any of the above circumstances or events may harm our reputation, cause customers to stop using our services, impair our ability to increase revenue from existing customers, impair our ability to grow our customer base and otherwise harm our business, results of operations, and financial condition.

Unauthorized disclosure, destruction or modification of data, through cybersecurity breaches, computer viruses or otherwise or disruption of our services could expose us to liability, protracted and costly litigation and damage our reputation.

Our business involves the collection, storage, processing and transmission of significant amounts of data. An increasing number of organizations, including large merchants and businesses, other large technology companies, financial institutions and government institutions, have disclosed breaches of their information technology systems, some of which have involved sophisticated and highly targeted attacks, including on portions of their websites or infrastructure. We could also be subject to breaches of security by hackers. Threats may derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. Concerns about security are increased when we transmit information. Electronic transmissions can be subject to attack, interception or loss. Also, computer viruses and malware can be distributed and spread rapidly over the internet and could infiltrate our systems or those of our associated participants, which can impact the confidentiality, integrity and availability of information, and the integrity and availability of our products, services and systems, among other effects. Denial of service or other attacks could be launched against us for a variety of purposes, including interfering with our services or creating a diversion for other malicious activities. These types of actions and attacks could disrupt our delivery of products and services or make them unavailable, which could damage our reputation, force us to incur significant expenses in remediating the resulting impacts, expose us to uninsured liability, subject us to lawsuits, fines or sanctions, distract our management or increase our costs of doing business.

Our encryption of data and other protective measures may not prevent unauthorized access or use of sensitive data. A breach of our system or that of one of our associated participants may subject us to material losses or liability. A misuse of such data or a cybersecurity breach could harm our reputation and deter customers from using our products and services, thus reducing our revenue. In addition, any such misuse or breach could cause us to incur costs to correct the breaches or failures, expose us to uninsured liability, increase our risk of regulatory scrutiny, subject us to lawsuits, result in the imposition of material penalties and fines under applying laws or regulations.

We cannot assure that there are written agreements in place with every associated participant or that such written agreements will prevent the unauthorized use, modification, destruction or disclosure of data or enable us or our customers to obtain reimbursement in the event we should suffer incidents resulting in unauthorized use, modification, destruction or disclosure of data. Any unauthorized use, modification, destruction or disclosure of data could result in protracted and costly litigation, which could have a material adverse effect on our business, financial condition and results of operations.

Cybersecurity incidents are increasing in frequency and evolving in nature and include, but are not limited to, installation of malicious software, unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. Given the unpredictability of the timing, nature and scope of information technology disruptions, there can be no assurance that the procedures and controls we employ will be sufficient to prevent security breaches from occurring and we could be subject to manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our business, financial condition and results of operations.

We are subject to a variety of laws and other obligations regarding data protection, any failure to comply with applicable laws and obligations could have a material adverse effect on our business, financial condition and results of operations.

We are subject to various regulatory requirements relating to the security and privacy of data, including restrictions on the collection and use of personal information and requirements to take steps to prevent personal data from being divulged, stolen, or tampered with. See “Regulation— Regulations Relating to Information Security and Privacy Protection.” Regulatory requirements regarding the protection of data are constantly evolving and can be subject to differing interpretations or significant change, making the extent of our responsibilities in that regard uncertain. For example, pursuant to the Cybersecurity Law of the PRC which became effective on June 1, 2017, personal information and important data collected and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and if a critical information infrastructure operator purchases internet products and services that affects or may affect national security, it should be subject to cybersecurity review by the Cyberspace Administration of China, or the CAC. Due to the lack of further interpretations, the exact scope of “critical information infrastructure operator” remains unclear. It is possible that those regulatory requirements may be interpreted and applied in a manner that is inconsistent with our practices. On December 28, 2021, the Office of the Central Cyberspace Affairs Commission and the Office of Cybersecurity Review under the CAC released the Measures for Cybersecurity Review which took effect and replace the existing Measures for Cybersecurity Review on February 15, 2022. The newly promulgated Measures for Cybersecurity extend the scope of cybersecurity reviews to data processing operators engaging in data processing activities that affect or may affect national security, including listing in a foreign country. Further, it is required that any online platform operator with more than 1 million users’ personal information data shall apply for a mandatory cybersecurity review with the Cybersecurity Review Office prior to its listing in a “foreign country.” As of the date of this prospectus, the actual number of users’ personal information used by the VIE and its subsidiaries is well below one million With the expansion of our business in the future, the number of user’s personal information will increase, but the personal information would mainly come from government terminal (hereinafter referred to as “G terminal”) procurement and education technology companies (hereinafter referred to as “B terminal”) procurement and C terminal self-payment. The C terminal users are authorized by the G terminal, and the VIE will sign authorization agreements related to teacher and student users’ personal information while expanding G/B terminal users. Therefore, both now and in the future, the VIE will not have more than 1 million users’ personal information, and does not belong to any of the enterprises that need to apply for a mandatory cybersecurity review as stipulated in the “the Measures for Cybersecurity Review”. In general, we believe we are compliant with all the regulations or policies that have been issued by CAC to date, which could have a material adverse effect on our business. However As a data driven artificial intelligence, or A.I., technology company focused on kindergarten through year twelve, or K-12 education in China, and we could be subject to cybersecurity review in the future. During such review, we may be required to suspend our operation experience other disruptions to our operations. Cybersecurity review could also result in negative publicity with respect to our company and diversion of our managerial and financial resources. Furthermore, if we are found to be in violation of applicable laws and regulations in China during such review, we could be subject to administrative penalties, such as warnings, fines, or service suspension. Therefore, cybersecurity review could materially and adversely affect our business, financial condition, and results of operations.

In addition, the Office of the Central Cyberspace Affairs Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, and the State Administration for Market Regulation jointly issued an announcement on January 23, 2019 regarding carrying out special campaigns against mobile internet application programs collecting and using personal information in violation of applicable laws and regulations, which prohibits business operators from collecting personal information irrelevant to their services, or forcing users to give authorization in disguised manner. Further, the Cyberspace Administration of China issued the Provisions on the Cyber Protection of Children’s Personal Information on August 22, 2019, which took effect on October 1, 2019. The Provisions on the Cyber Protection of Children’s Personal Information requires, among others, that network operators who collect, store, use, transfer and disclose personal information of children under the age of 14 shall establish special rules and user agreements for the protection of children’s personal information, inform the children’s guardians in a noticeable and clear manner, and shall obtain the consent of the children’s guardians. We have been taking and will continue to take reasonable measures to comply with such announcement and provisions; however, as the announcement and provisions are relatively new, we cannot assure you we can adapt our operations to it in a timely manner.

The PRC Data Security Law, which was promulgated by the Standing Committee of the National People’s Congress on June 10, 2021 and took effect on September 1, 2021, requires data collection to be conducted in a legitimate and proper manner, and stipulates that, for the purpose of data protection, data processing activities must be conducted based on data classification and hierarchical protection system for data security. As the Data Security Law was recently promulgated and has not yet taken effect, we may be required to make further adjustments to our business practices to comply with this law. After the Data Security Law takes effect, if our data processing activities are found to not be in compliance with this law, we could be ordered to make corrections, and under certain serious circumstances, such as severe data divulgence, we could be subject to penalties, including the revocation of our business licenses or other permits.

On July 7, 2022, CAC promulgated the Measures for the Security Assessment of Data Cross-border Transfer, effective on September 1, 2022, which requires the data processors to apply for data cross-border security assessment coordinated by the CAC under the following circumstances: (i) any data processor transfers important data to overseas; (ii) any critical information infrastructure operator or data processor who processes personal information of over 1 million people provides personal information to overseas; (iii) any data processor who provides personal information to overseas and has already provided personal information of more than 100,000 people or sensitive personal information of more than 10,000 people to overseas since January 1st of the previous year and ; and (iv) other circumstances under which the data cross-border transfer security assessment is required as prescribed by the CA. As the VIE and its subsidiaries do not engage in any operation of information in infrastructure or involve the process of personal data of more than 1,000,000 individual, and have not provided over 100,000 individual’s personal information or over 10,000 individual’s sensitive personal information since January 1 of the last years abroad, further, the PRC entities have not involved the “important data” under the Security Assessment Measures for Outbound Data Transfer. Therefore, the VIE and its subsidiaries are currently not subject to the data cross-border security assessment. However, if such assessment is required in the future, we cannot assure you that we will complete the relevant procedure on a timely basis.

The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severe and Lawful Crackdown on Illegal Securities Activities, which were made available to the public on July 6, 2021. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings of China-based companies. These opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. The aforementioned policies and any related implementation rules to be enacted may subject us to additional compliance requirement in the future. As these opinions were recently issued, official guidance and interpretation of the opinions remain unclear in several respects at this time. Therefore, we cannot assure you that we will remain fully compliant with all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all.

Any failure, or perceived failure, by us, or by our third-party partners, to maintain the security of our user data or to comply with applicable privacy, data security and personal information protection laws, regulations, policies, contractual provisions, industry standards, and other requirements, may result in civil or regulatory liability, including governmental or data protection authority enforcement actions and investigations, fines, penalties, enforcement orders requiring us to cease operating in a certain way, litigation, or adverse publicity, and may require us to expend significant resources in responding to and defending allegations and claims. Moreover, claims or allegations that we have failed to adequately protect our users’ data, or otherwise violated applicable privacy, data security and personal information protection laws, regulations, policies, contractual provisions, industry standards, or other requirements, may result in damage to our reputation and a loss of confidence in us by our users or our partners, potentially causing us to lose users, advertisers, content providers, other business partners and revenues, which could have a material adverse effect on our business, financial condition and results of operations.

If we are qualified as a tutoring institution under the Opinions on Further Reducing the Burden of Excessive Homework and Off-Campus Tutoring for Students Undergoing Compulsory Education, or the Opinions, in the future, our business, financial condition and results of operations could be adversely affected due to the great uncertainties about how the policy will be implemented.

We are a big data technology company centering on test question database establishment and score evaluation, mainly serving competent authorities of education and public schools (hereinafter referred to as “G terminal”), B-terminal education (technology companies mainly providing API authorization service), and C-terminal students and parent users imported through G/B terminal users. Through AI technology, we can help students and teachers to reduce the burden of teaching and learning, help students reduce the burden of study and after-school tutoring. We do not operate any online or offline tutoring courses, so we are not qualified as a tutoring institution affected by the Opinions. There is no risk factor associated with it currently, but we cannot promise we will not be qualified as such tutoring institution in the future due to lack of detailed rules and plans for policy implementation. If that is the case, our business, financial condition and results of operations could be adversely affected.

We face risks related to natural disasters, health epidemics and other outbreaks, specifically the coronavirus, which could significantly disrupt our operations.

In recent years, there have been outbreaks of epidemics in various countries, including China. Recently, there was an outbreak of a novel strain of coronavirus (COVID-19) in China, which has spread rapidly to several parts of the world. COVID-19 has resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities throughout China and several other parts of the world. In March 2020, the World Health Organization declared COVID-19 a pandemic.

Substantially all of our revenues and our workforce are concentrated in China. Consequently, our results of operations will likely be adversely, and may be materially, affected, to the extent that the COVID-19 pandemic or any other epidemic harms the Chinese and global economy in general. Any potential impact to our results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain the COVID-19 pandemic or treat its impact, almost all of which are beyond our control. Potential impacts include, but are not limited to, the following:

	●	temporary closure of offices, travel restrictions or suspension of services of our customers and suppliers have negatively affected, and could continue to negatively affect, the demand for our services;

	●	our customers may require additional time to pay us or fail to pay us at all, which could significantly increase the amount of accounts receivable and require us to record additional allowances for doubtful accounts;

	●	the business operations of our distributors have been and could continue to be negatively impacted by the outbreak, which may negatively impact our distribution channel, our services will be provided free of charge due to the impact of COVID-19, and as a result, we predict that the number of customers will increase, but the revenue may decrease which may in turn materially adversely affect our financial condition and operating results; and

	●	any disruption of our customers could adversely impact our business and results of operations.

Since the outbreak of the COVID-19 pandemic in late January 2020, in the 2020 year we experienced temporary disruptions to our business operations, such as temporary closures of our office facilities. During this period, the COVID-19 pandemic resulted in temporary school closures and consequently negatively affected our SmartExam® Solution and SmartHomework® Solution platform development business. Despite such impacts, the COVID-19 pandemic did not materially adversely impact our financial performance as a whole for the 2022 year, which was evidenced by our financial condition including revenue and profitability in 2022 as compared to the same period in 2021. Nevertheless, any potential impact to our business will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of COVID-19 and the actions taken by government authorities and other entities to contain COVID-19 or treat its impact, almost all of which are beyond our control. In addition, there is no guarantee that our total revenues will grow or remain at a similar level. We may have to record downward adjustments or impairment in the fair value of investments, if conditions have not been significantly improved and global stock markets have not recovered from recent declines.

In general, our business could be adversely affected by the effects of epidemics, including, but not limited to, COVID-19, avian influenza, severe acute respiratory syndrome (SARS), the influenza A virus, Ebola virus, severe weather conditions such as a snowstorm, flood or hazardous air pollution, or other outbreaks. In response to an epidemic, severe weather conditions, or other outbreaks, government and other organizations may adopt regulations and policies that could lead to severe disruption to our daily operations, including temporary closure of our offices and other facilities. These severe conditions may cause us and/or our partners to make internal adjustments, including but not limited to, temporarily closing down business, limiting business hours, and setting restrictions on travel and/or visits with clients and partners for a prolonged period of time. Various impacts arising from severe conditions may cause business disruption, resulting in material, adverse impact to our financial condition and results of operations.

We have engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of operations.

We have entered into a number of transactions with related parties. See “Certain Relationships and Related Party Transactions”. We may in the future enter into additional transactions with entities in which members of our board of directors and other related parties hold ownership interests.

Transactions with related parties present potential for conflicts of interest, as the interests of related parties may not align with the interests of our shareholders. Although we believe that these transactions were in our best interests, we cannot assure you that these transactions were entered into on terms as favorable to us as those that could have been obtained in an arms-length transaction. We may also engage in transactions with related parties in the future. Conflicts of interests may arise when we transact business with related parties. These transactions, individually or in the aggregate, may have an adverse effect on our business and results of operations or may result in government enforcement actions or other litigation.

Our future growth depends in part on new products and new technology innovation, and failure to invent and innovate could adversely impact our business prospects.

Our future growth depends in part on maintaining our current products in new and existing markets, as well as our ability to develop new products and services to serve such markets. To the extent that competitors develop competitive products and services, or new products or services that achieve higher customer satisfaction, our business prospects could be adversely impacted. In addition, if regulatory approvals for new products or services may be required, these approvals may not be obtained in a timely or cost-effective manner, adversely impacting our business prospects.

If we are unable to conduct sales and marketing activities cost-effectively, our business, financial condition and results of operations may be materially and adversely affected.

We rely on our sales and marketing efforts to enlarge our user base and drive the growth of our paying users. Our sales and marketing activities may not be well received by the market and may not result in the levels of sales that we anticipate. We also may not be able to retain or recruit a sufficient number of experienced sales and marketing personnel, or to train newly hired sales and marketing personnel, which we believe is critical to implementing our sales and marketing strategies cost-effectively. Further, sales and marketing approaches and tools in China’s intelligent learning industry are evolving rapidly. This requires us to continually enhance our sales and marketing approaches and experiment with new methods to keep pace with industry developments and user preferences. Failure to engage in sales and marketing activities in a cost-effective manner may reduce our market share, cause our net revenues to decline, negatively impact our profitability, and materially harm our business, financial condition and results of operations.

We may be the subject of detrimental conduct by third parties such as our competitors, including complaints to regulatory agencies and the public dissemination of malicious assessments of our business, which could have a negative impact on our reputation.

We may be the target of anti-competitive, harassing or other detrimental conduct by third parties including our competitors. Such conduct may include complaints, anonymous or otherwise, to regulatory agencies regarding our operations, accounting, business relationships, business prospects and business ethics. Additionally, allegations, directly or indirectly against us, may be posted online by anyone, whether or not related to us, on an anonymous basis. We may be subject to government or regulatory investigation as a result of such third-party conduct and may be required to expend significant time and incur substantial costs to address such third-party conduct, and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time, or at all. Our reputation may also be materially negatively affected as a result of the public dissemination of anonymous allegations or malicious statements about our business.

Changes in demand for our products, services and business relationships with key customers and vendors may negatively affect operating results.

To achieve our objectives, we must develop and sell products that are subject to the demands of our customers. This is dependent on several factors, including managing and maintaining relationships with key customers, responding to the rapid pace of technological change and obsolescence, which may require increased investment by us or result in greater pressure to commercialize developments rapidly or at prices that may not fully recover the associated investment, and the effect on demand resulting from customers’ research and development, capital expenditure plans and capacity utilization. If we are unable to keep up with our customers’ demands, our sales, earnings and operating results may be negatively affected.

Our future success depends in part on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the principal members of our executive team listed in the section entitled “Management” located elsewhere in this prospectus, the loss of whose services may adversely impact the achievement of our objectives. Recruiting and retaining other qualified employees for our business, including technical personnel, will also be critical to our success. Competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous companies for individuals with similar skill sets. The inability to recruit or loss of the services of any executive or key employee could adversely affect our business.

We may need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

As of November 30, 2022, we had 148 full-time employees and 15 part-time employees whom signed part-time labor contracts with Jiangxi Ruanyun and its subsidiaries, and all of whom were located in China. As we continue to grow, we also expect to expand our employee base. In addition, we intend to grow by expanding our business, increasing market penetration of our existing products and services, developing new products and services and increasing our targeting of certain markets in China. Future growth would impose significant additional responsibilities on our management, including the need to develop and improve our existing administrative and operational systems and our financial and management controls and to identify, recruit, maintain, motivate, train, manage and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Future growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of our existing or future product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and grow revenue could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to effectively manage any future growth.

Failure of beneficial owners of our shares who are PRC residents to comply with certain PRC foreign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investment activities and subject us to liability under PRC law.

The State Administration of Foreign Exchange, or SAFE, has promulgated regulations, including the Notice on Relevant Issues Relating to Foreign Exchange Control on Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or SAFE Circular 37, and its appendices. These regulations require PRC residents, including PRC institutions and individuals, to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle”, or SPV. The term “control” under SAFE Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-making rights acquired by the PRC residents in the offshore SPVs by such means as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements. SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the SPV, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a SPV fails to fulfill the required SAFE registration, the PRC subsidiaries of that SPV may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the SPV may be restricted in its ability to contribute additional capital into its PRC subsidiaries. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.

These regulations apply to our direct and indirect shareholders who are PRC residents and may apply to any offshore acquisitions or share transfers that we make in the future if our shares are issued to PRC residents. However, in practice, different local SAFE branches may have different views and procedures on the application and implementation of SAFE regulations, and there remains uncertainty with respect to its implementation. We cannot assure you that these direct or indirect shareholders of our Company who are PRC residents will be able to successfully update the registration of their direct and indirect equity interest as required in the future. If they fail to update the registration, our PRC subsidiary could be subject to fines and legal penalties, and SAFE could restrict our cross-border investment activities and our foreign exchange activities, including restricting our PRC subsidiary’s ability to distribute dividends to, or obtain loans denominated in foreign currencies from, our Company, or prevent us from contributing additional capital into our PRC subsidiary. As a result, the VIE and its subsidiaries and our ability to make distributions to you could be materially and adversely affected. In addition, non-U.S. shareholders may experience unfavorable tax consequences if such non-U.S. shareholders are determined to be a resident enterprise for PRC tax purposes. See “Regulations - Regulations on Tax in the PRC” and “Material Income Tax Considerations - PRC Taxation” for further information.

As of the date of this prospectus, to our knowledge, 27 of our shareholders had registered according to SAFE Circular 37. The registration of foreign exchange return investment has been completed.

Failure to make adequate contributions to various employee benefits plans as required by PRC regulations may subject us to penalties

Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where 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. If we fail to make contributions to various employee benefit plans and to comply with applicable PRC labor-related laws in the future, we may be subject 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 do not have business insurance coverage. Any future business liability, disruption or litigation we experience might divert management focus from our business and could significantly impact our financial results.

Availability of business insurance products and coverage in China is limited, and most such products are expensive in relation to the coverage offered. We have determined that the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurances on commercially reasonable terms make it impractical for us to maintain such insurance. As a result, we do not have any business liability, disruption or litigation insurance coverage for our operations in China. Accordingly, a business disruption, litigation or natural disaster may result in substantial costs and divert management’s attention from our business, which would have an adverse effect on our results of operations and financial condition.

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

In addition to the proceeds to be raised in this offering, we may need to obtain additional debt or equity financing to fund future capital expenditures. While we do not anticipate seeking additional financing in the immediate future, any additional equity financing may result in dilution to the holders of our outstanding ordinary shares. Additional debt financing may impose affirmative and negative covenants that restrict our freedom to operate our business. We cannot guarantee that we will be able to raise proceeds in this offering or obtain additional financing on terms that are acceptable to us, or any financing at all, and the failure to obtain sufficient financing could adversely affect our business operations.

Risks Related to Intellectual Property

If we are not able to adequately protect our proprietary intellectual property and information, and protect against third party claims that we are infringing on their intellectual property rights, our results of operations could be adversely affected.

The value of our business depends in part on our ability to protect our intellectual property and information, including our patents, copyrights, trademarks, trade secrets, and rights under agreements with third parties, in China and around the world, as well as our customer, employee, and customer data. Third parties may try to challenge our ownership of our intellectual property in China and around the world. In addition, intellectual property rights and protections in China may be insufficient to protect material intellectual property rights in China. Further, our business is subject to the risk of third parties counterfeiting our products or infringing on our intellectual property rights. The steps we have taken may not prevent unauthorized use of our intellectual property. We may need to resort to litigation to protect our intellectual property rights, which could result in substantial costs and diversion of resources. If we fail to protect our proprietary intellectual property and information, including with respect to any successful challenge to our ownership of intellectual property or material infringements of our intellectual property, this failure could have a significant adverse effect on our business, financial condition, and results of operations.

If we are unable to adequately protect our intellectual property rights, or if we are accused of infringing on the intellectual property rights of others, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights.

Our commercial success will depend in part on our success in obtaining and maintaining patents, copyrights, trademarks, trade secrets and other intellectual property rights in China and elsewhere and protecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

We cannot provide any assurances that any of our patents have, or that any of our future pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect our products, any additional features we develop for our products or any new products. Other parties may have developed technologies that may be related or competitive to our system, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate our patent position. Our patent position may involve complex legal and factual questions, and, therefore, the scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented. Proceedings challenging our patents could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that we may own may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to commercialize our products.

Though an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and it may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our patents, or develop and obtain patent protection for more effective technologies, designs or methods. We may be unable to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, suppliers, vendors, former employees and current employees.

Our ability to enforce our patent rights depends on our ability to detect infringement. It may be difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our patents covering our products are invalidated or found unenforceable, or if a court found that valid, enforceable patents held by third parties covered one or more of our products, our competitive position could be harmed or we could be required to incur significant expenses to enforce or defend our rights.

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

	●	any of our patents, or any of our future pending patent applications, if issued, will include claims having a scope sufficient to protect our products;

	●	any of our future pending patent applications will be issued as patents;

	●	we will be able to successfully commercialize our products on a substantial scale, if approved, before our relevant patents we may have expire;

	●	we were the first to make the inventions covered by each of our patents and future pending patent applications;

	●	we were the first to file patent applications for these inventions;

	●	others will not develop similar or alternative technologies that do not infringe our patents; any of our patents will be found to ultimately be valid and enforceable;

	●	any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

	●	we will develop additional proprietary technologies or products that are separately patentable; or

	●	our commercial activities or products will not infringe upon the patents of others.

We rely, in part, upon unpatented trade secrets, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. Further, our trade secrets could otherwise become known or be independently discovered by our competitors.

Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money and could prevent us from selling our products or affect our stock price.

Our commercial success will depend in part on not infringing the patents or copyrights, or otherwise violating the other proprietary rights, of others. Significant litigation regarding patent rights and copyright rights occur in our industry. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell our products. We do not always conduct independent reviews of patents issued to third parties. In addition, patent applications in China and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications can be revived, so there may be applications of others now pending or recently revived patents of which we are unaware. These applications may later result in issued patents, or the revival of previously abandoned patents, that will prevent, limit or otherwise interfere with our ability to make, use or sell our products. Third parties may, in the future, assert claims that we are employing their proprietary technology without authorization, including claims from competitors or from non-practicing entities that have no relevant product revenue and against whom our own patent portfolio may have no deterrent effect. As we continue to commercialize our products in their current or updated forms, launch new products and enter new markets, we expect competitors may claim that one or more of our products infringe their intellectual property rights as part of business strategies designed to impede our successful commercialization and entry into new markets. The large number of patents, the rapid rate of new patent applications and issuances, the complexities of the technology involved, and the uncertainty of litigation may increase the risk of business resources and management’s attention being diverted to patent litigation. We have, and we may in the future, receive letters or other threats or claims from third parties inviting us to take licenses under, or alleging that we infringe, their patents.

Moreover, we may become party to future adversarial proceedings regarding our patent portfolio or the patents of third parties. Patents may be subjected to opposition, post-grant review or comparable proceedings lodged in various foreign, both national and regional, patent offices. The legal threshold for initiating litigation or contested proceedings may be low, so that even lawsuits or proceedings with a low probability of success might be initiated. Litigation and contested proceedings can also be expensive and time-consuming, and our adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. We may also occasionally use these proceedings to challenge the patent rights of others. We cannot be certain that any particular challenge will be successful in limiting or eliminating the challenged patent rights of the third party.

Any lawsuits resulting from such allegations could subject us to significant liability for damages and invalidate our proprietary rights. Any potential intellectual property litigation also could force us to do one or more of the following:

	●	stop making, selling or using products or technologies that allegedly infringe the asserted intellectual property;

	●	lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; incur significant legal expenses;

	●	pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing;

	●	pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing;

	●	redesign those products that contain the allegedly infringing intellectual property, which could be costly, disruptive and infeasible; and

	●	attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all, or from third parties who may attempt to license rights that they do not have.

Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation. If we are found to infringe the intellectual property rights of third parties, we could be required to pay substantial damages (which may be increased up to three times of awarded damages) and/or substantial royalties and could be prevented from selling our products unless we obtain a license or are able to redesign our products to avoid infringement. Any such license may not be available on reasonable terms, if at all, and there can be no assurance that we would be able to redesign our products in a way that would not infringe the intellectual property rights of others. We could encounter delays in product introductions while we attempt to develop alternative methods or products. If we fail to obtain any required licenses or make any necessary changes to our products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.

We rely on copyright, patent, trade secret, and trademark protection as well as confidentiality agreements with our employees, consultants and third parties, and we may in the future rely on additional intellectual property protection, to protect our confidential and proprietary information. In addition to contractual measures, we try to protect the confidential nature of our proprietary information using commonly accepted physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Unauthorized parties may also attempt to copy or reverse engineer certain aspects of our products that we consider proprietary. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. Even though we use commonly accepted security measures, trade secret violations are often a matter of state law, and the criteria for protection of trade secrets can vary among different jurisdictions. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our business and competitive position could be harmed.

Third parties may assert ownership or commercial rights to inventions we develop, which could have a material adverse effect on our business.

Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property. Any infringement claims or lawsuits, even if not meritorious, could be expensive and time consuming to defend, divert management’s attention and resources, require us to redesign our products and services, if feasible, require us to pay royalties or enter into licensing agreements in order to obtain the right to use necessary technologies, and/or may materially disrupt the conduct of our business.

In addition, we may face claims by third parties that our agreements with employees, contractors or third parties obligating them to assign intellectual property to us are ineffective or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such intellectual property. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property or may lose our exclusive rights in that intellectual property. Either outcome could harm our business and competitive position.

Third parties may assert that our employees or contractors have wrongfully used or disclosed confidential information or misappropriated trade secrets, which could result in litigation.

We may employ individuals who previously worked with other companies, including our competitors or potential competitors. Although we try to ensure that our employees and contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees or contractors have inadvertently or otherwise used or disclosed intellectual property or personal data, including trade secrets or other proprietary information, of a former employer or other third party. Litigation may be necessary to defend against these claims. If we fail in defending any such claims or settling those claims, in addition to paying monetary damages or a settlement payment, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Our computer systems and operations may be vulnerable to security breaches, which could adversely affect our business.

We believe the safety of our computer network and our secure transmission of information over the internet will be essential to our operations and our services. Our network and our computer infrastructure are potentially vulnerable to physical breaches or to the introduction of computer viruses, abuse of use and similar disruptive problems and security breaches that could cause loss (both economic and otherwise), interruptions, delays or loss of services to our users. It is possible that advances in computer capabilities or new technologies could result in a compromise or breach of the technology we use to protect user transaction data. A party that is able to circumvent our security systems could misappropriate proprietary information, cause interruptions in our operations or utilize our network without authorization. Security breaches also could damage our reputation and expose us to a risk of loss, litigation and possible liability. We cannot guarantee you that our security measures will prevent security breaches.

Risks Related to our Ordinary Shares and this Offering

If we fail to implement and maintain an effective system of internal control, we may be unable to accurately report our operating results, meet our reporting obligations or prevent fraud.

Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting.

In the course of auditing our consolidated financial statements as of and for the years ended March 31, 2022 and 2021, we and our independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting as well as other control deficiencies. As defined in standards established by the Public Company Accounting Oversight Board (United States), a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified relate to (i) our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of the U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review consolidated financial statements and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements and (ii) our lack of comprehensive accounting policies and procedures manual in accordance with U.S. GAAP.

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

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Generally, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our consolidated financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, and harm our results of operations. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.

There has been no prior public market for our ordinary shares and an active trading market may never develop or be sustained.

Prior to this offering, there has been no public market for our ordinary shares. An active trading market for our ordinary shares may never develop following completion of this offering or, if developed, may not be sustained. The lack of an active trading market may impair the value of your shares and your ability to sell your shares at the time you wish to sell them. An inactive trading market may also impair our ability to raise capital by selling our ordinary shares and entering into strategic partnerships or acquiring other complementary products, technologies or businesses by using our ordinary shares as consideration. In addition, if we fail to satisfy exchange listing standards, we could be delisted, which would have a negative effect on the price of our ordinary shares.

We expect that the price of our ordinary shares will fluctuate substantially and you may not be able to sell the shares you purchase in this offering at or above the initial public offering price.

The initial public offering price for our ordinary shares sold in this offering is determined by negotiation between the representative of the underwriters and us. This price may not reflect the market price of our ordinary shares following this offering. In addition, the market price of our ordinary shares is likely to be highly volatile and may fluctuate substantially due to many factors, including:

	●	the volume and timing of sales of our products;

	●	the introduction of new products or product enhancements by us or others in our industry;

	●	disputes or other developments with respect to our or others’ intellectual property rights;

	●	our ability to develop, obtain regulatory clearance or approval for, and market new and enhanced products on a timely basis;

	●	product liability claims or other litigation;

	●	quarterly variations in our results of operations or those of others in our industry;

	●	media exposure of our products or of those of others in our industry;

	●	changes in governmental regulations or in reimbursement;

	●	changes in earnings estimates or recommendations by securities analysts; and

	●	general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our ordinary shares, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our ordinary shares shortly following this offering. If the market price of our ordinary shares after this offering does not ever exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.

In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business.

If we fail to meet applicable listing requirements, Nasdaq may delist our ordinary shares from trading, in which case the liquidity and market price of our ordinary shares could decline.

Assuming our ordinary shares are listed on Nasdaq, we cannot assure you that we will be able to meet the continued listing standards of Nasdaq in the future. For example, legislative or other regulatory action in the United States could result in listing standards or other requirements that, if we cannot meet, may result in delisting and adversely affect our liquidity or the trading price of our shares that are listed or traded in the United States. If we fail to comply with the applicable listing standards and Nasdaq delists our ordinary shares, we and our shareholders could face significant material adverse consequences, including:

	●	a limited availability of market quotations for our ordinary shares;

	●	reduced liquidity for our ordinary shares;

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

	●	a limited amount of news about us and analyst coverage of us; and

	●	a decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because we expect that our ordinary shares will be listed on Nasdaq, such securities will be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulations in each state in which we offer our securities.

If you purchase our ordinary shares in this offering, you will incur immediate and substantial dilution in the book value of your shares.

Investors purchasing our ordinary shares in this offering will pay a price per share that substantially exceeds the pro forma as adjusted net tangible book value per share. As a result, investors purchasing ordinary shares in this offering will incur immediate dilution of $4.73 per share, representing the difference between our assumed initial public offering price of $5.50 per share (the midpoint of the price range set forth on the cover page of this prospectus) and our pro forma as adjusted net tangible book value of $0.77 per share as of March 31, 2022. For more information on the dilution you may experience as a result of investing in this offering, see “Dilution.”

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our ordinary shares to drop significantly, even if our business is doing well.

Sales of a substantial number of our ordinary shares in the public market could occur at any time. These sales, or the perception in the market that these sales may occur, could result in a decrease in the market price of our ordinary shares. Immediately after this offering, we will have 35,000,004 outstanding ordinary shares, based on the number of ordinary shares outstanding as of March 31, 2022, assuming no exercise of the underwriters’ over-allotment option. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates or existing shareholders. Of that amount, 30,000,004 shares are currently restricted as a result of securities laws and/or lock-up agreements, but will be able to be sold after the closing of this offering, subject to securities laws and/or lock-up agreements. If held by one of our affiliates, the resale of those securities will be subject to volume limitations under Rule 144 of the Securities Act. See “Shares Eligible for Future Sale.”

Our directors, officers and principal shareholders have significant voting power and may take actions that may not be in the best interests of our other shareholders.

As of the date of this prospectus, our directors, officers and principal shareholders holding 5% or more of our ordinary shares, collectively, control approximately 70.08% of our ordinary shares. After this offering, our directors, officers and principal shareholders holding 5% or more of our ordinary shares, collectively, will control approximately 60.05% of our outstanding ordinary shares. As a result, these shareholders, if they act together, will be able to control our management and affairs and most matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. The interests of these shareholders may not be the same as or may even conflict with your interests. For example, these shareholders could attempt to delay or prevent a change in control of us, even if such change in control would benefit our other shareholders, which could deprive our shareholders of an opportunity to receive a premium for their ordinary shares as part of a sale of us or our assets, and might affect the prevailing market price of our ordinary shares due to investors’ perceptions that conflicts of interest may exist or arise. As a result, this concentration of ownership may not be in the best interests of our other shareholders.

We will have broad discretion in the use of proceeds of this offering designated for working capital and general corporate purposes.

We intend to use approximately 30% of the net proceeds of this offering for research and development of new products and services, approximately 25% for marketing and customer services, approximately 25% for new content creation, approximately 5% for cash reserves and approximately 15% for working capital and general corporate purposes, including, without limitation, costs to set up two additional regional offices. Within those categories, we have not determined the specific allocation of the net proceeds of this offering. Our management will have broad discretion over the use and investment of the net proceeds of this offering within those categories. Accordingly, investors in this offering have only limited information concerning management’s specific intentions and will need to rely upon the judgment of our management with respect to the use of proceeds.

We expect to incur significant additional costs as a result of being a public company, which may adversely affect our business, financial condition and results of operations.

Upon completion of this offering, we expect to incur costs associated with corporate governance requirements that will become applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Exchange Act, as well as the rules of the Nasdaq. These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs and make some activities more time-consuming. We also expect these rules and regulations to make it more expensive for us to obtain and maintain directors’ and officers’ liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. Accordingly, increases in costs incurred as a result of becoming a publicly traded company may adversely affect our business, financial condition and results of operations.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon the closing of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We will design our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

We have never declared or paid cash dividends. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our ordinary shares will be your sole source of gain for the foreseeable future.

Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our stock price or trading volume to decline.

If a trading market for our ordinary shares develops, the trading market will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a newly public company, we may be slow to attract research coverage and the analysts who publish information about our ordinary shares will have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline and result in the loss of all or a part of your investment in us.

The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with this offering under PRC law.

The M&A Rules purport to require offshore SPVs that are controlled by PRC companies or individuals and that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange. In September 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by a SPV seeking CSRC approval of its overseas listings. The interpretation and application of the regulations remain unclear, and this offering may ultimately require approval from the CSRC. If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval, and any failure to obtain or delay in obtaining CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.

Our PRC legal counsel, Jingtian & Gongcheng, has advised us that, based on its understanding of the current PRC laws and regulations, we will not be required to submit an application to the CSRC for the approval of the listing and trading of our ordinary shares on Nasdaq because (i) we established our WFOE by means of direct investment and not through a merger or acquisition of the equity or assets of a “PRC domestic company” as such term is defined under the M&A Rules; and (ii) no provision in the M&A Rules classifies the contractual arrangements under the Contractual Arrangements as a type of acquisition transaction falling under the M&A Rules.

However, Jingtian & Gongcheng has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering, and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as Jingtian & Gongcheng, and hence we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of the ordinary shares. The CSRC or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of the ordinary shares offered hereby. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such approval requirement could have a material adverse effect on the trading price of the ordinary shares.

Draft rules for China-based companies seeking for securities offerings in foreign stock markets were released by the CSRC for public consultation. While such rules have not yet come into effect as of the date of this prospectus, the Chinese government may exert more oversight and control over overseas public offerings conducted by China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our Ordinary Shares to investors and could cause the value of our Ordinary Shares to significantly decline or become worthless.

On December 24, 2021, the CSRC and relevant departments of the State Council published the Draft Rules Regarding Overseas Listings, which aim to regulate overseas securities offerings and listings by China-based companies, are available for public consultation. The Draft Rules Regarding Overseas Listing aim to lay out the filing regulation arrangement for both direct and indirect overseas listing and clarify the determination criteria for indirect overseas listing in overseas markers.

The Draft Rules Regarding Overseas Listing, among other things, stipulate that, after making initial applications with overseas stock markets for initial public offerings or listings, all China-based companies shall file with the CSRC within three working days. The required filing materials with the CSRC include (without limitation): (i) record-filing reports and related undertakings, (ii) compliance certificates, filing or approval documents from the primary regulator of the applicants’ businesses (if applicable), (iii) security assessment opinions issued by related departments (if applicable), (iv) PRC legal opinions, and (v) prospectus. In addition, overseas offerings and listings may be prohibited for such China-based companies when any of the following applies: (1) if the intended securities offerings and listings are specifically prohibited by the laws, regulations or provision of the PRC; (2) if the intended securities offerings and listings may constitute a threat to, or endanger national security as reviewed and determined by competent authorities under the State Council in accordance with laws; (3) if there are material ownership disputes over applicants’ equity interests, major assets, core technologies, etc.; (4) if, in the past three years, applicants’ domestic enterprises, controlling shareholders or de facto controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (5) if, in the past three years, any directors, supervisors, or senior executives of applicants have been subject to administrative punishments for severe violations, or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations; (6) other circumstances as prescribed by the State Council. The Draft Administrative Provisions further stipulate that a fine between RMB 1 million and RMB 10 million may be imposed if an applicant fails to fulfill the filing requirements with the CSRC or conducts an overseas offering or listing in violation of the Draft Rules Regarding Overseas Listings, and in cases of severe violations, a parallel order to suspend relevant businesses or halt operations for rectification may be issued, and relevant business permits or operational license revoked.

The Draft Rules Regarding Overseas Listings, if enacted, may subject us to additional compliance requirements in the future, and though we believe that none of the situations that would clearly prohibit overseas listing and offering applies to us, and we cannot assure you that we will be able to receive clearance of such filing requirements in a timely manner, or at all. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer the Ordinary Shares, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations, and cause the Ordinary Shares to significantly decline in value or become worthless.

Economic substance legislation of the Cayman Islands may impact us and our operations.

The Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain geographically mobile activities which attract profits without real economic activity in the jurisdiction in which they are incorporated. With effect from January 1, 2019, the Cayman Islands Government enacted the International Tax Co-operation (Economic Substance) Act (as amended from time to time), or the Substance Act, introducing certain economic substance requirements for “relevant entities” which are engaged in “relevant activities” and receives “relevant income”. To support the Substance Act, the Cayman Islands Tax Information Authority, or TIA, has issued Guidance in relation to Economic Substance for Geographically Mobile Activities in relation to the Substance Act in accordance with section 5 of the Substance Act, or the Guidance Notes, as amended from time to time. The term “relevant entity” is defined under the Substance Act to mean:

(a)

a company, other than a domestic company, that is (i) incorporated under the Companies Act (as amended) of the Cayman Islands, or (ii) a limited liability company registered under the Limited Liability Companies Act (as amended) of the Cayman Islands;

(b)

a partnership as defined under section 3 of the Partnership Act (as amended) of the Cayman Islands, except where the partnership is a local partnership;

(c)

an exempted limited partnership as defined under section 2 of the Exempted Limited Partnership Act (as amended) of the Cayman Islands;

(d)

a foreign limited partnership registered under section 42 of the Exempted Limited Partnership Act (as amended) of the Cayman Islands;

(e)

a limited liability partnership that is registered in accordance with the Limited Liability Partnership Act (as amended) of the Cayman Islands; and

(f)

a company that is incorporated outside of the Islands and registered under the Companies Act (as amended) of the Cayman Islands,

but does not include:

(a)

an investment fund; or

(b)

an entity that is tax resident out of the Cayman Islands.

For Cayman Islands law purposes, the Company falls within the definition of a “relevant entity”, as per subparagraph (a) above.

There are nine “relevant activities” under the Substance Act, which are banking business, distribution and service center business, financing and leasing business, fund management business, headquarters business, holding company business, insurance business, intellectual property business, or shipping business. Based on the current structuring of the Company, under the Substance Act, the Company can be classified as conducting “holding company business”. Holding company business means the business of being a “pure equity holding company”. Pure equity holding company means a company that only holds equity participations in other entities and only earns dividends and capital gains. A relevant entity (such as the Company) that is only carrying on a relevant activity that is the business of a pure equity holding company is subject to a reduced economic substance test under the Substance Act. The Company will satisfy this reduced economic substance requirement if the relevant entity (i.e. the Company) confirms that (a) it has complied with all applicable filing requirements under the Companies Act (as amended) in the Cayman Islands and (b) it has adequate human resources and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. The Guidance Notes have interpreted how limb (b) of the reduced economic substance test as applicable to legal entities that conduct holding company business is satisfied. The Guidance Notes makes it clear that a pure equity holding company maintaining a registered office in the Cayman Islands and engaging its registered office service provider in accordance with the Companies Act (as amended) in the Cayman Islands may be able to satisfy these reduced economic substance requirements in the Cayman Islands, depending on the level and complexity of activity required to operate its business. Every company in the Cayman Islands, including the Company, will have a relationship with its registered office and as such is able to satisfy limb (b) in addition to complying with the statutory obligations under the Companies Act (as amended) of the Cayman Islands as required by limb (a). In consequence, the Company would,

at present, satisfy the reduced economic substance test as required under the Substance Act. Since the Company is considered to be a legal entity and conducting a relevant activity it will need to provide information to the TIA. The Company will need to notify the TIA annually of: (a) whether or not it is carrying on a relevant activity, (b) if it is carrying on a relevant activity, whether or not it is a relevant entity, (c) in the case of an entity that is carrying on a relevant activity and is tax resident in a jurisdiction outside the Cayman Islands and if so, shall provide appropriate evidence to support the information provided in the notification as may be reasonably required by the TIA. A relevant entity that is carrying on a relevant activity and receiving relevant income is required to satisfy the substance test must prepare and submit to the TIA an economic substance return annually for the purpose of the TIA’s determination whether the substance test has been satisfied in relation to that relevant activity. Compliance with the reduced substance requirements is unlikely to be onerous for the Company and at present subject to any change in the Substance Act or the Guidance Notes, the Company is complying with the reduced economic substance test.

Although it is presently anticipated that the Substance Act will have little material impact on us and our operations, as the legislation is new and remains subject to further clarification and interpretation, it is not currently possible to ascertain the precise impact of these legislative changes on us and our operations.

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

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

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than register of mortgages and charges, memorandum and articles of association and special resolutions) or to obtain copies of lists of shareholders of these companies. However, a list of the names of the current directors and alternative directors (if applicable) are made available by the Registrar of Companies of the Cayman Islands for inspection by any person on payment of a fee. Any person, by making payment of the fee specified in the Companies Act, is also entitled to the rights to inspect the particulars set out in Schedule 1A of the Companies Act and the inspection shall be subject to such conditions as the Registrar of Companies may impose. Our second amended and restated memorandum and articles of association, or our post-offering memorandum and articles of association, will become effective and replace our current amended and restated memorandum and articles of association in its entirety immediately prior to the completion of this offering. It is expected that our directors will have discretion under our post-offering memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders unless required by the Companies Act (as amended) of the Cayman Islands or other applicable law or authorized by the directors or by ordinary resolution. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

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

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

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

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

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

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies, including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain 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. We do not plan to “opt out” of such exemptions afforded to an emerging growth company. As a result of this election, our financial statements may not be comparable to those of companies that comply with public company effective dates.

We qualify as a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that permit less detailed and less frequent reporting than that of a U.S. domestic public company.

Upon the closing of this offering, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K upon the occurrence of specified significant events. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our ordinary shares. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers also are exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

If we lose our status as a foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain and maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing standards.

We are a foreign private issuer with the meaning of the rules under the Exchange Act, and as such we are exempted from certain provisions of the securities rules and regulations in the United States that are applicable to the United States domestic issuers. In addition, as an exempted company incorporated in the Cayman Islands, we are permitted to adopt our home country law for certain governance matters. Certain corporate governance practices in our home country, the Cayman Islands, may differ significantly from corporate governance listing standards. For example, we are not required to have a majority of the board consisting of independent directors, and not required to have a compensation committee or a nominating and corporate governance committee consisting entirely of independent directors. Currently, we do not plan to rely on home country practices with respect to our corporate governance after we complete this offering. However, if we choose to follow home country practices in the future, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.

There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ordinary shares.

A non-U.S. corporation will be a PFIC for any taxable year if either (1) at least 75% of its gross income for such year consists of certain types of “passive” income; or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income, or the asset test. Based on our current and expected income and assets (taking into account the expected cash proceeds and our anticipated market capitalization following this offering), we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance that the Internal Revenue Service, or IRS, will agree with our conclusion or that the IRS would not successfully challenge our position. Fluctuations in the market price of our ordinary shares may cause us to become a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of our ordinary shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. If we were to be or become a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See “Taxation— Passive Foreign Investment Company Consequences.”

We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.

As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than 50% of our ordinary shares are directly or indirectly held by residents of the United States and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a listing on a U.S. securities exchange.

The price of our ordinary shares could be subject to rapid and substantial volatility, and such volatility may make it difficult for prospective investors to assess the rapidly changing value of our ordinary shares.

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

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “goal,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this prospectus are based upon information available to us as of the date of this prospectus and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include statements about:

	●	timing of the development of future business;

	●	capabilities of our business operations;

	●	expected future economic performance;

	●	the impact of COVID-19 on our Company;

	●	competition in our market;

	●	continued market acceptance of our services and products;

	●	protection of our intellectual property rights;

	●	changes in the laws that affect our operations;

	●	inflation and fluctuations in foreign currency exchange rates;

	●	our ability to obtain and maintain all necessary government certifications, approvals, and/or licenses to conduct our business;

	●	continued development of a public trading market for our securities;

	●	the cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations;

	●	managing our growth effectively;

	●	projections of revenue, earnings, capital structure and other financial items;

	●	fluctuations in operating results;

	●	dependence on our senior management and key employees; and

	●	other factors set forth under “Risk Factors.”

You should refer to the section titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus forms a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

INDUSTRY AND MARKET DATA

This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties, as well estimates and conclusions drawn by our management based on such data. The market data and estimates used in this prospectus involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data and estimates. While we believe that the information from these industry publications, surveys and studies is reliable, the emerging industry in China in which we operate is subject to a high degree of uncertainty and risk due to a variety of important factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of 5,000,000 ordinary shares in this offering will be approximately $24.2 million after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us, based on the assumed initial public offering price of $5.50 per ordinary share (the midpoint of the price range set forth on the cover page of this prospectus). If the underwriters exercise their over-allotment option in full, we estimate that the net proceeds to us from this offering will be approximately $28.0 million, after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us.

Each $1.00 increase (decrease) in the assumed initial public offering price of $5.50 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by $4.6 million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. An increase (decrease) of 1.0 million in the number of ordinary shares we are offering would increase (decrease) the net proceeds to us from this offering by $5.1 million, assuming the assumed initial public offering price remains the same, and after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us.

The primary purposes of this offering are to create a public market for our shares for the benefit of all shareholders, retain talented employees, and obtain additional capital. We plan to use the net proceeds of this offering as follows:

	●	approximately 30% for R&D of new products and services;

	●	approximately 25% for marketing and customer services;

	●	approximately 25% for new content creation;

	●	approximately 5% for cash reserves; and

	●	approximately 15% for working capital and general corporate purposes, including, without limitation, costs to set up two additional regional offices.

This expected use of the net proceeds from this offering represents our intentions based upon our current plans and prevailing business conditions, which could change in the future as our plans and prevailing business conditions evolve. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering and we reserve the right to change the use of proceeds that we presently anticipate and describe herein.

Pending any use described above, we plan to invest the net proceeds in short-term, interest-bearing, debt instruments.

The net proceeds from this offering must be remitted to China before we will be able to use the funds to grow our business. The procedure to remit funds may take several months after completion of this offering, and we will be unable to use the offering proceeds in China until remittance is completed. See “Risk Factors” for further information.

DIVIDEND POLICY

Our board of directors may from time to time pay interim dividends, or make such distributions out of the Company’s share premium account, subject to certain requirements of Cayman Islands law. In addition, our shareholders may in a general meeting declare dividends, but no dividend may exceed the amount recommended by our board of directors. In either case, all dividends are subject to certain restrictions under Cayman Islands law, namely that we may only pay dividends out of profits or share premium, and provided always that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. Even if we decide to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

Notwithstanding the above, we have never declared or paid a dividend, and we do not anticipate declaring or paying dividends in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business.

We are a holding company incorporated in the Cayman Islands. If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our WFOE, Rollingthunder Technology (Jiangxi) Co., Ltd.

Current PRC regulations permit our PRC subsidiary to pay dividends to the Company only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, WFOE and the VIE and its subsidiaries are required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if our subsidiary and affiliates in the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations through the current contractual arrangements, we may be unable to pay dividends on our Ordinary Shares.

Cash dividends, if any, on our Ordinary Shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%. See “Taxation — PRC Taxation.”

In order for us to pay dividends to our shareholders, we will rely on payments made from Soft Cloud Technology Limited to WFOE, pursuant to Contractual Arrangements between them, and the distribution of such payments to Soft Cloud Technology Limited HK as dividends from our PRC subsidiary. Certain payments from our Soft Cloud Technology Limited to WFOE are subject to PRC taxes, including VAT. In addition, if Soft Cloud Technology Limited or our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC project. However, the 5% withholding tax rate does not automatically apply and certain requirements must be satisfied, including without limitation that (a) the Hong Kong project must be the beneficial owner of the relevant dividends; and (b) the Hong Kong project must directly hold no less than 25% share ownership in the PRC project during the twelve consecutive months preceding its receipt of the dividends. In current practice, a Hong Kong project must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiary to its immediate holding company, Soft Cloud Technology Limited HK. As of the date of this prospectus, we have not applied for the tax resident certificate from the relevant Hong Kong tax authority. Soft Cloud Technology Limited HK intends to apply for the tax resident certificate when WFOE plans to declare and pay dividends to Soft Cloud Technology Limited HK. See “Risk Factors- There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2022 on:

	●	an actual basis; and

	●	a pro forma as adjusted basis to give effect to the sale of 5,000,000 ordinary shares in this offering at the assumed initial public offering price of $5.50 per ordinary share (the midpoint of the price range set forth on the cover page of this prospectus) after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us, assuming the underwriters do not exercise the over-allotment option.

You should read this information together with our audited consolidated financial statements appearing elsewhere in this prospectus and the information set forth under the sections titled “Selected Consolidated Financial Data,” “Exchange Rate Information,” “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	As of March 31, 2022
	Actual $			Pro Forma As Adjusted (1) $

Short-term bank loans		4,559,738			4,559,738
Ordinary shares, $0.0002 par value per share: 5,000,000,000 shares authorized; 30,000,004 shares issued and outstanding; 35,000,004 shares issued and outstanding pro forma		6,000			7,000
Additional paid-in capital		15,210,301			39,416,406
Accumulated deficit		(12,050,550	)		(12,050,550	)
Accumulated other comprehensive income		587,345			587,345
Total shareholders’ equity		3,753,096			27,960,201
Non-controlling interest		(76,971	)		(76,971	)
Total equity		3,676,125			27,883,230
Total capitalization		8,235,863			32,442,968

(1) Reflects the sale of ordinary shares in this offering at an assumed initial public offering price of $5.50 per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. Additional paid-in capital reflects the net proceeds we expect to receive, after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. We estimate that such net proceeds will be approximately $24.2 million. For an itemization of an estimation of the total offering expenses payable by us, see “Expenses Related to this Offering.”

Each $1.00 increase (decrease) in the assumed initial public offering price of $5.50 per ordinary share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the pro forma as adjusted amount of total capitalization by $4.6 million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. An increase (decrease) of 1.0 million in the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of total capitalization by $5.1 million, assuming no change in the assumed initial public offering price per ordinary share as set forth on the cover page of this prospectus.

DILUTION

If you invest in our ordinary shares in this offering, your interest will be immediately diluted to the extent of the difference between the initial public offering price per ordinary share in this offering and the net tangible book value per ordinary share after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the net tangible book value per ordinary share. As of March 31, 2022, we had a historical net tangible book value of approximately $2.8 million, or $0.09 per ordinary share. Our net tangible book value per share represents total tangible assets less total liabilities, all divided by the number of ordinary shares outstanding as of March 31, 2022.

After giving effect to the sale of ordinary shares in this offering at the assumed initial public offering price of $5.50 per ordinary share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value at March 31, 2022 would have been approximately $27.0 million, or $0.77 per ordinary share. This represents an immediate increase in pro forma as adjusted net tangible book value of $0.68 per ordinary share to existing investors and immediate dilution of $4.73 per ordinary share to new investors. The following table illustrates this dilution to new investors purchasing ordinary shares in this offering:

	Post- Offering (1)		Full Exercise of Over- allotment Option (2)
Assumed initial public offering price per ordinary share (the midpoint of the price range set forth on the cover page of this prospectus)	$	5.50	$	5.50
Net tangible book value per ordinary share as of March 31, 2022	$	0.09	$	0.09
Increase in pro forma as adjusted net tangible book value per ordinary share attributable to new investors purchasing ordinary shares in this offering	$	0.68	$	0.77
Pro forma as adjusted net tangible book value per ordinary share after this offering	$	0.77	$	0.86
Dilution per ordinary share to new investors in this offering	$	4.73	$	4.64

	(1)	Assumes that the underwriters’ over-allotment option has not been exercised.
	(2)	Assumes that the underwriters’ over-allotment option has been exercised in full.

Each $1.00 increase (decrease) in the assumed initial public offering price of $5.50 per ordinary share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) our pro forma as adjusted net tangible book value as of March 31, 2022 after this offering by approximately $0.81 per ordinary share, and would increase (decrease) dilution to new investors by $0.87 per ordinary share, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. An increase (decrease) of 1.0 million ordinary shares in the number of ordinary shares we are offering would increase (decrease) our pro forma as adjusted net tangible book value as of March 31, 2022 after this offering by approximately $0.80 per ordinary share, and would increase (decrease) dilution to new investors by approximately $0.12 per ordinary share, assuming the assumed initial public offering price per ordinary share, as set forth on the cover page of this prospectus remains the same, and after deducting the estimate underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

If the underwriters exercise their over-allotment option in full, the pro forma as adjusted net tangible book value per ordinary share after this offering would be $0.86 per share, the increase in net tangible book value per ordinary share to existing shareholders would be $0.77 per share, and the immediate dilution in net tangible book value per ordinary share to new investors in this offering would be $4.64 per share.

The table and discussion above is based on 30,000,004 ordinary shares outstanding as of March 31, 2022.

To the extent that we issue additional ordinary shares in the future, there will be further dilution to new investors participating in this offering.

EXCHANGE RATE INFORMATION

Our reporting currency is U.S. dollars. The functional currency of the Company and its subsidiaries incorporated in Hong Kong is U.S. dollars. The functional currency of the Company’s PRC subsidiaries, the VIE and its subsidiaries is RMB. The determination of the respective functional currency is based on the criteria of Accounting Standards Codification, or ASC, Topic 830, Foreign Currency Matters. The consolidated financial statements are translated from the functional currency to the reporting currency, USD. We use the average exchange rate for the year and the exchange rate at the balance sheet date to translate the operating results and financial position, except for equity, respectively. For equity items, we used the historical exchange rate to translate the equity items from functional currency to reporting currency. Translation differences are recorded in accumulated other comprehensive loss, a component of shareholders’ deficits. Transactions denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are re-measured at the exchange rates prevailing at the balance sheet date. Non-monetary items that are measured in terms of historical costs in foreign currency are re-measured using the exchange rates at the dates of the initial transactions. Exchange gains and losses are included in the consolidated statements of comprehensive loss.

We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. We do not currently engage in currency hedging transactions.

The consolidated balance sheet amounts, with the exception of equity, at March 31, 2022 and 2021 were translated at RMB 6.3393 to $1.00 and RMB 6.5518 to $1.00, respectively. Equity accounts were stated at their historical rates. The average translation rates applied to consolidated statements of operations and comprehensive income(loss) and cash flows for the years ended March 31, 2022 and 2021 were RMB 6.4180 to $1.00 and RMB 6.7834 to $1.00 respectively.

CORPORATE HISTORY AND STRUCTURE

Corporate History and Structure

Ruanyun Edai Technology Inc., or Ruanyun, is a holding company and was incorporated in the Cayman Islands on March 11, 2021. Ruanyun, through its consolidated subsidiaries, the VIE, and the VIE’s subsidiaries, is primarily engaged in providing online academic exercise question banks with A.I. capabilities, online classes and homework, and on-demand lectures and evaluations that cover all K-12 subject fields and grade levels. Our principal operations and geographic markets are mainly in the PRC. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through our PRC subsidiaries, the VIE and its subsidiaries in China. We receive the economic benefits and absorb losses of the VIE and its subsidiaries’ business operations through the Contractual Arrangements. However, uncertainties in the interpretation and enforcement of the PRC laws, regulations and policies affect the validity of the Contractual Arrangements or could limit our ability to enforce the Contractual Arrangements. As a result, we may be unable to consolidate the VIE and its subsidiaries in the consolidated financial statements. Our position of being the primary beneficiary of the VIE and its subsidiaries also depends on the authorization by the shareholders of the VIE to exercise voting rights on all matters requiring shareholders’ approval in the VIE. As of the date of this prospectus, we believe that the agreements on the authorization to exercise shareholders’ voting power are valid and legally enforceable. See “Risk Factors-Risks Related to our Corporate Structure” for further information. Ordinary shares offered in this offering are shares of our offshore holding company instead of shares of the VIE or VIE subsidiaries in China.

Reorganization

On March 11, 2021, Ruanyun was incorporated with limited liability under the laws of the Cayman Islands. On December 24, 2020, Soft Cloud Technology Limited, or Soft Cloud, was established in accordance with the law and regulations of Hong Kong and subsequently become the wholly-owned subsidiary of Ruanyun. Soft Cloud is a holding company and holds all the equity interests of Rollingthunder Technology (Jiangxi) Co., Ltd, or the WFOE, which was established in the PRC on January 19, 2021. Jiangxi Ruanyun Technology Co., Ltd., or Jiangxi Ruanyun, was established on March 27, 2012 under the laws of the PRC. The main operations of Jiangxi Ruanyun include a focus on A.I. database and testing center development. Jiangxi Ruanyun formed the following subsidiaries subsequent to its establishment:

	●	Jiangxi Ruanyun Technology Co., Ltd. (Shenzhen Branch), or Shenzhen Ruanyun, a company incorporated on March 27, 2017 in the PRC. It is a branch office of Jiangxi Ruanyun and mainly operating an A.I database.

	●	Jiangxi Alphabet Technology Co., Ltd., or Jiangxi Alphabet, a company incorporated on February 21, 2017 in the PRC. It is a 70% subsidiary of Jiangxi Ruanyun and mainly operates in paperless testing center development.

	●	Jiangxi Jiaotou Technology Co., Ltd., or Jiangxi Jiaotuo, a company incorporated on December 31, 2020 in the PRC. Jiangxi Ruanyun has 65% equity interest in Jiangxi Jiaotuo, which mainly operates in personalized homework book development.

	●	Jiangxi Huizuoye Technology Co., Ltd., or Jiangxi Huizuoye, a company incorporated on April 8, 2021 in the PRC. Jiangxi Ruanyun has 51% equity interest in Jiangxi Huizuoye, which mainly operates in electronic publications.

On April 8, 2021, WFOE entered into a series of contractual arrangements with Jiangxi Ruanyun and its shareholders, which allow Ruanyun to have controlling financial interest in Jiangxi Ruanyun, or the VIE. Under the United States generally accepted accounting principle, or US GAAP, Ruanyun was deemed to be the primary beneficiary of the VIE for accounting purposes and must consolidate the VIE. These contractual arrangements include an Exclusive Equity Interest Purchase Agreement, an Equity Interest Pledge Agreement, Powers of Attorney, an Exclusive Technical Consulting and Service Agreement and Supplementary Agreements to the Exclusive Technical Consulting and Service Agreement, or collectively, the Contractual Arrangements. Ruanyun together with its wholly-owned subsidiary Soft Cloud, and its subsidiary, WFOE and the VIE and its subsidiaries were effectively controlled by the same shareholders before and after the reorganization. The consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of the Company.

The charts below summarize our corporate legal structure and identify our subsidiaries, the VIE and its subsidiaries as of the date of this prospectus and upon completion of this offering:

Name	Background	Ownership
Soft Cloud Technology Limited	A Hong Kong company formed on December 24, 2020	100% owned by Ruanyun Edai Technology Inc.
Rollingthunder Technology (Jiangxi) Co., Ltd.	A PRC company formed on January 19, 2021	100% owned by Soft Cloud Technology Limited
Jiangxi Ruanyun Technology Co., Ltd.	A PRC company formed on March 27, 2012	VIE of Rollingthunder Technology (Jiangxi) Co., Ltd
Jiangxi Ruanyun Technology Co., Ltd. (Shenzhen Branch)	A PRC company formed on March 27, 2017	100% owned by Jiangxi Ruanyun Technology Co., Ltd.

Jiangxi Alphabet Technology Co., Ltd.	A PRC company formed on February 21, 2017	70% owned by Jiangxi Ruanyun Technology Co., Ltd.
Jiangxi Jiaotou Technology Co., Ltd.	A PRC company formed on December 31, 2020	65% owned by Jiangxi Ruanyun Technology Co., Ltd.
Jiangxi Huizuoye Technology Co., Ltd.	A PRC company formed on April 8, 2021	51% owned by Jiangxi Ruanyun Technology Co., Ltd.

Share Consolidation

On October 17, 2022, Ruanyun, with the approval of its board of directors and shareholders, effected a 1-for-2 share consolidation of all of its issued and unissued ordinary shares, or the share consolidation, whereby each two ordinary shares of par value of $0.0001 each were consolidated into one ordinary share of par value of $0.0002 each, following which the share capital of Ruanyun was $1,000,000 divided into 5,000,000,000 shares with a par value of $0.0002 each. Any and all fractional shares were rounded up to the nearest whole share. We have retroactively restated all share and per share data for all of the periods presented in this prospectus to reflect the share consolidation.

Contractual Arrangements

Despite the lack of equity ownership, Ruanyun controls the VIE’s financial interest through the Contractual Arrangements. The equity interests of the VIE are legally held by PRC individuals, or the Nominee Shareholders. Through the Contractual Arrangements, the Nominee Shareholders effectively assign all their voting rights underlying their equity interests in the VIE to Ruanyun, and therefore, Ruanyun has the power to direct the activities of the VIE that most significantly impact economic performance. Ruanyun also has the right to receive economic benefits and absorb losses from the VIE. Based on the above, Ruanyun consolidates the accounts of the VIE in accordance with Regulation S-X-3A-02 promulgated by the SEC and Accounting Standards Codification, or ASC, Topic 810-10, Consolidation: Overall.

The significant terms of the Contractual Arrangements are as follows:

Exclusive Equity Interest Purchase Agreement

Equity Interest Pledge Agreement

Powers of Attorney

Exclusive Technical Consulting and Service Agreement

We believe the Contractual Arrangements are in compliance with the current PRC laws and are legally enforceable. However, uncertainties in the interpretation and enforcement of the PRC laws, regulations and policies could limit our ability to enforce the Contractual Arrangements. As a result, we may be unable to consolidate the VIE and its subsidiaries in the consolidated financial statements. Our position of being the primary beneficiary of the VIE and its subsidiaries also depends on the authorization by the shareholders of the VIE to exercise voting rights on all matters requiring shareholders’ approval in the VIE. We believe that the agreements on the authorization to exercise shareholders’ voting power are legally enforceable. In addition, if the legal structure and contractual arrangements with the VIE were found to be in violation of any future PRC laws and regulations, we may be subject to fines or other actions. See “Risk Factors-Risks Related to our Corporate Structure” for further information. We believe the possibility that we will no longer be able to control and consolidate the VIE as a result of the aforementioned risks is remote.

Based on the foregoing Contractual Arrangements, we account for Jiangxi Ruanyun as a VIE. We have the power to direct the activities of Jiangxi Ruanyun and become the primary beneficiary of Jiangxi Ruanyun for accounting purposes through such Contractual Arrangements, which are less effective than direct ownership. Our power to direct the of Jiangxi Ruanyun and our position of being the primary beneficiary of Jiangxi Ruanyun for accounting purposes are limited to the conditions that we met for consolidation of Jiangxi Ruanyun under U.S. GAAP. Such conditions include that (i) we have the power to direct the activities that could most significantly affect the economic performance of Jiangxi Ruanyun, and (ii) we are entitled to receive benefits and obligated to absorb losses from Jiangxi Ruanyun that could potentially be significant to Jiangxi Ruanyun. Accordingly, we consolidate the accounts of Jiangxi Ruanyun for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the SEC, and ASC Topic 810-10, Consolidation: Overall. Only if we meet the aforementioned conditions to be the primary beneficiary of Jiangxi Ruanyun under U.S. GAAP, we will consolidate Jianxi Ruanyun and Jiangxi Ruanyun will be treated as our consolidated affiliated entities for accounting purposes.

SELECTED CONSOLIDATED FINANCIAL DATA

The following tables summarize our selected consolidated financial data for the periods and as of the dates indicated. The summary consolidated statements of operations for the years ended March 31, 2022 and 2021, and the summary consolidated balance sheet data as of March 31, 2022 and 2021 are derived from our audited consolidated financial statements for those years, which have been prepared in accordance with U.S. GAAP and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), and included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. The following summary consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements included elsewhere in this prospectus.

	For the Years Ended March 31,
	2022 $			2021 $
Consolidated Statements of Operations:
Total revenues, net		12,803,123			11,499,442
Cost of revenues		(7,180,326	)		(7,614,950	)
Gross profit		5,622,797			3,884,492
Operating expenses		(6,400,631	)		(3,875,411	)
(Loss) income from operations		(777,834	)		9,081
Total other income, net		38,341			463,341
(Loss) income before income tax		(739,493	)		472,422
Income tax expenses		—			—
Net (loss) income		(739,493	)		472,422
(Loss) earnings per share, basic and diluted		(0.02	)		0.02
Weighted average number of ordinary shares outstanding		30,000,004			30,000,004

	March 31,
Consolidated Balance Sheet Data:	2022 $			2021 $

Current assets		8,843,320			6,855,462
Total assets		11,063,844			8,833,931
Current liabilities		7,387,719			4,481,379
Total liabilities		7,387,719			4,552,646
Total shareholders’ equity		3,753,096			4,347,060
Non-controlling interest		(76,971	)		(65,775	)
Total equity		3,676,125			4,281,285

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Overview

We are a data driven A.I. technology company focused on K-12 education in China. We bring technology to schools and are committed to reforming the traditional Chinese education and learning model by facilitating schools, teachers and students with new teaching, learning, and assessment methods in the A.I. era.

We currently sell our products and services through two primary product lines, namely our SmartExam® solution and SmartHomework® solution. Our SmartExam® solution helps deliver China’s Academic Proficiency Assessment test, which is required in China for obtaining a high-school diploma, in computer-based format. Our SmartHomework® solution delivers personalized learning solutions for students to study more effectively. Teachers can adjust instructions for students based on their specific needs.

Since inception, our online academic exercise question bank has accumulated more than 10 billion test data generated by approximately 14.26 million students from more than 27,000 schools and we have issued approximately 298 million evaluation reports. With the continuous collection and analyzing of students' online learning data, our A.I. algorithms are constantly expanding and upgrading, reaching an evaluation accuracy rate of 97%, allowing us to provide students with tailored and effective learning strategies.

Our net revenue grew from $11,499,442 for the year ended March 31, 2021, or fiscal 2021, to $12,803,123 for the year ended March 31, 2022, or fiscal 2022. We had a net profit of $472,422 in fiscal 2021 and a net loss of $739,493 in fiscal 2022.

Key Factors Affecting Our Results of Operations

Our results of operations are primarily affected by the following company-specific factors:

Ability to grow our platform development business

We generated a significant portion of our revenues with platform development business in both SmartExam® solution and SmartHomework® solution product lines, which comprised 29.2% and 31.2% of our total revenues, respectively, for the years ended March 31, 2022 and 2021. This is a key factor affecting our revenues as it affected our ability to attract and retain students to subscribe to our premium services. We intend to increase our presence in China by expanding our product offerings in additional provinces in China. In the absence of unforeseen events beyond our control, such as pandemic and natural disasters, we expect to grow our platform development business in the foreseeable future.

Ability to expand and improve our SmartHomework® contents

We will continue to broaden and enhance our SmartHomework® contents, which we believe will increase our ability to attract more students to subscribe to our services as well as more schools to implement our platforms. For the years ended March 31, 2022 and 2021, 74.2% and 79.7% of total revenues were generated from our SmartHomework® solution products and services, respectively. We believe that our ability to enhance our SmartHomework® contents will contribute to our long-term sustained growth over time.

Ability to continue to integrate technology into our products and services

We believe we have a strong ability to integrate technology into our products and services, which we believe is a critical differentiating advantage for us and also a key factor that affects our revenue and financial results. With our tremendous investments in technological innovations, we have successfully developed industry-leading proprietary technologies in optical character recognition (OCR), data mining and data analytics and continue to integrate them into our comprehensive suite of products and services. Going forward, we will continue to increase our investments in developing and upgrading our technology with a focus on optimizing our products and services. We believe our ability to grow our business significantly depends on our ability to continue to integrate technology into our products and services and to offer more intelligence and better solutions.

Ability to manage costs and expenses

We have incurred significant costs and expenses in building our platform, growing our customer base and developing capabilities in A.I. technology. Our platform is built to support our continued growth. Our cost of revenues primarily consists of cost of equipment from our platform development projects and staff payroll. Comparing fiscal 2022 to fiscal 2021, despite the increase in our revenue, our cost of revenues decreased by 5.7% from $7,614,950 in fiscal 2021 to $7,180,326 in fiscal 2022. The decrease in our cost of revenue is mainly attributed to our ability to effectively and efficiently manage our costs during the period. From time to time, we may need to increase our expenses in order to enhance our products and promote our products and services. For the years ended March 31, 2022 and 2021, our total operating expenses increased by 65.2% from $3,875,411 in fiscal 2021 to $6,400,631 in fiscal 2022. The significant increase in our total operating expenses are mainly due to bad debt expenses, impairment expenses, and increasing operating expenses in connection with our proposed initial public offering. Going forward, we expect the absolute amount of costs and expenses to continue increasing as we continue to invest in current and new technologies and services, grow the number of students using our services and improve our contents. We expect to achieve significant operating leverage as we grow our scale and achieve platform synergies. Our ability to manage costs and expenses will affect whether we will be able to sustain our current expansion and growth plans.

Ability to maintain and expand cooperation with schools

A majority of our revenue is derived from our cooperation with schools, which is the primary source of our student customers. We have provided services to more than 27,000 schools since our inception. If we fail to maintain or further expand our customer base, our results of operations will be adversely affected.

Government policy may impact our business and operating results

Change in government policies and regulation in the PRC could adversely affect our business. For the years ended March 31, 2022 and 2021, our SmartHomework® solution personalized exercise book and MOTK Pro revenues decreased by 93.9%, primarily attributed to actions we have taken in compliance with the latest PRC regulation. We are working to change our SmartHomework® solution personalized exercise book and MOTK Pro business model in order to compliance with the regulatory development. Any unfavorable changes in government policies could affect the demand for our products and could materially and adversely affect our result of operations.

COVID-19 Affecting Our Results of Operations

In 2020, the COVID-19 pandemic spread throughout the world, especially in China. The pandemic resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. Consequently, our business operations were adversely affected by the foregoing measures for a temporary period of time. Since the outbreak of the COVID-19 pandemic in the 2020, we had experienced temporary disruptions to our business operations, such as temporary closure of our office facilities for about three months from April 2020 to June 2020. The resurgent of the COVID-19 in fiscal 2022 also force our business to halt for about a month in March 2022. The COVID-19 outbreak also resulted in temporary campus closures and affected our SmartExam® Solution and SmartHomework® Solution platform development business. The company’s business operations gradually resumed after the reopening of schools in September 2020. Our overall revenue in fiscal 2022 and fiscal 2021 were not significantly impacted by COVID-19. Starting from fiscal 2021, we provided up to 12 months payment term extensions to these customers based on our assessment of the creditworthiness of these customers. In consideration of the payment term extension, we evaluated and concluded that additional collectability risk exists and provided additional bad debt allowance for accounts receivables due from these customers. As of the date of this prospectus, $5.4 million, or 82%, of the accounts receivable balance due from third parties as of March 31, 2022 has been collected. The remaining balance after deducting the bad debt allowance is expected to be fully collected within the extended credit terms. See “Risk Factors—Risks Related to Our Business and Industry— We face risks related to natural disasters, health epidemics and other outbreaks, specifically the coronavirus, which could significantly disrupt our operations.” We will continue to actively monitor the rapidly evolving situation related to COVID-19 and may take further actions that alter our business operations, or that we determine are in the best interests of our employees, business partners and shareholders. At this point, the extent to which the COVID-19 pandemic may impact our business, operations and regulatory and commercialization timelines remains uncertain.

Key Financial Performance Indicators

Our key financial performance indicators, which consist of our revenues, gross profit and gross margin, and operating expenses, are discussed in the following paragraphs.

Revenues

We derived revenues from our SmartExam® solution and SmartHomework® solution product lines. SmartExam® solution – platform development revenues are primarily generated from exam platform implementation for the computer-based test centers providing China’s Academic Proficiency Test in the form of project development fees that we charge to schools. The number of projects is affected by a mix of factors including, but are not limited to, the overall demand of our products, the geographic markets where our products are offered, the pricing of our products, the fees charged by our competitors for the same or similar products or services, and changes in the regulatory requirement of the education industry in China. For the years ended March 31, 2022 and 2021, we had 1 and 14 completed projects for our SmartExam® solution respectively, representing a decrease of 92.9%. The decrease in the number of projects was mainly attributed to our focus on one larger project in Nanchang market and we had no projects in other cities due to the impact of COVID-19 in the areas of our market expansion. The average revenue per project also increased from $167,144 in fiscal 2021 to $2,868,302 in fiscal 2022, representing an increase of 1616.1%, which was the result of our focus on larger projects. Our future revenue growth will depend significantly upon our ability to gain or maintain market share to capitalize on the computerized testing centers growth for the China’s Academic Proficiency Test.

We started to provide other services for our SmartExam® solution during fiscal 2022, which include software customization, hardware sales and other comprehensive professional testing services, including test registration, test paper sampling, and test center evaluation,. As we started to provide these services in fiscal 2022, our revenue generated from other services comprised only 3.4% of the total revenue for the year ended March 31, 2022. Our future revenue growth will depend significantly upon our ability to satisfy our customers’ need and capitalize the market.

SmartHomework® solution revenues are generated from our platform development, Software customization and content development, license, personalized exercise book and MOTK Pro as well as digitization services product lines.

SmartHomework® solution platform development revenues are primarily generated from our platform implementation for digital teaching and learning, such as A.I study room, in the form of service fees and project development fees that we charge to the customers. The amount of revenues is positively linked to the number of projects that we implement. The number of projects is affected by a mix of factors including, but are not limited to, the overall demand of our products, the variety and selections of our content offering, the geographic markets where our products are offered, the pricing of our products, the fees charged by our competitors for the same or similar products or services, changes in the regulatory requirement of the education industry in China, and our brand reputation. For the year ended March 31, 2022, we had 11 total projects, with no related party sales project. For the year ended March 31, 2021, we had 7 total projects, including 1 related party sales project amounting $156,551. The total number of projects increased by 57.1% during fiscal 2022 and fiscal 2021. While our total number of projects increased, our revenue in this sector decreased by 30.6% during the same period. The decrease in revenue is primarily attributed to change in product demand from our customers. In fiscal 2021, customers mainly purchased our regular A.I study room, which yielded a higher revenue per project. In fiscal 2022, the majority of the customers purchased our mini A.I study room, which yielded a lower revenue per project comparing to our regular study room. Our future revenue growth will depend significantly upon our ability to gain or maintain market share by attracting more schools to use our products.

In fiscal 2022, we launched a new product line in software customization and content development under our SmartHomework® solution brand during fiscal 2022, which we design, develop, and install customized software as well as develop educational content for customers. Our future revenue growth will depend significantly upon our ability to satisfy our customers’ need and capitalize the market.

SmartHomework® solution license revenues are primarily generated from the sales of our online contents, namely our academic exercise question banks, to other educational services providers and educational technology companies in term of monthly or yearly subscription fees. Our revenues from licensing are directly linked to the numbers of subscribed companies for our contents. For the years ended March 31, 2022 and 2021, we had 91 and 152 companies subscripting our services, representing a decrease of 40.1%. The decrease in number of subscribed companies was mainly the result of (1) the reduction in licensing to educational corporate customers to avoid cultivating competitors in the market which result in a shrinkage of this category of business since April 2021 (2) the decrease in demand resulting from the additional government restrictions over online and offline education industries. On the other hand, the average revenue per client increased from $6,000 in fiscal 2021 to $8,334 in fiscal 2022, representing an increase of 38.9%. The increase was primarily attributed to our customer portfolio as most of the small companies’ customers that ceased their operations in fiscal 2022 and stopped their subscription of our content.

SmartHomework® solution personalized exercise book and MOTK Pro revenues are primarily generated from service subscription fees that charged to students by semester or school year. Such revenues are directly linked to the numbers of students that subscribing our services. For the years ended March 31, 2022 and 2021, we had 10,195 and 213,355 students subscribing our services respectively, representing a decrease of 95.2%. The decrease was mainly due to additional government restrictions over online education industries as students could no longer directly purchase our products online. We expect be a decrease in revenue for a certain period of time. As we change our business model to comply with government regulations, we expect the revenue from personalized exercise book and MOTK Pro to increase in the long run. Our future revenue growth will depend significantly upon our ability to adopt a feasible business model that compliance with government regulations and Telecom operators requirements.

SmartHomework® solution digitization services revenues are primarily generated from fees earned from publishers for converting publications to digital format. The number of publications converted are directly linked to this revenue stream. For the years ended March 31, 2022 and 2021, we had converted 3.6 million and 3.8 million publications, respectively. Although the number of books converted decreased slightly, our revenue per publication increased leading to the overall revenue increased to $5,610,552 in fiscal 2022 from $5,067,730 in fiscal 2021, an increase of $542,822 or 10.7%. The increase was mainly due to our partnership with one of the largest publishers in China for digitization services in fiscal 2021 and it continued to order our digitization services in fiscal 2022. Our future revenue growth will depend significantly upon our ability to gain or maintain market share by partnering with the publishers in China.

Cost of revenues

Our cost of revenues mainly consists of cost of equipment from our platform development projects, staff payroll, payments to various channels, related equipment depreciation, amortization of capitalized software development cost and other overhead costs. Our cost of revenues accounted for 56.1% and 66.2% of our total revenue for the fiscal years 2022 and 2021, respectively. In anticipation of the increase sales in our SmartExam® solution and SmartHomework® solution platform development product lines, we expect our costs associated with equipment and staff payroll to further increase in the foreseeable future.

Gross margin

We use gross margin to measure whether we are selling our products and services at an appropriate profit. Our gross margin is affected by a mix of factors including, but not limited to, our ability to source competitive pricing suppliers, our ability to maintain the number of our staff and the corresponding payroll, the demand of our products offering, and our pricing strategies. Our gross margin increased from 33.8% in fiscal 2021 to 43.9% in fiscal 2022, mainly attributed to our improvement in cost structure and efficiency. We will continue our effort to enhance our products and services offering as well as optimizing our cost structures to sustain our business growth.

Operating expenses

Our operating expenses consist of selling expenses, general and administrative expenses, research and development expenses and impairment of capitalized software.

Our selling expenses primarily include expenses incurred for marketing expenses, payroll and related expenses for personnel engaged in sales activities. As a percentage of revenues, our selling expenses accounted for 17.1% and 12.9% of our total revenue for the years ended March 31, 2022 and 2021, respectively. Our selling expenses increased in fiscal 2022 mainly due to the increase in marketing and promotion expense as well as staff compensation and benefits. If our business further grows, we expect that our overall sales and marketing expenses, including but not limited to, advertising expenses, brand promotion expenses and salaries, will continue to increase in the foreseeable future.

Our general and administrative expenses primarily consist of payroll and related costs for employees involved in general corporate functions, including accounting, finance, tax, legal and human resources, professional fees for third parties and other general corporate costs. As a percentage of revenues, general and administrative expenses were 16.6% and 12.5% of our revenue for the years ended March 31, 2022 and 2021, respectively. The increase in general and administrative expenses as a percentage of revenue is mainly attributed to the increase staff compensation and benefits and increased professional fees. We expect our general and administrative expenses, including, but not limited to, salaries and professional fee for third parties, to continue to increase in the foreseeable future, as we hire additional personnel and incur additional expenses in connection with the expansion of our business operations and this offering.

Our research and development expenses primarily consist of technology infrastructure expenses, payroll and related costs for employees involved in application development, category expansion, and other system support expenses. As a percentage of revenues, research and development expenses were 14.2% and 8.3% of our revenue for the years ended March 31, 2022 and 2021, respectively, mainly attributed to the increase in staff compensation and benefits. We expect our research and development expenses, including, but not limited to, salaries and investment in technology infrastructure expenses, to continue to increase in the foreseeable future, as we hire additional personnel and expand our technological capabilities.

We evaluated long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful life is shorter than we originally estimated. When these events occur, we evaluate the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, we recognize an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. For the years ended March 31, 2022 and 2021, $266,482 and $nil were recognized as impairment of capitalized software respectively. The impairment for the year ended March 31, 2022 was primarily attributed to the decreased net realizable value of the capitalized software resulting from the decrease in estimated future revenue from licensing services under the SmartHomework® solution.

Key Components of Our Results of Operations

Net revenues

We commenced operations in 2013 and generate substantially all of our revenues from two primary product lines, namely SmartExam® Solution and SmartHomework® Solution since 2017, in which revenues are derived from 6 major revenue streams, namely, platform development, other testing services, software customization and content development, license, personalized exercise book and MOTK Pro, digitization services.

SmartExam® Solution includes (1) developing and implementing an exam platform that provide computerized testing for China’s Academic Proficiency Test and (2) other testing services, including software customization, hardware sales and other comprehensive professional testing services.

SmartHomework® solution is a platform providing various digital teaching and learning contents and services to our customers. Our revenues are derived primarily from (1) platform development (2) software customization and content development (3) license (4) personalized exercise book and MOTK Pro, and (5) digitization services.

The following table sets forth the breakdown of our revenues by revenue stream, both in absolute amounts and as a percentage of our total revenues, for the years indicated:

	For the Years Ended March 31,
	2022				2021
	$		%		$		%
SmartExam® Solution – Platform Development	$	3,300,277		25.8	$	2,340,019		20.3
SmartHomework® Solution		9,502,846		74.2		9,159,423		79.7
Total revenues	$	12,803,123		100.0	$	11,499,442		100.0

We generated almost all of our revenue from our consolidated VIE and its subsidiaries. We expect to continue to generate a substantial of our revenue from our consolidated VIE and its subsidiaries in the near future.

Cost of revenues

Our cost of revenues consists of cost of equipment from our platform development projects, staff payroll, payments to various channels related equipment depreciation, amortization of capitalized software development cost and other overhead costs.

We expect that cost of revenue will increase in absolute amounts in future periods as we plan to continue to increase our business. We also expect the gross profit margin to change from period to period as we expand our business and market shares as well as the changes in our product mix along with our expansion and growth.

Operating expenses

Our operating expenses consist of (i) selling expenses, (ii) general and administrative expenses, (iii) research and development expenses, and (iv) impairment for capitalized software. Share-based compensation expenses are included in our research and development expenses when incurred. The following table sets forth the components of our operating expenses both in absolute amount and as a percentage of total net revenues for the periods indicated:

	For the Years Ended March 31,
	2022				2021
	$		%		$		$
Selling expenses		2,191,181		17.1		1,478,570		12.9
General and administrative expenses		2,120,086		16.6		1,442,757		12.5
Research and development expenses		1,822,882		14.2		954,084		8.3
Impairment capitalized software		266,482		2.1		—		—
Total operating expenses		6,400,631		50.0		3,875,411		33.7

Selling expenses. Selling expenses consist primarily of marketing expenses, payroll and related expenses for personnel engaged in sales activities.

We expect that selling expenses will increase in absolute amounts and vary from period to period as a percentage of revenues for the foreseeable future as we plan to continue to invest in sales to attract and retain customers for our services and products as well as increase our sales coverage in China.

General and administrative expenses. General and administrative expenses consist primarily of payroll and related costs for employees involved in general corporate functions, including accounting, finance, tax, legal and human resources, professional fees for third parties and other general corporate costs, as well as costs associated with the use of facilities and equipment for these general corporate functions, such as depreciation and rental expenses.

As our business further grows and we become a public company after the completion of this offering, we expect our general and administrative expenses to continue to increase in absolute amount in the foreseeable future.

Research and development expenses. Research and development expenses consist primarily of technology infrastructure expenses, payroll and related costs for employees involved in application development, category expansion, and system support expenses, as well as costs associated with computation, storage, and telecommunication infrastructures.

We expect that the research and development expenses will increase in absolute amounts but vary from period to period as a percentage of revenues for the foreseeable future as we continue to expand our technological capabilities to support our anticipated growth and enhance user experience.

Impairment for capitalized software. Impairment for capitalized software consist primarily of the impairment loss we recognized related to our capitalized software which we evaluate by comparing the unamortized capitalized cost to the net realizable value.

The impairment for capitalized software for the year ended March 31, 2022 was primarily attributed to the decreased net realizable value of the capitalized software resulting from the decrease in revenue from licensing services under our SmartHomework® solution. The decrease in revenue from licensing services was primarily due to we have reduced licensing to educational corporate customers to avoid cultivating competitors in the market which result in a shrinkage of this category of business since April 2021 as well as the decrease in demand resulting from the additional government restrictions over online and offline education industries.

Other income (expenses)

Other income (expenses) consist of (i) government subsidy (ii)interest expenses, net (iii) others (expenses) income, net. The following table sets forth the components of other income (expenses) both in absolute amount and as a percentage of total net revenues for the periods indicated.

	For the Years Ended March, 31
	2022						2021
	$			%			$			%
Interest expenses, net		(137,608	)		(1.1	)		(61,329	)		(0.5	)
Government subsidy		183,843			1.4			495,796			4.3
Other (expenses) income, net		(7,894	)		(0.1	)		28,874			0.3
Total other income		38,341			0.2			463,341			4.1

Interest expense, net. Our Interest expense, net is comprised of interest expenses and incidental charges associated with our bank borrowings, netting interest received from our bank deposits and interest earned from long-term accounts receivable.

Government subsidy. Our government subsidy is comprised of grant payments received from the PRC government.

Other income, net. Other income, net is comprised of deduction of VAT tax, netting other operating expenses.

Taxation

Cayman Islands

We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, we are not subject to income or capital gains tax in the Cayman Islands. In addition, our payment of dividends to our shareholders, if any, is not subject to withholding tax in the Cayman Islands.

Hong Kong

Our subsidiary incorporated in Hong Kong is subject to the two-tiered profits tax rates regime, which the first 2 million Hong Kong Dollar, or HKD, of profits of the qualifying group entity will be taxed at 8.25% and profits above HKD2 million will be taxed at 16.5%. Under the Hong Kong tax laws, we are exempted from the Hong Kong income tax on our foreign-derived income and there are no withholding taxes in Hong Kong on the remittance of dividends.

PRC

Our subsidiary, the VIE and the VIE’s subsidiaries incorporated in China are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%. For the years ended March 31, 2022 and 2021, Shenzhen Ruanyun, Jiangxi Alphabet, Huizuoye and WFOE were qualified as "Small Enterprise with Low Profit" entities in accordance with PRC tax laws. These entities received a preferential income tax rate of 5% for the year ended December 31, 2020 and a preferential income tax rate of 2.5% starting from January 1, 2021. The VIE is entitled to a favorable statutory tax rate of 15% as its qualification as a “High and New Technology Enterprise”.

We are currently subject to value added tax, or VAT, at rates between 6% and 13% on the services and products that we provide, less any deductible VAT we have already paid or borne.

Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and receives approval from the relevant tax authority. If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%.

If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Risk Factors — Risks Relating to Doing Business in China — If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.”

Results of Operations

The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages of total revenues. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.

	For the Years Ended March 31
	2022						2021						Change
	$			%			$			%			$			%
Revenues from third parties		12,803,123			100.0			10,341,807			89.9			2,461,316			23.8
Revenues from related parties		—			—			1,157,635			10.1			(1,157,635	)		(100.0	)
Total Revenues		12,803,123			100.0			11,499,442			100.0			1,303,681			11.3
Cost of revenues		(7,180,326	)		(56.1	)		(7,614,950	)		(66.2	)		434,624			(5.7	)
Gross profit		5,622,797			43.9			3,884,492			33.8			1,738,305			44.7
Operating expenses
Selling expenses		(2,191,181	)		(17.1	)		(1,478,570	)		(12.9	)		(712,611	)		48.2
General and administrative expenses		(2,120,806	)		(16.6	)		(1,442,757	)		(12.5	)		(677,329	)		46.9
Research and development expenses		(1,822,882	)		(14.2	)		(954,084	)		(8.3	)		(868,798	)		91.1
Impairment for capitalized software		(266,482	)		(2.1	)		—			—			(266,482	)		100.0
Total operating expenses		(6,400,631	)		(50.0	)		(3,875,411	)		(33.7	)		(2,525,220	)		65.2
(Loss) income from operations		(777,834	)		(6.1	)		9,081			0.1			(786,915	)		(8665.5	)
Other income (expenses)
Interest expenses, net		(137,608	)		(1.1	)		(61,329	)		(0.5	)		(76,279	)		124.4
Government subsidy		183,843			1.4			495,796			4.3			(311,953	)		(62.9	)
Other (expenses) income, net		(7,894	)		(0.1	)		28,874			0.3			(36,768	)		(127.3	)
(Loss) income before income tax		(739,493	)		(5.8	)		472,422			4.1			(1,211,915	)		(256.5	)
Income tax expenses		—			—			—			—			—			—
Net (loss) income		(739,493	)		(5.8	)		472,422			4.1			(1,211,915	)		(256.5	)

Comparison of Years Ended March 31, 2022 and 2021

Revenues

Our revenues increased by $1,303,681 or 11.3% from $11,499,442 in fiscal 2021 to $12,803,123 in fiscal 2022. The increase primarily reflected the increase in sales from our platform development services of SmartExam® Solution, our software customization and content development services and our digitalization services of our SmartHomework® Solution, which partially offset by the decrease in sales from personalized exercise book and MOTK Pro services of our SmartHomework® Solution, as discussed in greater detail below.

The following table sets forth the breakdown of our revenues, both in absolute amounts and as a percentage of our total revenues, for the years indicated:

	For the Years Ended March 31,
	2022				2021
	$		%		$		%
SmartExam® Solution:
Platform Development		2,868,302		22.4		2,340,019		20.3
Others		431,975		3.4		—		—
SmartHomework® Solution:
Platform Development		870,295		6.8		1,253,198		10.9
Software customization and content development		2,146,085		16.8		—		—
License		758,378		5.9		912,034		7.9
Personalized Exercise Book and MOTK Pro		117,536		0.9		1,926,461		16.8
Digitization Services		5,610,552		43.8		5,067,730		44.1
Total revenues		12,803,123		100.0		11,499,442		100.0

SmartExam® Solution

1.	Platform development

Our SmartExam® Solution platform development revenue increased by $528,283 or 22.6% from $2,340,019 in fiscal 2021 to $2,868,302 in fiscal 2022, primarily due to increase in our SmartExam® Solution platform implementation services that were previously postponed as campuses were closed in fiscal 2021 due to the COVID-19 pandemic.

Others

We started to provide other services under our SmartExam® Solution during fiscal 2022, which include software customization, hardware sales and other comprehensive professional testing services. We recorded a revenue of $431,975 in fiscal 2022.

SmartHomework® Solution

Platform development

SmartHomework® Solution platform development revenue decreased by $382,903 or 30.6% from $1,253,198 in fiscal 2021 to $870,295 in fiscal 2022. The decrease was primarily attributed to the change in product demand from our customers. In fiscal 2021, customers mainly purchased our regular A.I study room, which yielded a higher revenue per project. In fiscal 2022, the majority of the customers purchased our mini A.I study room, which yielded a lower revenue per project comparing to our regular study room. For fiscal 2022 and 2021, we completed 11 and 7 projects, respectively.

Software customization and content development

We started providing software customization and content development services in fiscal 2022 and recorded $2,146,085 in revenue in fiscal 2022. In fiscal 2022, we completed 5 software development projects and 1 content development project.

License

License revenue decreased by $153,656 or 16.8% from $912,034 in fiscal 2021 to $758,378 in fiscal 2022. The decrease was primarily due to we have reduced licensing to educational corporate customers to avoid cultivating competitors in the market which result in a shrinkage of this category of business since April 2021 as well as the decrease in demand resulting from the additional government restrictions over online and offline education industries.

Personalized exercise book and MOTK Pro

Revenue from personalized exercise book and MOTK Pro decreased by $1,808,925 or 93.9% from $1,926,461 in fiscal 2021 to $117,536 in fiscal 2022. The decrease was mainly attributed to the additional government restrictions which limited our capability of distributing our services directly to the students. Starting in fiscal 2022, we developed a new distribution model that we distribute our personalized exercise book and MOTK Pro services through telecom operators. This change in our distribution model led to significant decrease in revenue generated from this revenue stream. We expect there to be a decrease in revenue generated from this revenue stream for a period of time as the ultimate users of our services adapting to this new distribution model. From the long run, we expect to see revenue generated from this revenue stream to recover and further increase after the market fully adapts to our new distribution model.

5.	Digitization services

Revenue from digitization services increased by $542,822 or 10.7% from $5,067,730 in fiscal 2021 to $5,610,552 in fiscal 2022. The increase was primarily due to the growth of this product line with our strategic alliance with one of the largest publishers in China for converting their publications into digital format as their demand for digitalizing their products increase.

Cost of revenues

Our cost of revenues decreased by $434,624 or 5.7% from $7,614,950 in fiscal 2021 to $7,180,326 in fiscal 2022. The decrease was primarily attributable to the decrease of cost in our personalized exercise book and MOTK Pro which amounted to $1,306,474 and the decrease of cost in our digitization services which amounted to $891,791 of our SmartHomework® Solution, which offset by the increase of $1,212,375 in our new business in software customization and content development under our SmartHomework® Solution and the increase of $530,256 in platform development and others under our SmartExam® Solution.

Gross profit

As a result of the foregoing, our gross profit increased by $1,738,305 or 44.7% from $ $3,884,492 in fiscal 2021 to $5,622,797 in fiscal 2022. Our gross margin increased by 10.1% from 33.8% in fiscal 2021 to 43.9% in fiscal 2021, which was mainly attribute to the extend scale from the sales increase from our digitization services with higher gross profit margin compared to fiscal 2021 and high gross profit margin of our customized software and content development services. The increase is also attributed to the SmartHomework® Solution platform development revenue as our projects were primarily located in Nanchang city and few channel cost were incurred.

Operating expenses

Our operating expenses increased by $ 2,525,220 or 65.2%from $3,875,411 in fiscal 2021 to $6,400,631 in fiscal 2022.

Selling expenses

Our selling expenses increased by $712,611 or 48.2% from $1,478,570 in fiscal 2021 to $2,191,181 in fiscal 2022. This increase was primarily due to the increase in marketing and promotion expenses, which increased by $585,442 or 105.1% from $556,866 in fiscal 2021 to $1,142,308 in fiscal 2022. The increase is also attributed to our staff compensation and benefit expenses, which increased by $114,001 or 19.2% from $592,297 in fiscal 2021 to $706,297 in fiscal 2022. The increase is primarily offset by the decrease in our conference and business development expenses, which decreased by $30,466 or 22.8% from $133,906 in fiscal 2021 to $103,439 in fiscal 2022.

General and administrative expenses

Our general and administrative expenses increased by $677,329 or 46.9% from $1,442,757 in fiscal 2021 to $2,120,086 in fiscal 2022. The increase is primarily attributable to the increase in staff compensation and benefit, which increase by $288,868 or 61.9% from $466,470 in fiscal 2021 to $755,338 in fiscal 2022. Professional expenses for third parties also increased by $399,328 or 936.7% from $42,632 in fiscal 2021 to $441,960 in fiscal 2022, which is the due to additional expenses incurred in connection with our IPO process. Our rental expenses increased by $14,566 or 27.0% from $53,959 in fiscal 2021 to $68,525 in fiscal 2022. Our provision for doubtful accounts increased by $64,823 or 12.5% from $518,241 in fiscal 2021 to $583,063 in fiscal 2022 . The increase is primarily offset by the decrease in expenses associated with internal meetings and reimbursable meals, which decreased by $58,856 or 43.9% from $133,955 in fiscal 2021 to $75,099 in fiscal 2022.

Research and development expenses

Our research and development expenses increased by $868,798 or 91.1% from $954,084 in fiscal 2021 to $1,822,882 in fiscal 2022. The increase is primarily attributable to the increase in the staff compensation and benefits for research activities prior to the establishing of technological feasibility, which increased by $615,698 or 148.1% from $415,621 in fiscal 2021 to $1,031,319 in fiscal 2022, as a result of our continuous investment in software development. Amortization for our capitalized software development cost also increased by $114,019 or 60.7% from $187,731 in fiscal 2021 to $301,749 in fiscal 2022. Outsourcing expenses increased by $94,580 or 78.7% from $120,192 in fiscal 2021 to $214,772 in fiscal 2022. The increase also attributed to the increase in sever rental expenses, which increased by $45,192 or 43.4% from $104,120 in fiscal 2021 to $149,312 in fiscal 2022.

Impairment for capitalized software

Impairment for capitalized software increased from $nil for the year ended March 31, 2021 to $266,482 for the year ended March 31, 2022, primarily attributed to the decreased net realizable value of the capitalized software resulting from the decrease in revenue from licensing services under our SmartHomework® solution. The decrease in revenue from licensing services was primarily due to we have reduced licensing to educational corporate customers to avoid cultivating competitors in the market which result in a shrinkage of this category of business since April 2021.

Other Income (Expenses)

Other Income decreased by $425,000 or 91.7% from $463,341 in fiscal 2021 to $38,341 in fiscal 2022.

Interest expenses, net

Our interest expenses, net increased by $76,279 or 124.4% from $61,329 in fiscal 2021 to $137,608 in fiscal 2022, which is mainly due to interest cost in association with several new bank loans in fiscal 2022. In fiscal 2022, we had a weighted average loan outstanding of $2,868,120 compared to a weighted average loan outstanding of $1,559,792 in fiscal 2021. Our interest income decreased by $8,219 or 61.2% from $13,439 in fiscal 2021 to $5,220 in fiscal 2022.

Government subsidy

Government subsidy decreased by $311,953 or 62.9% from $495,796 in fiscal 2021 to $183,843 in fiscal 2022. The decrease was mainly attributed to the strengthen government grant policies that lengthen the approval process.

Net Income(loss)

We recorded a net loss of $739,493 in fiscal 2022, as compared to a net income of $472,422 in fiscal 2021. Such change was mainly due to the reasons significant increase in operating expenses as discussed above.

Liquidity and Capital Resources

To date, we have financed our operations primarily through capital contribution, bank loans, and shareholder working capital funding, when necessary. We plan to support our future operations primarily from cash flows provided by operating activities, cash on hand, bank loans and additional capital contributions.

As of March 31, 2022, we had $1,148,728 in cash as compared to $2,179,628 as of March 31, 2021. As of March 31, 2022, we also had $5,818,781 in accounts receivable balance from third parties and approximately $5.4 million, or 82%, has been subsequently collected as of the date of this prospectus. The remaining 70% of the balance is expected to be collected before March 31, 2023 and the remaining 30% of the balance is expected to be collected before September 30, 2023. The collection of such receivables made cash available for use in our operations as working capital, if necessary.

We normally granted our third-party customers one to four months payment terms after credit sales. The days sales outstanding for accounts receivable due from third-parties increased from approximately 72 days in fiscal years ended March 31, 2021 to 125 days in fiscal years ended March 31, 2022. As of March 31, 2022, 61% of the accounts receivable outstanding aged within 6 months. The increase in the days sales outstanding was primarily because some of our customers required extended payment terms up to 12 months due to temporary financial difficulties and longer payment processing times as a result of COVID-19. The increased days sales outstanding has resulted with an increased in provision of doubtful accounts and ultimately resulted with a net loss and negative cash flow from operating activities for fiscal 2022. We closely monitored the collectability risk and we collected the majority balance outstanding as of the date of this prospectus and the remaining balance is expected to be collected in the near future.

As of March 31, 2022, we had $4,559,738 in short-term bank loans outstanding. We expect that we will be able to renew our existing short-term bank loan upon its maturity based on experience and our good credit history.

We believe that our cash from operations, existing cash, cash equivalents, and bank loans are sufficient to fund our operating activities, capital expenditures and other obligations for the next 12 months. We may, however, need additional cash resources in the future if we experience changes in business conditions or other developments. We may also need additional cash resources in the future if we wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand, we may seek to obtain additional credit facilities or issue debt or equity securities. After this offering, we may decide to enhance our liquidity position or increase our cash reserve through additional capital and finance funding. The incurrence of indebtedness would result in increased fixed obligations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

A majority of our future revenues for the foreseeable future is likely to be denominated in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.

The following table sets forth a summary of our cash flows for the periods indicated:

	For the Years Ended March 31,
	2022			2021

Net cash used in operating activities	$	(2,551,753	)	$	(1,619,828	)
Net cash used in investing activities		(588,968	)		(368,326	)
Net cash provided by financing activities		2,050,297			683,288
Effect of exchange rate fluctuation on cash		59,524			217,642
Net decrease in cash		(1,030,900	)		(1,087,224	)
Cash and cash equivalents at beginning of year		2,179,628			3,266,852
Cash and cash equivalents at end of year	$	1,148,728		$	2,179,628

Operating activities

Net cash used in operating activities amounted to $2,551,753 for the year ended March 31, 2022, as compared to a net loss of $739,493 for the same year. The net change was due to $1,400,303 for non-cash adjustments and $3,212,563 changes in our working capital. Non-cash adjustment primarily consisted of depreciation and amortization of $459,627 and provision for doubtful accounts of $583,064. Changes in working capital accounts primarily consisted of an increase in accounts receivable from third parties of $3,335,286, an increase in long-term receivable of $223,169 and a decrease of $555,188 in deferred revenue, partially offset by an increase in account payable of $895,963.

Net cash used in operating activities amounted to $1,619,828 for the year ended March 31, 2021, as compared to a net income of $472,422 for the same year. The net change was due to $1,191,945 for non-cash adjustments and $3,284,195 changes in our working capital. Non-cash adjustment primarily consisted of depreciation and amortization of $524,524 and provision for doubtful accounts of $518,241. Changes in working capital accounts primarily consisted of an increase in accounts receivable from third parties of $2,147,700, an increase in account receivable from related parties of $1,070,260, an increase in inventories of $232,483, an increase in prepayments and other current assets of $277,909, an increase in account payable of $877,583, and an increase in deferred revenue from third parties of $220,233, partially offset by a decrease of $221,128 in accounts payable from related parties and a decrease in accrued expenses and other liabilities of $135,925.

Investing activities

Net cash used in investing activities amounted to $588,968 for the year ended March 31, 2022, primarily attributable to acquisition of property and equipment for $504,886.

Net cash used in investing activities amounted to $368,326 for the year ended March 31, 2021, primarily attributable to the capitalization of software and development cost of $382,107.

Financing activities

Net cash provided by financing activities amounted to $2,050,297 for the year ended March 31, 2022, primarily as a result of proceeds from bank loans of $4,503,824, and partially offset by the repayments of bank loans of $2,181,365 and payments of issuance cost of $272,162.

Net cash provided by financing activities amounted to $683,288 for the year ended March 31, 2021, primarily as a result of proceeds from bank loans of $2,063,862, and partially offset by the repayments of bank loans of $884,512 and repayments from loans related parties of $442,256.

Contractual Obligations

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

	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years

Short-term bank loans ⁽¹⁾		4,559,738		4,559,738		—		—		—
Future lease payments ⁽²⁾		146,269		146,269		—		—		—
Total		4,706,007		4,706,007		—		—		—

Notes

(1)	Our contractual obligation to repay outstanding short-term bank loans amounted to $4,559,738 comprised of the following bank loans:

●

⁽¹⁾In June 2020, Jiangxi Ruanyun entered into a one-year unsecured loan agreement with China Merchants Bank of RMB1,000,000 (US$152,630) bearing an interest rate of 4.80% per annum. In December 2020, Jiangxi Ruanyun entered into another one-year loan agreement with China Merchants Bank for RMB2,000,000 (US$305,259) bearing an interest rate of 4.80% per annum. Both loans were fully repaid on their maturity date in June and December 2021, respectively. In August 2021, Jiangxi Ruanyun entered into a one-year credit facility agreement of maximum RMB 3,000,000 (US$473,239) with China Merchants Bank. In November 2021, Jiangxi Ruanyun made a withdraw of RMB 3,000,000 (US$473,239) bearing an interest rate of 4.80% per annum. The loan was guaranteed by a third-party entity, Nanchang Industrial Holdings Guarantee Co., Ltd. ⁽²⁾In July 2020, Jiangxi Ruanyun entered into a one-year unsecured loan agreement with China Construction Bank for RMB2,000,000 (US$305,260) bearing an interest rate of 4.2525% per annum. The loan was extended to September 2021 with an interest rate of 4.2525% per annum. In July 2020, Jiangxi Ruanyun entered into another one-year unsecured loan agreement with China Construction Bank for RMB3,000,000 (US$457,890) bearing an interest rate of 4.2525% per annum. The loan was extended to October 2021 with an interest rate of 4.2525% per annum. Both loans were fully repaid on their maturity date in September and October 2021, respectively. In December 2021, Jiangxi Ruanyun entered into a one-year loan agreement with China Construction Bank for RMB 5,000,000 (US$788,731) bearing an interest rate of 4.7850% per annum. The loan was guaranteed by a third-party entity, Nanchang Industrial Holdings Guarantee Co., Ltd. The Company incurred a guarantee fee of $7,791 for the loan and the unamortized balance as of March 31, 2022 was $5,609. Loan issuance costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the loan and amortized to interest expense using the effective interest rate of 5.84% as of March 31, 2022. In January 2022, Jiangxi Ruanyun entered into another one-year loan agreement with China Construction Bank of RMB5,000,000 (US$788,731) bearing an interest rate of 4.7850% per annum. The loan was guaranteed by a third-party entity, Nanchang Industrial Holdings Guarantee Co., Ltd. The Company incurred a guarantee fee of $7,791 for the loan and the unamortized balance as of March 31, 2022 was $6,222. Loan issuance costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the loan and amortized to interest expense using the effective interest rate of 5.84% as of March 31, 2022. ⁽³⁾In July 2020, Jiangxi Ruanyun entered into a one-year loan agreement with Bank of China to for RMB3,000,000 (US$457,889) bearing an interest rate of 3.85% per annum. The loan was fully repaid on its maturity date in July 2021. In July 2021, Jiangxi Ruanyun entered into a one-year loan agreement with Bank of China of RMB3,000,000 (US$473,238) bearing an interest rate of 4.3500% per annum. The loan was guaranteed by Ms. Fu Yan, the Company's director and chief executive officer and the chief executive officer of Jiangxi Ruanyun Technology Co., Ltd. The loan was fully repaid on its maturity date in July 2022. ⁽⁴⁾In December 2020, Jiangxi Ruanyun entered into a one-year loan agreement with Bank of Communication for RMB3,000,000 (US$457,889) bearing an interest rate of 4.35% per annum. This loan was guaranteed by Ms. Fu Yan, the Company’s director and chief executive officer and the chief executive officer of Jiangxi Ruanyun Technology Co., Ltd. The loan was fully repaid on its maturity date in December 2021. In December 2021, Jiangxi Ruanyun entered into a one-year credit facility agreement of maximum RMB3,000,000 (US$473,238) with Bank of Communication. In January 2022, Jiangxi Ruanyun made a withdraw of RMB3,000,000 (US$473,238) which will be due in January, 2023. The loan bears a fixed interest rate of 4.35% per annum. The loan was guaranteed by a third party, Jiangxi Provincial Financing Guarantee Group Co., Ltd. and Ms. Fu Yan, the Company's director and chief executive officer and the chief executive officer of Jiangxi Ruanyun. The Company incurred guarantee fee of $3,739 for the loan and the unamortized balance as of March 31, 2022 was $3,060. Loan issuance costs are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the loan and amortized to interest expense using the effective interest rate of 5.19% as of March 31, 2022. ⁽⁵⁾In September 2021, Jiangxi Ruanyun entered into a one-year loan agreement with Shanghai Pudong Development Bank for RMB5,229,200 (US$ 824,886) bearing an interest rate of 4.35% per annum. In November 2021, Jiangxi Ruanyun entered into a one-year loan agreement with Shanghai Pudong Development Bank Nanchang Branch for RMB4,770,745.00 (US$748,634) bearing an interest rate of 5.30% per annum. These loans were pledged by an accounts receivable from one of the customers. As of March 31, 2022, such accounts receivable balance was RMB 12,364,400 (US$1,950,436). Both loans were fully repaid in July 2022. The weighted average interest rate for the bank loans was approximately 4.69% and 4.52% for the years ended March 31, 2022 and 2021, respectively. For the years ended March 31, 2022 and 2021, interest expense related to the bank loans amounted to $125,182 and $66,111, respectively.

(2)

We lease office spaces, which are classified as operating lease in accordance with ASC Topic 842.

Holding Company Structure

Ruanyun Edai Technology Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our wholly owned subsidiary, our consolidated VIE and its subsidiaries in China, or the PRC Entities. As a result, our ability to pay dividends depends upon dividends paid by our PRC Entities. If our PRE Entities or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our PRC Entities are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our PRC Entities 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. In addition, our PRC Entities may allocate a portion of their after-tax profits based on PRC accounting standards to discretionary surplus funds at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our PRC Entities have not paid dividends, and some of them will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds.

Trend Information

Other than as disclosed elsewhere in this registration statement, we are not aware of any trends, uncertainties, demands, commitments, or events that are reasonably likely to have a material effect on our net revenue, income from continuing operations, profitability, liquidity, or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

Off-Balance Sheet Commitments and Arrangements

We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits. We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Inflation

Since we commenced our current business operations, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for March 2022 and 2021 were increases of 1.5% and 0.4%, respectively. Although we have not in the past been materially affected by inflation since we commenced our current business operations, we can provide no assurance that we will not be affected in the future by higher rates of inflation in China.

Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Risk

We earn all of our revenues and incur most of our expenses in RMB. As the impact of foreign currency risk on our operations was not material in the past, we have not used any forward contracts, currency borrowings or derivative instruments to hedge our exposure to foreign currency exchange risk.

To the extent that we need to convert U.S. dollars we receive from this offering into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amounts available to us.

Interest Rate Risk

Our exposure to interest rate risk primarily relates to interest income generated by excess cash, which is mostly held in interest-bearing bank deposits. We generated immaterial amounts of interest income in 2022 and 2021, respectively. We obtain loans from commercial banks from time to time to meet our working capital expenditure requirements. All of our bank borrowings as of March 31, 2022 and 2021 bear fixed interest rates with maturity of one year or less. If we were to renew any of these loans, we might be subject to interest rate risk.

We have not used derivative financial instruments to hedge the interest rate risk. We have not been exposed to material risks due to changes in market interest rates. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future.

Credit risk

All of our cash and cash equivalents are held by major financial institutions located in the PRC which we believe are of high credit quality. We expect that there is no significant credit risk associated with these assets.

We rely on a limited number of third parties to provide payment processing services to collect amounts due from customers. Payment service providers are financial institutions, credit card companies and online payment platforms which we believe are of high credit quality. As of March 31, 2022 and 2021, we did not have significant amounts of cash held in accounts managed by online payment platforms such as Alipay and WeChat Pay.

Accounts receivable are typically unsecured and are derived from revenues earned from customers in the PRC. The credit risk with respect to account receivables is mitigated by credit control policies we carry out with respect to our customers and our ongoing monitoring process of outstanding balances.

Liquidity risk

As of March 31, 2022, we had cash of $1,148,728, as compared to total current liabilities of $7,387,719.

Cash represents cash on hand and demand deposits placed with banks which are unrestricted as to withdrawal or use and have original maturities less than three months.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenue and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts of revenue and expenses incurred during the financial reporting period. The most significant estimates and assumptions include the valuation of accounts receivable, advances to suppliers, useful lives of property and equipment, the recoverability of long-lived assets, provision necessary for contingent liabilities, and revenue recognition. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe critical accounting policies as disclosed in this prospectus reflect the more significant judgments and estimates used in preparation of our consolidated financial statements.

While our significant accounting policies are more fully described in note 3 to our consolidated financial statements included elsewhere in this prospectus, we believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements. The following are descriptions of our critical accounting policies and estimates. They should be read in conjunction with our consolidated financial statements and other disclosures included in this prospectus.

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries, VIE and VIE’s subsidiaries in which WFOE is the primary beneficiary. All significant inter-company transactions and balances between the Company, its subsidiaries and the VIE have been eliminated upon consolidation.

Use of Estimates

The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenues and expenses during the reported period in the consolidated financial statements and accompanying notes. Significant accounting estimates include, but not limited to allowances for doubtful accounts, estimated useful lives and impairment of long-live assets, and revenue recognition. Actual results may differ materially from those estimates.

Revenue Recognition

We follow ASC 606, Revenue from Contracts with Customers, or ASC 606, for revenue recognition. ASC 606 establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized, as performance obligations are satisfied.

The following five steps are applied to achieve that core principle: (1) identify the contract with the customer (2) identify the performance obligations in the contract (3) determine the transaction price (4) allocate the transaction price to the performance obligation in the contract (5) recognize revenue when the company satisfies a performance obligation.

Our revenues are generated primarily from platform development, software customization and content development, license, personalized exercise book and MOTK Pro, digitization service.

SmartExam® Solution

1.	Platform Development

We contract with schools, local educational bureaus and business entities to provide SmartExam® solution to construct computer-based testing centers for a fixed price. Currently, we offer to construct testing centers for all eleven subjects through grade 7 to 12 of the China’s Academic Proficiency Assessment Test, or APT. The SmartExam® platform development service is mainly to build, upgrade and transform the physical environment of the testing centers, which normally includes procurement of hardware, customization of software, installation and implementation of software and hardware. We provide a perpetual license to our testing-taking software in the “SmartExam® Solution” upon transfer of the testing centers. The SmartExam® solution platform combines the A.I. algorithms and hardware including computers, test progress LCD, face recognition cameras, body sensing devices, and RFID card readers, and is capable of recognize the examinees, automatically assign seat for the examinees, generate exam questions and automatically assess the test results.

We conclude our SmartExam® solution platform development contracts meet all five criteria under Step 1: identify contract with customers in accordance with ASC 606. We evaluate the SmartExam® solution platform development contracts to identify performance obligations. A performance obligation is a promise to transfer to the customer either 1) a good or service (or a bundle of goods or services) that is distinct; or 2) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. We consider our promises to the customers include the construction of testing centers and providing a perpetual license to the testing-taking software. These two promises are capable of being distinct and separately identifiable in the contract.

For the construction of the testing centers, we consider the goods or service promises in the contract include the hardware, customization of software, and installation and implementation of software and hardware. These goods or services are capable of being distinct because the customer can benefit from each of them on its own or together with other readily available resources. However, the promises to transfer these goods or services are not separately identifiable. The testing center is an integrated solution that includes test and exam question content, grading and evaluation, onsite management, training and supervision, and we provide a significant service of integrating the hardware and software into the testing center that the customer has contracted for. Any separate delivery of hardware, software or installation and implementation of software and hardware cannot achieve the customer’s intended function that is, each of the promises represent the input into the testing center, which is the combined output which the customer has requested per the contract, thus we treat them as a single performance obligation. The perpetual license provides customer the right to use the testing-taking software in the SmartExam® solution which has significant standalone functionality and does not require significant ongoing maintenance or effort from us to assure the usefulness of the license. Accordingly, we conclude each of our SmartExam® solution platform development contract contains two performance obligations which are a) the construction of testing centers and b) to provide the customer a perpetual license to the testing-taking software. We allocate the fixed transaction price to each performance obligation based on their stand-alone selling price, or SSPs. The customers sign acceptance to us upon the transfer of the testing center and we grant the perpetual license at the same time upon the acceptance of customers. We recognize revenue for the construction of testing center at a point in time when the performance obligation is satisfied which normally occur upon the acceptance of customers. For the perpetual license, we consider the software license as a functional intellectual property since it has significant standalone functionality and recognize the revenue at a point in time when such license is granted to the customer which normally occur at the point when customers accept the project.

For certain sales contracts, the customers require us to provide a warranty for a period of 3 years after the completion of the implementation. We determine that such product warranty is not a separate performance obligation because the nature of the warranty is to provide assurance that a product will function as expected and comply with agreed-upon specifications. We have not sold the warranty separately. Because of the nature of the projects, including contract owner inspections of the work both during construction and prior to acceptance, we have not experienced material warranty costs and, therefore, do not believe an accrual for these costs is necessary.

Others

We provide other SmartExam® Solution services, which include software customization, hardware sales and other comprehensive professional testing services, including test registration, test paper sampling, test center evaluation, and etc. The promised services in each contract are generally combined as a single performance obligation, as the promised services in a contract are not distinct and are considered as a significant integrated service. The revenue generated from these services are either recognized over the time or at a point in time if the satisfaction of the performance obligation does not meet any of the criteria to be recognized over the time. For revenue recognized over the time, we measure the progress using the output method. For revenue recognized at a point in time, we recognized the revenue when control of the service or products is transferred to the customer.

SmartHomework® Solution

1.	Platform Development

We also contract with schools and local educational bureaus to provide SmartHomework® solution for a fixed price. The SmartHomework® platform development service is mainly to build, upgrade and transform the physical environment of the A.I. Study Room, which provides the customers a comprehensive combination of hardware and software including advanced OCR optical handwriting and graph recognition, knowledge point structural diagramming, and contents of the K-12 exercise question bank. We provide a perpetual license to our proprietary academic evaluation technology, A.I. algorithms and contents of the online academic exercise question bank (in combination the SmartHomework® Solution) upon transfer of the A.I. Study Room. After the transfer of the A.I. Study Room, we also provide unspecified software updates on a when-and-if-available basis which update the content of question bank, address security issues when they occur and address minor bugs discovered, and certain software-related cloud services including data collection, data cleaning, data modeling and data analysis under SmartHomework® Solution.

We conclude our SmartHomework® solution platform development contracts with schools and local educational bureaus meet the criteria to be contracts with customers in accordance with ASC 606. We consider our promises to the customers include the construction of the A.I. Study Room, providing a perpetual license and providing updates, cloud-based services associated with the software. We have identified up to four performance obligations for each of the platform development contract under SmartHomework® solution product line, which are a) the construction of A.I. Study Room and b) to provide a perpetual software license with the rights to use all the content and proprietary technology under SmartHomework® solution c) to provide certain software-related cloud services under SmartHomework® solution d) to provide the when-and-if-available software updates.

For the construction of the A.I. Study Room, similar to the construction of the testing centers under SmartExam® solution, we consider the promises to transfer the goods or services are capable of being distinct but not separately identifiable. The A.I. Study Room is a “retail outlet” of the comprehensive online interactive learning and A.I. big data platform and we provide a significant service of integrating the hardware and software into the A.I. Study Room that the customer has contracted for. Any separate delivery of hardware, software or installation and implementation of software and hardware cannot achieve the customer’s intended function, that is, each of the promises represent the input into the A.I. Study Room, which is the combined output which the customer has requested per the contract, thus we treat them as a single performance obligation.

The fixed transaction price is allocated among these performance obligations based on their SSPs. Because we lack observable prices for the software-related cloud services and when-and-if-available software updates, the allocation of revenue is based on our estimated SSPs. The customers sign acceptance to us upon the transfer of the A.I. Study Room and we grant the perpetual license at the same time upon the acceptance of customers. We recognize revenue for the construction of A.I. Study Room at a point in time when the performance obligation is satisfied which normally occur upon the acceptance of customers. For the perpetual license, we consider the software license as a functional intellectual property since it has significant standalone functionality and recognize the revenue at a point in time when such license is granted to the customer which is normally occurred at the point when customers accept the project. Revenue allocated to the software-related cloud services and unspecified software updates is deferred and recognized on a straight-line basis over the estimated period they are expected to be provided. Revenue from the software-related cloud services and unspecified software updates are immaterial for the years ended March 31, 2021 and 2020, and for the nine months ended December 31, 2021 and 2020.

Our process for determining estimated SSPs involves management’s judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each deliverable. Should future facts and circumstances change, our SSPs and the future rate of related amortization for the software-related cloud services and unspecified software updates could change. Factors subject to change include the nature of the software-related cloud services and unspecified software updates, their estimated value and the estimated period they are expected to be provided.

Software Customization and Content Development

We provide software customization and content development services based on customers’ specifications. Contracts of this revenue stream generally do not contain significant financing components or variable consideration. The promised services in each service contract are combined and accounted for as a single performance obligation, as the promised services in a contract are not distinct and are considered as a significant integrated service. We recognize revenue from its software customization and content development service contracts at a point of time when the customers accept the customized software and / or content when the control of such software and / or content is transferred to the customer. Additionally, we provide product warranty on customized software. The warranty is not a separate performance obligation because the nature of the warranty is to provide assurance that the software will function as expected and comply with agreed-upon specifications. No warranty is provided for customized content delivered. We have not experienced material warranty costs and, therefore, does not believe an accrual for these costs is necessary.

License

We also enter into separate license agreement for license of the proprietary academic evaluation technology and A.I. algorithms, as well as sell contents of the academic exercise question bank to other educational service providers and educational technology companies. Customers purchase the right to access the cloud-based contents under time-based arrangement, which is generally one year. We recognize revenue ratably over the respective term of agreement.

4.	Personalized Exercise Book and MOTK Pro

We provide print version of SmartHomework® exercise book, which provide personalized exercises to students with subscription charged to the students per semester. The digitized SmartHomework® content, including the personalized exercise book, is covered by the SmartHomework® solution platform contracts between us and the schools or local governmental bureau. Students are able to access to the contents through authorized hardware in school. The print version of SmartHomework® exercise books allow students to have a similar access when they are outside the campus. During the subscription period, personalized exercise book is delivered in paper-based format on a daily or weekly basis. Revenue is generally recognized ratably over the contract term beginning on the commencement date of each contract, which is the date the student is granted access to the print function.

We also provide a premium version of SmartHomework® program, called MOTK pro, with a typical annual subscription to students. This premium service cover all subject fields with unlimited access during the subscription period to the cloud-based contents from personal devices, such as personal smart phones or tablet. We also sell the MOTK pro through many nationwide corporations, who are considered as MOTK pro business partners. Revenue for sales of MOTK pro is recognized ratably over the subscription period, which starts on the date when the students activate the account and the content is made available to students.

Digitization services

We provide digitization services to publishers, which convert the paper-based studying and exercise books into digital format. We conclude there is only one performance obligation in each of the contracts with customers within this revenue stream, which is to provide digitization service to publishers. Revenues are recognized at a point in time when we complete our digitalization service and the customer receives the fully digitalized materials.

Income taxes

We account for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No penalties or interest relating to income taxes were incurred during the years ended March 31, 2022 and 2021. We do not believe there was any uncertain tax provision as of March 31, 2022 and 2021.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments (Topic 326)”, which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life, instead of when incurred. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, which amends Subtopic 326-20 (created by ASU No.2016-13) to explicitly state that operating lease receivables are not in the scope of Subtopic 326-20. Additionally, in April 2019, the FASB issued ASU No.2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, in May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief”, and in November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”, and ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, to provide further clarifications on certain aspects of ASU No. 2016-13 and to extend the nonpublic entity effective date of ASU No. 2016-13. The changes (as amended) are effective for the Company for annual and interim periods in fiscal years beginning after December 15, 2022, and the Company is in the process of evaluating the potential effect on its consolidated financial statements.

See Note 3 of our Notes to the consolidated financial statements for a further discussion of recently issued accounting standards.

BUSINESS

Overview - What is Ruanyun

We believe the road to college should come with directions. Our mission is to help each K-12 student in China understand their specialty and find their way to higher education and future success.

Ruanyun was founded because we believe we can connect students with suitable learning materials to help improve their learning efficiency through data and A.I. technology. We believe understanding student’s academic status is the foundation for matching and distributing high quality, personalized educational resources and that this is an effective way of learning. We are committed to delivering a modern, efficient and effective learning model by providing schools, teachers and students with new teaching, learning and evaluation tools using the internet and A.I. As of March 31, 2022, there were 10,195 primarily paying premium subscribers and approximately 276,340 monthly active users. We are forming and building on strategic business alliances with large national publishers, China Mobile and other such companies with large customer resources in order to gain a large number of paying premium subscribers. Please refer to “Business-Personalized Exercise Book and MOTK Pro” for more details. As of November 30, 2022, we had over 14.26 million K-12 students who were using our online SmartHomework® learning platform, of which approximately 1 million were monthly active users.

In 1995, China’s National People’s Congress enacted the PRC Education Law which sets forth provisions regarding the foundational education system in China. Among other things, this includes a school system of kindergartens, elementary schools, middle schools and high schools, with grades from Kindergarten through twelve that provide compulsory education. Such law also stipulates a series of official diplomas to be granted upon students’ passing various levels and exams; and the pinnacle of such exams is the National College Entrance Exam, or the NCEE, also known as Gao Kao.

As of the date of this prospectus, we believe we are the only A.I. educational service provider that is integrated with the public K-12 education system of an entire province (Jiangxi) within China. We believe we have one of the most comprehensive online learning ecosystems covering all K-12 subject fields and grade levels, one of the largest academic exercise question banks that is designed and built for interactive learning, and one of the most advanced A.I. algorithms that power such questions, all of which are accessible online and on demand. Online classes and homework, and on-demand lectures and evaluation, which were only supplementary to the traditional in-school education in the recent past, are becoming more mainstream, especially after the coronavirus outbreak in 2019. With our SmartHomework® platform in place, we believe schools could quite easily provide daily live-classes, while assigning homework, administrating tests and conducting evaluations online.

As of the date of this prospectus, we believe we are the only K-12 question bank vendor in China that licenses its contents and evaluation technology to other educational service providers. Since inception, our online academic exercise question bank has accumulated more than 10 billion test data generated by approximately 14.26 million users from more than 27,000 schools (over 14,600 in Jiangxi Providence and over 12,400 in other provinces) and we have issued over 298 million evaluation reports. With the continuous collection and analyzing of students’ online learning data, our A.I. algorithms are constantly expanding and upgrading, reaching an evaluation accuracy rate of 97% (based on our own calculations), allowing us to provide students with tailored and effective learning strategies. We believe that, in time, our online learning platform will be recognized as revolutionary in affecting the advancement of China’s K-12 education system.

Industry Background

China’s National People’s Congress enacted the PRC Educational Law which sets forth provisions relating to the fundamental education system in China. This includes the school system of preschool, elementary school, middle school and high school (namely, K-12), with grades from one through twelve being compulsory education. The law also stipulates a system of educational certificates, which require taking a series of tests and exams to earn. The pinnacle of such exams is the National College Entrance Exam, or the NCEE, also known as Gao Kao.

Today, China has the largest K-12 education system in the world.

According to Ministry of Education of the People’s Republic of China, as of December 2021, China’s K-12 system had over 184 million students, including approximately 108 million primary school students, 50 million secondary school students and 26 million high school students across over 221,800 schools.

Over the past 40 years, particularly since the resumption of the NCEE in 1997, China’s K-12 educational system has been shouldering the responsibility of providing both public education to the masses as well as training and selecting a large number of qualified professionals. In July of each year, millions of Chinese high school graduates take the NCEE. Their NCEE scores will determine whether the students have the option to continue with their more advanced studies in colleges and universities, or enter into the general workforce, most occupations of which do not have college degree requirements and therefore inadvertently sustain a lesser social and economic status. Hence, the term “one test for life” describes Gao Kao as an existential turning point in millions of young people’s lives each year in China.

From 2019 to 2020, according to the China National Bureau of Statistics as of December 2020, China’s national education expenditure was 4.22% percent of GDP, which represented a higher level of such spending among developing and developed countries alike. In 2020, China’s educational spending was 4.2 trillion RMB (approximately $640 billion), a year-over-year growth of 7.10% percent. Since 2016, the Education Ministry of China has made various attempts to reform China’s educational system, aiming to rid the “one test for life” reality and to evaluate students’ performance and potentials on a more comprehensive basis. This is a reform of tremendous undertaking and is expected to be carried out to each provincial and municipal level within China. However in its early stage, China’s well-intended and sometimes heavy-handed approach to such a reform has not been without adverse consequences, which we believe mainly stem from the following issues:

●	The distribution of educational resources is uneven in China.

●	In a modern and fast-paced society, the traditional ways of teaching, learning and academic evaluation are seen as less efficient, effective and fair.

●	Without a new and more holistic approach in place, standardized test-taking still dominates students’ performance evaluation.

Consequently, the competition for resources and the emphasis on the results of standardized tests have only intensified, while tech-savvy students and parents look to the internet for gaining a competitive edge and academic advancement. As a result, central and local governments alike are seeking solutions to this matter. According to an iResearch report dated as of December 2020, the market size of China’s K-12 after-school tutoring education reached 530 billion RMB (approximately $79 billion) as of 2020. Meanwhile, according to the China Statistics Bureau, China’s household education and entertainment expenditure grew at a compound rate of over 7% from 2014 to 2021. We aspire to be the preferred A.I. educational technology provider to China’s approximate 184 million K-12 students in about 221,800 schools. First, our online learning tools can be tailor-made for each individual school, class, teacher, and/or student. Second, our adaptive learning platform requires different investment amounts for different users, hence, even school districts or students with modest budgets can afford our products and services. Third, our solution can bridge the gap between standardized classroom teaching and adaptive individualized learning, as we use the internet as a means of distribution of otherwise scarce valuable educational resources.

Aside from public K-12 education, the traditional K-12 student homework book market alone reached over RMB102.3 billion (approximately $16 billion) in 2019, according to Duojing Capital as of December 2019. With the recent digital transformation ongoing in China’s school system and advanced AI technologies, personalized homework books are introduced to help students study efficiently. Personalized homework books can be in both digital and paper-based format. Such books contain custom-made learning and practice content for each student by classification according to students’ current learning situations and learning abilities. They can be delivered to students online or published and delivered in paper form on demand. We believe this new form of publishing is becoming one of the most sought after models. In July 2021, the “Opinions on Further Reducing the Burden of Excessive Homework and Off-Campus Tutoring for Students Undergoing Compulsory Education”, or the Opinions, policy was released by the China central government, seeking to decrease workloads for students and overhaul the private tutoring sector. In the policy, it states that elementary students must finish homework in-school, and junior high school students finish most of their homework in-school. In addition, the policy states “tiered, flexible and personalized homework is encouraged”. Our SmartHomework® solution provides in-school service aiming to help students to study more efficiently by providing personalized homework to each student. Based on the Opinions, local governments have quickly chosen our SmartHomework® solution to push new reforms into effect. In Jiangxi, our “Personalized Publishing” service has been granted Exclusive Operation Right by government authority throughout the entire Province of Jiangxi.

In addition, the computer-based Academic Proficiency Test, or APT, is also setting a new trend for the test-preparation market. As the assessment is changing from paper format to computerized format, the test preparation solutions and smart devices markets are experiencing rapid growth. The computer-based assessment is currently being implemented in one province (Jiangxi) as the pilot project for the China Education Department. According to iResearch as of September 2022, the smart learning device market reached RMB 35.3 billion (approximately $5.4 million) in 2020 and is expected to grow to over RMB 66 billion (approximately $10.25 billion) as the computer-based test format becomes mainstream.

Our online SmartHomework® platform provides effective learning tools to students, and can meaningfully improve students’ academic performance. In the meantime, we continuously accumulate students’ learning data, analyzing their logical thinking, spatial imagination, language skills, analytical reasoning and other specific characteristics. This allows us to provide both scientific and empirical evaluation to each student, and recommend solutions to his/her individual learning needs.

As of November 30, 2022, over 14.26 million students use Jiangxi Ruanyun to collect their daily homework exercise data, prepare for a test or attend the Academic Proficiency Assessment, which is an official assessment across all subjects taught in schools, conducted by the Education Testing Authority in China. We believe we are currently the only company in China that has comprehensive study and test data for each student. This allows us to understand each student better and enables us to help them reach the next level of educational success with an effective strategy, every step of the way.

What We Offer

Over the last decade, our A.I. learning platform has expanded from learning to assessment in school to A.I application, services and hardware. We believe we are a trend-setter to aid in reforming the traditional education model in China with the technological progress brought about by the advent of A.I. technology. We believe we are the only educational A.I. company in China that serves both everyday learning and Academic Proficiency Test in-school. By providing computerized testing for China’s Academic Proficiency Test, which is equivalent to the SAT in China, it enables us to serve every student. Our everyday learning to official assessment model allows us to expand into a range of personalized “online” services and “offline” products for students in high demand.

Since 2019, we have been working with the Jiangxi Education Department to help bring high quality education and learning materials to every student regardless of where they are or how much money they have. With our SmartHomework® system, we could also help each student learn effectively. In July 2021, the “Opinions on Further Reducing the Burden of Excessive Homework and Off-Campus Tutoring for Students Undergoing Compulsory Education”, or the Opinions, policy was released and local governments have chosen our SmartHomework® solution to implement new reforms, and recommended that all schools in Jiangxi Province adopt our solutions.

In addition, the Ministry of Education of the People’s Republic of China encouraged local education authorities to adopt computer-based APT to replace traditional paper-based exam gradually. We believe that as a result of the Opinions policy, more high school and college admission departments will take APT grades and multi-dimensional assessment into consideration.

Everyday Teaching and Learning

Our SmartHomework® system is a digital teaching and learning decision platform, which collects students paper-based homework data with our intelligent scanning machine. During collection, the system can evaluate the grasp of knowledge for each student, and the teacher can adjust instructions for students based on their specific needs. Items that should be reviewed in the next class and AI generated instructions are being provided to the teacher immediately.

As the homework data is collected, the system immediately forms a personalized exercise book, or P.E. Book, with analogy questions personalized for each student based on mistakes or errors picked up in such homework data. Jiangxi Ruanyun and its subsidiaries professional “Personalized Publishing” service delivers the P.E. Book in print within 24 hours. We believe that this helps each student study more effectively without changing their normal study habits. The items that students practice would be determined by their own study data, and is then made available to them in a personalized and timely manner.

In addition, our A.I. learning platform provides teachers and students with additional online services. Based on the homework data collected, the system allows teachers to adjust their instructions for students who are either ahead or behind in their studies. The students, on the other hand, have access to their historic study data and information showing their academic strength and weaknesses. Personalized online courses and adaptive online practices are also provided on demand. While practicing online, the system provides consistent feedback to help students stay on course in their studies. We believe this is a revolutionary tool for students to learn and that it can significantly improve their academic performance.

We continuously accumulate students’ learning data during their learning process, analyzing students’ logical thinking, spatial imagination, language skills, analytical reasoning and other specific characteristics. This allows us to provide both scientific and empirical assessments to each student and recommend solutions based on his/her individual learning needs.

Academic Proficiency Test

China’s Academic Proficiency Test, or APT, is an official assessment across all subjects taught in school. There are eleven subject assessments which include Chinese, Math, English, Physics, Chemistry, Biology, Political Science, History, Geography, Information Technology and General Technology. All subject APTs need to be taken both during the secondary and high school periods. The secondary school APT assessments would be included as part of the high school admission process, while the high school APT is a pre-requisite for obtaining one’s high school diploma. For high school graduates seeking to study overseas, official APT grade report could be issued by education authority as it is widely accepted by institutions around the world.

We began providing computer-based APT services for the subject of Biology in 2013 and expanded to all eleven assessment subjects in 2017. Today, our SmartExam® platform and service covers assessment question contents, grading and evaluation, onsite management, training and supervision and standard security. This allows us to cover every student in the serving provincial or municipal area. As of November 30, 2022, we believe we are the only computer-based educational APT assessment vendor in China.

Test Preparation

Smart Devices

Building on daily learning and assessment services, we began to invest in building smart devices that further enhance students’ learning experiences and efficiency. Based on this, we invented Smart-Printer for personalized publishing and Jiangxi Ruanyun Smart-Headset for English assessments. For the introduction of Smart Printer, please refer to “Personalized Exercise Book-Smart Printer”.

Notable Achievements to Date

Since inception, we have benefited greatly from China’s overall economic growth, the increase in Chinese families’ disposable income, the rising Chinese household spending on education, and increased competition for China’s K-12 educational resources.

We Believe We Are the Only Educational Technology Company Who Is Integrated With the Educational System of an Entire Province: Our philosophy has always been that students do most of their learning in school, therefore we bring technology and content to schools to help students learn. We integrate our online SmartHomework® content and evaluation tools with standardized curricula of fourth through twelfth grades, while providing technological solutions to both on-campus and online learning. By doing so, we believe we are achieving two goals: to improve students’ learning efficiency and to lessen teachers’ work load. This approach was proven especially productive during the coronavirus outbreak in the first quarter of 2020 as millions of students who took their spring semester classes online also used our SmartHomework® contents for homework and evaluation.

We Believe We Are the Only all Subjects Computerized K-12 Testing Service Provider in China: Since 2013, we began working with the Nanchang Education Testing Authority to provide the K-12 paperless Academic Proficiency Test. To date, with over one million tests taken, we believe our proprietary test-taking system has generally been materially glitch- and error-free. As a result, we believe the computerized academic assessments conducted by the Nanchang Education Testing Authority, through us, is regarded as an exemplary case in officially sanctioned K-12 computerized testing services by China’s Ministry of Education and China Education Testing Center. As a result, many provincial and municipal testing authorities have also been reaching out to us for our expertise and we believe future opportunities will arise.

We Believe We Are the Only Supplier of Online Academic Exercise Contents Paired with Evaluation Tools: Since inception, we have spent over RMB 51.48 million (approximately $7.17 million) on designing, constructing, and updating our academic exercise question bank as of November 30, 2022, which we believe is the cornerstone of our success. This question bank consists of 17.09 million questions as of November 30, 2022, updated and supplemented daily, and covers all K-12 schools’ subject fields and grade levels. It is used for students’ daily practice as well as test-taking and performance evaluation. Since 2018, computerized K-12 academic testing and Smart Campus 2.0 program (a program established by The Ministry of Education on April 13, 2018) advocated by the Chinese government have given rise to a great number of new service providers catering to K-12 education, and they are all in need of academic exercise content, since it is one of the prerequisites for the Chinese government’s educational project bidding. We believe our academic exercise question bank is one of the few on the market that is large and diverse enough to meet this demand. Therefore, rather than developing such content in-house, many service providers prefer purchasing content from a vendor like us.

We Believe We Are the Only Educational Technology Company with a Publication Business License: Jiangxi Ruanyun was granted the “Publication Business License” issued in August 2020 (expires June 2035) by the Jiangxi Provincial Press and Publication Bureau (License No. 20477), becoming the only educational technology company in the Educational Technology market with publishing and distribution qualifications. Our online SmartHomework® suite of products, which are used by over 14.26 million K-12 students, have features that analyze students’ graded homework and quizzes, provide correct answers, and personalize reports, study guides and recommendations (some of these features are paid for and provided to students complimentary by school districts). Our premium subscribers can also request and print additional practice exercises of their chosen subjects and knowledge points. Printing of such materials can be done either in our A.I. Study Rooms® or at students’ own homes, which require equipment purchased from us. Alternatively, printing can also be done by us and delivered to students for a fee. We believe this personalized publishing service is the future for the publishing industry. As of November 30, 2022, over 298 million copies of the P.E. Book have been issued and delivered to our student users.

Our Strengths - What Sets Us Apart

China is in the midst of a major educational reform that is aimed to aid the long-term transformation of the Chinese economy from a focus on low-cost, labor-intensive manufacturing to a focus on technology and innovation. We believe the following competitive strengths differentiate us from our competitors and will continue to contribute to our success:

Integration with Schools: We strongly believe that students should do most of their learning in schools, therefore we bring our technology to them there. We deliver online academic exercise content, build A.I. Study Rooms on campuses, and integrate our SmartHomework® platform with students’ daily learning. In return, the K-12 school system is becoming our most robust source of growth. As we provide services in school, we do not need to drastically change the current habits of teachers or students. The teachers still assign traditional homework, and students work on such assignments in the homework book. We believe this solution is favored by both teachers and students. In addition, the recent upsurge in online learning due to the coronavirus outbreak in China has also been reshaping millions of students’ learning and studying routines, which we believe has been creating many opportunities for us for online learning.

Leading Technologies: Since inception, we have continued to develop our proprietary big data analytic and online A.I. algorithms; they underpin the delivery of our products and services for the benefit of improving students’ learning efficiency and academic performance. We have invested significant resources in research and development, and we have built a strong research and development team. As of March 31, 2021, we had a research and development staff of 63 members, accounting for approximately 34% of our total full-time employees. As of March 31, 2022, we had a research and development staff of 49 members, accounting for approximately 26% of our total full-time employees. We value our proprietary technologies and strong research and development capabilities, which we believe differentiate us from other companies in our industry. As of the date of this prospectus, we have an intellectual property portfolio consisting of 11 patents (9 of which have been registered and 2 are pending) and 23 trademarks filed with the PRC State Intellectual Property Administration, 50 copyrights registered with the PRC State Copyright Bureau, and 8 domain names.

Big Data: Since establishment, our database has accumulated more than 10 billion of study data generated by over 14.26 million users in more than 27,000 schools, and we have issued over 298 million exercise books and assessment reports. With the continuous accumulation of learning data, we have enriched the student learning database, optimizing our “Deep Knowledge Tracing”, exercise push algorithm, and predicting and learning strategies recommendation A.I. algorithm.

High Quality Content: We believe the academic exercise question bank that we have created is a leader in the market. It covers all grades and subjects and has over 15,064 high-quality knowledge points as of November 30, 2022. It is in high demand by schools, other educational service providers, and testing authorities.

Best of Breed Homework OCR Technology: On the basis of owning a large number of paper homework pictures, we have developed Optical Character Recognition, or OCR, technology, handwritten and printed content differentiation and other AI technologies, which has greatly improved our image recognition. This is the cornerstone for A.I. driven personalized exercise book formation. We have registered paper based homework OCR as our patent in China.

Customer Loyalty: We have very low customer turnover, and we believe this is because the products and services we offer are of high quality and value, and they address important needs for modern-day K-12 learning. For example, based on our usage data, students who are accustomed to using our online tools are more likely to become active users and eventually paying customers. This is evidenced by the steady growing number of premium users among total number of registered users on our SmartHomework® platform. We have built our user base by serving our users’ learning journeys, which we believe leads to a high degree of loyalty to our brand. Our customer base also enables us to continually cross-sell and upsell our products and services and to expand our market share.

Scalable Business Model: Capitalizing on our proprietary technology infrastructure, our consumer, or 2C, and government procurement, or 2G, businesses can be expanded and replicated with consistency very quickly, which, in the foreseeable future, we believe will help us achieve economy of scale and profitability and enable us to efficiently address the needs of our customers.

Visionary and Experienced Management Team: We have a visionary and experienced management team with strong execution capability. We benefit from the extensive experience and knowledge of our management team. Founded by IT professionals, we know that technology can bring about revolution in all walks of life, including education. Our founders were educated, and worked extensively in the IT industry in the United States. Throughout the years, we have assembled a management team of top professionals in their respective fields – from big data analysts, A.I. algorithm programmers, and expert teachers to sales and marketing personnel. We believe that the extensive experience, service and product knowledge, strategic vision and execution capabilities of our management team will allow us to continue to execute our growth strategies to achieve a high level of success.

Ms. Yan Fu is our co-founder and has served as a member of our board of directors since March 2021 and our chief executive officer since November 2021. Ms. Yan Fu is the founder of Jiangxi Ruanyun, the VIE, and has served as its chief executive officer and president since 2012. She has 14 years of information and software enterprise management experience. Prior to founding our Company, Ms. Fu served as director of quality assurance at IgnitionOne, managing its R&D process and quality assurance department from 2011 to 2012. Prior to that, from 2001 to 2011, she was the principal quality assurance analyst at Manhattan Associates, a supply chain software company in the U.S., and was responsible for quality control and team management of three software products. She earned a master’s degree in Management of Information Technology, a master’s degree in Business Administration, and a bachelor’s degree in Computer Science, all from Indiana University.

Mr. Cong Zhao is our co-founder and has served as our chief technology officer since November 2021, and is in charge of product design and R&D. He has over 20 years of software and platform development experience, and is specialized in big data analysis and A.I. algorithms. From 2004 to 2012, Mr. Zhao co-founded and built up SearchIgnite (later renamed to IgnitionOne), which tracks more than $2 billion in online advertising as well as $30 billion in online sales. From 2003 to 2005, Mr. Zhao was the chief architect of SmartVideo Inc., where he presided over the development of the first mobile TV video software and platform in the U.S. From 2000 to 2003, Mr. Zhao was the senior architect of SimplyHealth Inc. in the U.S., and was in charge of the development of large-scale B2B medical insurance software system. In October 2021, he was appointed as a member of our board of directors, and in November 2022, he resigned as a member of our board of directors. He earned a master’s degree in computer science, and another master’s degree in statistics, both from Indiana University. Mr. Zhao also has a bachelor’s degree in mathematics from Nankai University.

Ms. Wei Hu has served as our chief financial officer since November 2021. She has over 10 years of financial management experience. Since November 2014, Ms. Hu has served as the chief financial officer of Jiangxi Ruanyun, the VIE, and is responsible for strategic planning, investment and financing, financial management and internal compliance related work of the company. From 2010 to 2014, Ms. Hu successively held the positions of cashier, cost accountant, general ledger accountant, and financial manager in Guangdong Dikesi Information Co., Ltd. In October 2021, she was appointed as a member of our board of directors, and in October 2021, she resigned as a member of our board of directors. She earned a bachelor’s degree in financial management from Henan University of Economics and Law.

Mr. Liang Jing has served as our chief marketing officer since November 2021. Since 2019, he has served as chief marketing officer of Jiangxi Ruanyun, the VIE, and is mainly in charge of the development and maintenance of government projects. Since 2014, Mr. Jing has served in Jiangxi Ruanyun, the VIE, successively as the director of the resource center and the head of the government business department, before becoming the chief marketing officer. He has rich experience in government project development and provincial project service experience. From 2011 to 2013, Mr. Jing worked in ZTE Software Technology Co., Ltd. From 2013 to 2014, he worked in Jiangxi Beikang Information Technology Co., Ltd. for technical support in the marketing department. He earned a master’s degree in computer technology from Jiangxi University of Finance and Economics.

Our Strategies - How We Approach the Future

We seek to be a major technological solution provider to China’s education reform and lead the development of the A.I. learning industry. Our primary goal is to establish ourselves as a dominant A.I. educational technology company in China.

We are seeing a transformation in China’s K-12 learning in conjunction with the advancement of internet technology and the ongoing educational reform. Based on the successful launch of our SmartHomework® platform, we are focusing our resources primarily on the consumer (2C) market in order to expand our business nationwide. We plan to pursue the following growth strategies to achieve our goals:

●	Further develop and pursue existing marketing channels that are proven successful at acquiring large numbers of 2C customers: On a national level, our collaboration with Tencent and traditional publishers are unique and successful marketing strategies that we are pursuing vigorously.

●	Convert more users into premium subscribers: As of November 30, 2022, we have over 14.26 million registered users nationwide. We believe the registered users and the percentage of paying users would continue to increase because of the following factors: 1) there is an adoption period for using our SmartHomework® platform which involves training and reforming learning habits; 2) all users who we acquire from traditional publishers and other strategic business partners are paying customers since they are mostly from out-of-province and therefore are not subsidized by the Jiangxi government; 3) the “addiction” to our online learning platform will give rise to greater demand and reliance as students advance onto higher grade levels and face entrance exams; and 4) special situations may promote the use of online learning tools, whether they are for subscription or for free. Once such learning habits are formed, students tend to stick with them.

●	Expand service offerings on our learning platform: According to students’ usage data that we collect on our SmartHomework® platform, we have noticed that the why’s and how’s are more important than the what’s. In other words, students who use our learning platform are more actively interested in finding out why they’ve done something wrong and how they are to