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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>UNITED
STATES<br/>
SECURITIES AND EXCHANGE COMMISSION<br/>
WASHINGTON, D.C. 20549</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

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</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(Mark
One)</b></span></p><div>

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</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement">&#9744;</ix:nonNumeric> <b>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OR</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport">&#9746;</ix:nonNumeric> <b>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OR</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport">&#9744;</ix:nonNumeric> <b>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </b></span></p><div>



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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OR</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentShellCompanyReport">&#9744;</ix:nonNumeric> <b>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>



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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img alt="" src="image_001.jpg"/><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="-sec-ix-hidden: hidden-fact-0">XIAO-I
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 41%; border-bottom: black 1.5pt solid; padding-top: 0.7pt; padding-bottom: 0.7pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Title of Each Class</b></span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 2%; padding-top: 0.7pt; padding-bottom: 0.7pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 15%; border-bottom: black 1.5pt solid; padding-top: 0.7pt; padding-bottom: 0.7pt; text-align: center; text-indent: 4.15pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Trading Symbol(s)</b></span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 2%; padding-top: 0.7pt; padding-bottom: 0.7pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; width: 40%; border-bottom: black 1.5pt solid; padding-top: 0.7pt; padding-bottom: 0.7pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name of Each Exchange on which<br/>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
registered or to be registered pursuant to Section 12(g) of the Act.</span></p><div>

</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 7pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 7pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
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by the annual report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">24,015,592</ix:nonFraction>
Ordinary Shares, par value $0.00005 per share </b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. &#9744; Yes &#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. &#9744; Yes &#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Note
&#8211; Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.</span></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. &#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric> &#9744; No</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (&#167;232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). &#9746; <ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric> &#9744; No</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See the definitions of &#8220;large accelerated filer,&#8221; &#8220;accelerated filer,&#8221; and &#8220;emerging growth company&#8221;
in Rule 12b-2 of the Exchange Act.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; width: 31%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large accelerated filer&#160;&#160;&#9744;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 38%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accelerated filer&#160;&#160;&#9744;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 31%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory">Non-accelerated filer</ix:nonNumeric> &#9746;</span></p></td> <td style="font: 10pt Times New Roman, Times, Serif"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging growth company <ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntityEmergingGrowthCompany">&#9746;</ix:nonNumeric></span></p></td> <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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&#8224; provided
pursuant to Section 13(a) of the Exchange Act. <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityExTransitionPeriod">&#9744;</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8224;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
term &#8220;new or revised financial accounting standard&#8221; refers to any update issued by the Financial Accounting Standards Board
to its Accounting Standards Codification after April 5, 2012.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether the registrant has filed a report on and attestation to its management&#8217;s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:IcfrAuditorAttestationFlag">&#9744;</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant&#8217;s executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b). &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"> <td style="font: 10pt Times New Roman, Times, Serif; width: 15%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="-sec-ix-hidden: hidden-fact-1">U.S. GAAP</span>&#160;&#160;&#9746;</span></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 70%"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">International Financial Reporting</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Standards as issued by the</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">International Accounting Standards Board &#9744;</span></p></td> <td style="font: 10pt Times New Roman, Times, Serif; width: 15%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other&#160;&#160;&#9744;</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
&#8220;Other&#8221; has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow. Item 17 &#9744; Item 18 &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). &#9744; Yes <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany">&#9746;</ix:nonNumeric> No</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>






</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="text-decoration:underline">TABLE
OF CONTENTS</span></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td colspan="2" style="padding-bottom: 1.5pt; padding-left: 0.125in; text-indent: -0.125in; text-align: left">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="text-decoration:underline;text-decoration: none">Page</span></b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2" style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_001">ABOUT THIS ANNUAL REPORT</a></td>
    <td style="text-align: center">iii</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td colspan="2" style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_002">PRESENTATION OF FINANCIAL INFORMATION</a></td>
    <td style="text-align: center">vi</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2" style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_003">CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS</a></td>
    <td style="text-align: center">vi</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td colspan="2" style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_004">PART I</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0pt; text-align: left; width: 10%">Item 1.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; width: 80%"><a href="#a_005">Identity of Directors, Senior Management and Advisers</a></td>
    <td style="text-align: center; width: 10%">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 2.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_006">Offer Statistics and Expected Timetable</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 3.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_007">Key Information</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_008">[Reserved]</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_009">Capitalization and Indebtedness</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">C.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_010">Reasons for the Offer and Use of Proceeds</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">D.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_011">Risk Factors</a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 4.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_012">Information on the Company</a></td>
    <td style="text-align: center">52</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_013">History and Development of the Company</a></td>
    <td style="padding-left: -0.125in; text-align: center">52</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_014">Business Overview</a></td>
    <td style="text-align: center">53</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">C.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_015">Organizational Structure</a></td>
    <td style="text-align: center">68</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">D.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_016">Property, Plants and Equipment</a></td>
    <td style="text-align: center">69</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 5.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_017">Operating and Financial Review and Prospects</a></td>
    <td style="text-align: center">69</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_019">Operating Results</a></td>
    <td style="text-align: center">69</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_020">Liquidity and Capital Resources</a></td>
    <td style="text-align: center">79</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">C.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_020a"><span>Research and Development, Patents and Licenses, etc</span></a></td>
    <td style="text-align: center">83</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">D.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_021">Trend Information</a></td>
    <td style="text-align: center">83</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">E.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_022">Critical Accounting Estimates</a></td>
    <td style="text-align: center">83</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 6.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_023">Directors, Senior Management and Employees</a></td>
    <td style="text-align: center">85</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_024">Directors and Senior Management</a></td>
    <td style="text-align: center">85</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_025">Compensation</a></td>
    <td style="text-align: center">87</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">C.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_026">Board Practices</a></td>
    <td style="text-align: center">88</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">D.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_027">Employees</a></td>
    <td style="text-align: center">90</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">E.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_028">Share Ownership</a></td>
    <td style="text-align: center">91</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">F.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_029">Disclosure of a Registrant&#8217;s Action to Recover Erroneously Awarded Compensation</a></td>
    <td style="text-align: center">91</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 7.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_030">Major Shareholders and Related Party Transactions</a></td>
    <td style="text-align: center">91</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_031">Major Shareholders</a></td>
    <td style="text-align: center">91</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_032">Related Party Transactions</a></td>
    <td style="text-align: center">93</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">C.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_032a">Interests of Experts and Counsel</a></td>
    <td style="text-align: center">105</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 8.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_033">Financial Information</a></td>
    <td style="text-align: center">105</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_034">Consolidated Statements and Other Financial Information</a></td>
    <td style="text-align: center">105</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_035">Significant Changes</a></td>
    <td style="text-align: center">105</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 9.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_036">The Offer and Listing</a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_037">Offer and Listing Details</a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_038">Plan of Distribution</a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">C.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_039">Markets</a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">D.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_040">Selling Shareholders</a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">E.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_041">Dilution</a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">F.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_042">Expenses of the Issuer</a></td>
    <td style="text-align: center">106</td></tr>
</table><div>

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</div><table cellpadding="0" cellspacing="0" style="width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left; width: 10%">Item 10.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; width: 80%"><a href="#a_043">Additional Information</a></td>
    <td style="text-align: center; width: 10%">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_044">Share Capital</a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_045">Memorandum and Articles of Association</a></td>
    <td style="text-align: center">106</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">C.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_046">Material Contracts</a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">D.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_047">Exchange Controls</a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">E.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_048">Taxation</a></td>
    <td style="text-align: center">116</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">F.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_049"> Dividends and Paying Agents</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">G.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_050">Statement by Experts</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">H.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_051">Documents on Display</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">I.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_052">Subsidiary Information</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">J.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_052a">Annual Report to Security Holders</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 11.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_053">Quantitative and Qualitative Disclosures About Market Risk</a></td>
    <td style="text-align: center">122</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 12.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_054">Description of Securities Other than Equity Securities</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_055">Debt Securities</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_056">Warrants and Rights</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">C.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_057">Other Securities</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">D.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_058">American Depositary Shares</a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td colspan="2" style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_059">PART II</a></td>
    <td style="text-align: center">126</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 13.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_060">Defaults, Dividend Arrearages and Delinquencies</a></td>
    <td style="text-align: center">126</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 14.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_061">Material Modifications to the Rights of Security Holders and Use of Proceeds.</a></td>
    <td style="text-align: center">126</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 15.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_062">Controls and Procedures</a></td>
    <td style="text-align: center">126</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 16.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_063">[Reserved]</a></td>
    <td style="text-align: center">127</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 16.A.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_064">Audit Committee Financial Expert</a></td>
    <td style="text-align: center">127</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 16.B.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_065">Code of Ethics</a></td>
    <td style="text-align: center">128</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 16.C.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_066">Principal Accountant Fees and Services</a></td>
    <td style="text-align: center">128</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 16.D.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_067">Exemptions from the Listing Standards for Audit Committees</a></td>
    <td style="text-align: center">128</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 16.E.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_068">Purchases of Equity Securities by the Issuer and Affiliated Purchasers</a></td>
    <td style="text-align: center">128</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 16.F.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_069">Change in Registrant&#8217;s Certifying Accountant</a></td>
    <td style="text-align: center">128</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 16.G.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_070">Corporate Governance</a></td>
    <td style="text-align: center">128</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 16.H.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_071">Mine Safety Disclosure</a></td>
    <td style="text-align: center">129</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 16.I.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_072">Disclosure Regarding Foreign Jurisdictions that Prevent Inspections</a></td>
    <td style="text-align: center">129</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 16.J.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_073">Insider Trading Policies</a></td>
    <td style="text-align: center">129</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2" style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_074">PART III</a></td>
    <td style="text-align: center">130</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 17.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_075">Financial Statements</a></td>
    <td style="text-align: center">130</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0in; text-align: left">Item 18.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_076">Financial Statements</a></td>
    <td style="text-align: center">130</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td style="padding-left: 0in; text-align: left">Item 19.</td>
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_077">Exhibits</a></td>
    <td style="text-align: center">130</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; background-color: rgb(204,238,255)">
    <td colspan="2" style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_078">SIGNATURES</a></td>
    <td style="text-align: center">132</td></tr>
<tr style="font: 10pt Times New Roman, Times, Serif; text-align: left; vertical-align: bottom; ">
    <td colspan="2" style="padding-left: 0.125in; text-indent: -0.125in; text-align: left"><a href="#a_079">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</a></td>
    <td style="text-align: center">F-1</td></tr>
</table><div>

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</div><div><a id="a_001"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ABOUT
THIS ANNUAL REPORT</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unless
otherwise indicated or the context requires otherwise, the reference in this Annual Report to:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Xiao-I&#8221;
                                            or the &#8220;Company&#8221; or &#8220;we&#8221; or &#8220;us&#8221; is to Xiao-I Corporation,
                                            an exempted company with limited liability incorporated under the laws of Cayman Islands;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;AI
                                            Plus&#8221; is to AI Plus Holding Limited, organized under the law of British Virgin Islands,
                                            as Xiao-I&#8217;s intermediate holding company;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Xiao-i
                                            Technology&#8221; is to Xiao-i Technology Limited, organized under the law of Hong Kong,
                                            which is wholly owned by AI Plus;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;WFOE&#8221;
                                            is to Zhizhen Artificial Technology (Shanghai) Company Limited (&#8220;Zhizhen Technology&#8221;),
                                            a limited liability company established and existing under the laws of the PRC, which is
                                            wholly owned by Xiao-i Technology;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Shanghai
                                            Xiao-i&#8221; or the &#8220;VIE&#8221; is to Shanghai Xiao-i Robot Technology Company Limited,
                                            a company limited by shares established and existing under the laws of the PRC;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;the
                                            PRC operating entities&#8221; refers to the VIE, Shanghai Xiao-i, and its subsidiaries;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Memorandum
                                            and Articles of Association&#8221; means the amended and restated memorandum of association
                                            (&#8220;Memorandum&#8221;) and the amended and restated articles of association (&#8220;Articles
                                            of Association&#8221;) of Xiao-I;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;China&#8221;
                                            or the &#8220;PRC&#8221; are to the People&#8217;s Republic of China, including the special
                                            administrative regions of Hong Kong and Macau, and excluding Taiwan for the purposes of this
                                            annual report only; the term &#8220;Chinese&#8221; has a correlative meaning for the purpose
                                            of this annual report;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;mainland
                                            China&#8221;, &#8220;mainland of PRC&#8221; or &#8220;mainland PRC&#8221; are to the mainland
                                            China of the PRC, excluding Taiwan, the special administrative regions of Hong Kong and Macau
                                            for the purposes of this annual report only; the term &#8220;mainland Chinese&#8221; has
                                            a correlative meaning for the purpose of this annual report;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;PRC
                                            government&#8221;, &#8220;PRC regulatory authorities&#8221;, &#8220;PRC authorities&#8221;,
                                            &#8220;PRC governmental authorities&#8221;, &#8220;Chinese government&#8221;, &#8220;Chinese
                                            authorities&#8221; or &#8220;Chinese governmental authorities&#8221; is to the government
                                            of mainland China for the purposes of this annual report only; and the similar wordings have
                                            a correlative meaning for the purpose of this annual report;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;PRC
                                            laws and regulations&#8221;, &#8220;PRC laws&#8221;, &#8220;laws of PRC&#8221;, &#8220;Chinese
                                            laws and regulations&#8221; or &#8220;Chinese laws&#8221; are to the laws and regulations
                                            of mainland China; and the similar wordings have a correlative meaning for the purpose of
                                            this annual report;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Ordinary
                                            Shares&#8221; are to the ordinary shares of the Company, par value US$0.00005 per share;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;$,&#8221;
                                            &#8220;U.S.$,&#8221; &#8220;U.S. dollars,&#8221; &#8220;dollars&#8221; and &#8220;USD&#8221;
                                            are to U.S. dollars;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;RMB&#8221;
                                            and &#8220;&#165;&#8221; are to Renminbi;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Companies
                                            Act&#8221; is to the Companies Act (As Revised), Cap. 22 of the Cayman Islands.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;ADSs&#8221;
                                            refer to Xiao-I&#8217;s American depositary shares, each of which represents one-third of
                                            an Ordinary Share.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Xiao-I is a holding company incorporated in the
Cayman Islands. As a holding company with no material operations of its own, Xiao-I conducts a substantial majority of its operations
through Shanghai Xiao-i Robot Technology Co., Ltd. (&#8220;Shanghai Xiao-i&#8221;), a variable interest entity (the &#8220;VIE&#8221;),
in the People&#8217;s Republic of China, or &#8220;PRC&#8221; or &#8220;China.&#8221; Investors in Xiao-I&#8217;s ADSs should be aware
that they may never hold equity interests in the VIE, but rather purchasing equity interests solely in Xiao-I, the Cayman Islands holding
company, which does not own any of the business in China conducted by the VIE and the VIE&#8217;s subsidiaries (&#8220;the PRC operating
entities&#8221;). Xiao-I&#8217;s indirect wholly owned subsidiary, Zhizhen Artificial Intelligent Technology (Shanghai) Co. Ltd. (&#8220;Zhizhen
Technology&#8221; or &#8220;WFOE&#8221;) entered into a series of contractual arrangements that establish the VIE structure (the &#8220;VIE
Agreements&#8221;). The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where
Chinese law prohibits direct foreign investment in the operating companies. Xiao-I has evaluated the guidance in FASB ASC 810 and determined
that Xiao-I is the primary beneficiary of the VIE, for accounting purposes, based upon such contractual arrangements. ASC 810 requires
a VIE to be consolidated if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority
of the VIE&#8217;s residual returns. A VIE is an entity in which a company or its WFOE, through contractual arrangements, is fully and
exclusively responsible for the management of the entity, absorbs all risk of losses of the entity (excluding non-controlling interests),
receives the benefits of the entity that could be significant to the entity (excluding non-controlling interests), and has the exclusive
right to exercise all voting rights of the entity, and therefore the company or its WFOE is the primary beneficiary of the entity for
accounting purposes. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE,
if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly
affect the VIE&#8217;s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially
be significant to the VIE. Through the VIE Agreements, the Company is deemed the primary beneficiary of the VIE for accounting purposes.
The VIE has no assets that are collateral for or restricted solely to settle its obligations. The creditors of the VIE do not have recourse
to the Company&#8217;s general credit. Accordingly, under U.S. GAAP, the results of the PRC operating entities are consolidated in Xiao-I&#8217;s
financial statements. However, investors will not and may never hold equity interests in the PRC operating entities. The VIE Agreements
may not be effective in providing control over Shanghai Xiao-i. Uncertainties exist as to Xiao-I&#8217;s ability to enforce the VIE Agreements,
and the VIE Agreements have not been tested in a court of law. The Chinese regulatory authorities could disallow this VIE structure,
which would likely result in a material change in the PRC operating entities&#8217; operations and the value of Xiao-I&#8217;s ADSs,
including that it could cause the value of such securities to significantly decline or become worthless. See &#8220;Item 3. Key Information&#8212;D.
Risk Factors &#8212;Risks Related to Our Corporate Structure&#8221; and &#8220;Item 7. Major Shareholders and Related Party Transactions
&#8212;B. Related Party Transactions &#8212;Consolidation.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Xiao-I is a holding company with no operations
of its own. Xiao-I conducts its operations in China primarily through the PRC operating entities in China. As a result, although other
means are available for us to obtain financing at the holding company level, Xiao-I&#8217;s ability to pay dividends and other distributions
to its shareholders and to service any debt it may incur may depend upon dividends and other distributions paid by Xiao-I&#8217;s PRC
subsidiaries, which relies on dividends and other distributions paid by the PRC operating entities pursuant to the VIE Agreements. If
any of these entities incurs debt on its own in the future, the instruments governing such debt may restrict its ability to pay dividends
and other distributions to Xiao-I.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, dividends and distributions from
WFOE and the VIE are subject to regulations and restrictions on dividends and payment to parties outside of China. Applicable PRC law
permits payment of dividends to Xiao-I by WFOE only out of net income, if any, determined in accordance with PRC accounting standards
and regulations. A PRC company is not permitted to distribute any profits until any losses from prior fiscal&#160;years have been offset
by general reserve fund and profits (if general reserve fund is not enough). Profits retained from prior fiscal&#160;years may be distributed
together with distributable profits from the current fiscal year. In addition, a wholly foreign-owned enterprise is required to set aside
at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount
of such fund reaches 50% of its registered capital. As of December 31, 2022, our PRC operating entities had restricted amount of US$237,486 (RMB1,569,546) the reserve fund. Moreover, registered share capital and capital reserve accounts are also restricted from withdrawal
in the PRC, up to the amount of net assets held in each operating subsidiary. In contrast, there is presently no foreign exchange control
or restrictions on capital flows into and out of Hong&#160;Kong. Hence, Xiao-I&#8217;s Hong&#160;Kong subsidiary is able to transfer
cash without any limitation to the Cayman Islands under normal circumstances.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Further, the PRC government also imposes controls
on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC.&#160;Xiao-I&#8217;s WFOE generates
primarily all of its revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency
exchange may limit the ability of Xiao-I&#8217;s WFOE to use its Renminbi revenues to pay dividends to Xiao-I. The PRC government may
continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by State Administration
of Foreign Exchange (the &#8220;SAFE&#8221;) for cross-border transactions falling under both the current account and the capital account.
Any limitation on the ability of Xiao-I&#8217;s WFOE to pay dividends or make other kinds of payments to Xiao-I could materially and
adversely limit its ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise
fund and conduct our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Additionally, the transfer of funds among
the PRC operating entities are subject to the Provisions on Private Lending Cases, which was implemented on January&#160;1, 2021 to
regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private
Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated PRC operating
entity&#8217;s operations. Xiao-I or the PRC operating entities have not been notified of any other restriction which could limit
the PRC operating entities&#8217; ability to transfer cash among each other. As of the date of this annual report, cash was
transferred among the Company, WFOE, other subsidiaries of the Company, the VIE and its consolidated subsidiaries, in the following
manners: (i) the Company provided a total of US$10,000,550 in cash to its other subsidiaries while other subsidiaries transferred
US$4,500 to the Company; (ii) Other subsidiaries of the Company provided a total of US$10,000,000 in cash to WFOE; (iii) WFOE
provided a total of US$9,859,073 (RMB68,000,000) to VIE and its subsidiaries while VIE and its subsidiaries transferred US$36,247
(RMB250,000) to WFOE; (iv) VIE and its subsidiaries transferred US$8,000 to other subsidiaries of the Company. The aforementioned
cash transfers were generally for working capital purpose among the Company, WFOE, VIE and its consolidated subsidiaries, and other
subsidiaries. Xiao-I intends to keep any future earnings to finance the expansion of its business, and it does not anticipate that
any cash dividends will be paid in the foreseeable future. In the future, cash proceeds from overseas financing activities,
including the IPO proceeds, may be transferred by Xiao-I to AI Plus, and then transferred to Xiao-i Technology, and then transferred
to WFOE via capital contribution or shareholder loans, as the case may be. Cash proceeds may flow to Shanghai Xiao-i from WFOE
pursuant to certain contractual arrangements between WFOE and Shanghai Xiao-i as permitted by the applicable PRC regulations. As a
result of these PRC laws and regulations, the PRC operating entities are restricted in their ability to transfer a portion of their
net assets to the Company. For details about the applicable PRC laws and regulations that limit transfer of funds from overseas to
the PRC operating entities, see &#8220;Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds &#8212;
Use of Proceeds&#8221;, &#8220;Item 3. Key Information&#8212;D. Risk Factors &#8212;Risks Related to Our Corporate Structure&#8212;
Some of our shareholders are not in compliance with the PRC&#8217;s regulations relating to offshore investment activities by PRC
residents, and as a result, currently WFOE is unable to open a new capital account with banks within China, and may be restricted
from remitting funds or handling other foreign exchange businesses within China unless and until we remediate the
non-compliance,&#8221; and &#8220;Item 3. Key Information&#8212;D. Risk Factors &#8212;Risks Related to Doing Business in
China&#8212;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 our available funds to make loans to our PRC subsidiary and consolidated
affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect
our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December&#160;31, 2021 and 2022, US$1,254,528 and US$908,614
of cash and cash equivalents were denominated in RMB, US$15,170 and US$11,224 of cash and cash equivalents were denominated in US dollars,
US$42,148 and US$106,407 of cash and cash equivalents were denominated in Hong&#160;Kong dollars, respectively.</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 7; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->v<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_002"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRESENTATION
OF FINANCIAL INFORMATION</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
consolidated financial statements included in this Annual Report have been prepared in accordance with accounting principles generally
accepted in the United States of America, or U.S. GAAP. The reporting currency is United States dollar. Unless otherwise indicated, all
monetary amounts in this annual report are in U.S. dollars.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
Annual Report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise
stated, all translations from Renminbi to U.S. dollars were made at RMB6.8972 to $1.00 on December 30, 2022, representing the noon buying
rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Board. Xiao-I makes
no representation that the Renminbi or U.S. dollar amounts referred to in this Annual Report could have been or could be converted into
U.S. dollars or Renminbi, as the case may be, at any particular rate or at all.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>TRADEMARKS,
SERVICE MARKS AND TRADE NAMES</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Solely
for convenience, the trademarks, service marks, logos, copyrights and trade names referred to in this Annual Report are without the &#174;
and &#8482; symbols. Such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable
law, our rights or the rights of the applicable licensors to these trademarks, service marks, logos, copyrights and trade names or that
the applicable owner will not assert its rights to these trademarks, service marks, logos, copyrights and trade names. This Annual Report
contains additional trademarks, service marks, logos, copyrights and trade names of others, which are the property of their respective
owners. All trademarks, service marks, logos, copyrights and trade names appearing in this Annual Report are, to our knowledge, the property
of their respective owners. We do not intend our use or display of other companies&#8217; trademarks, service marks, logos, copyrights
or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_003"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
annual report contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this
annual report can be identified by the use of forward-looking words such as &#8220;anticipate,&#8221; &#8220;believe,&#8221; &#8220;could,&#8221;
&#8220;expect,&#8221; &#8220;should,&#8221; &#8220;plan,&#8221; &#8220;intend,&#8221; &#8220;estimate&#8221; and &#8220;potential,&#8221;
among others.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Forward-looking
statements appear in a number of places in this annual report and include, but are not limited to, statements regarding our intent, belief
or current expectations. Forward-looking statements are based on our management&#8217;s beliefs and assumptions and on information currently
available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those
expressed or implied in the forward-looking statements due to of various factors, including, but not limited to, those identified under
the section entitled &#8220;Risk Factors&#8221; in this annual report. These risks and uncertainties include factors relating to:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">general
                                            economic, political, demographic and business conditions in China and globally;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            PRC operating entities&#8217; ability to implement their growth strategy;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            success of operating initiatives, including marketing and promotional efforts and new product
                                            and service development by us and the PRC operating entities&#8217; competitors;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            PRC operating entities&#8217; ability to develop and apply their technologies to support
                                            and expand their product and service offerings;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            availability of qualified personnel and the ability to retain such personnel;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">competition
                                            in the AI industries;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in government policies and regulation;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">other
                                            factors that may affect our financial condition, liquidity and results of operations; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">other
                                            risk factors discussed under &#8220;Risk Factors.&#8221;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Forward-looking
statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information
or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or
to reflect the occurrence of unanticipated events.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>


</div><!-- Field: Page; Sequence: 8; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->vi<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_004"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART
I</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_005"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
1.  Identity of Directors, Senior Management and Advisers.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_006"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
2.  Offer Statistics and Expected Timetable.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_007"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
3.  Key Information.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_008"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
[Reserved]</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_009"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.
<b><i>Capitalization and Indebtedness.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_010"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">C.
<b><i>Reasons for the Offer and Use of Proceeds.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_011"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">D.
<b><i>Risk Factors.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SUMMARY
OF RISK FACTORS</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>An
investment in our ADSs is subject to a number of risks, including but not limited to risks related to doing business in China, risks
related to our corporate structure, risks related to our business and industry, , and risks related to ownership of our ADSs. Investors
should carefully consider all of the information in this Annual Report before making an investment in the ADSs. The following list summarizes
some, but not all, of these risks. Please read the information in the section below entitled &#8220;Risk Factors&#8221; for a more thorough
description of these and other risks.</i></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to Our Business and Industry</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            have had net losses (except for 2021) and negative cash flows from operating activities in
                                            the past, and we may not achieve or sustain profitability.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            we fail to maintain and grow our customer base, keep our customers engaged through our products
                                            and solutions, our business growth may not be sustainable.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            we fail to maintain and enhance the functions, performance, reliability, design, security,
                                            and scalability of our platforms to meet our customers&#8217; evolving needs, we may lose
                                            our customers.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            our products and solutions do not achieve sufficient market acceptance, our business and
                                            competitive position will suffer.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            our expansion into new industries is not successful, our business, prospects and growth momentum
                                            may be materially and adversely affected.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            market in which we participate is competitive, and if we do not compete effectively, our
                                            business, operating results and financial condition could be harmed.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 9; Options: NewSection; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#9679;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">If we fail to adapt and respond effectively to rapidly changing technology,
evolving industry standards, changing regulations, and changing customer needs, requirements or preferences, our business may be materially
and adversely affected.</td></tr>
                                                                                                                                          <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
                                                                                                                                          <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
                                            support our business growth, we continue to invest heavily in our research and development
                                            efforts, the expenses of which may negatively impact our cash flow, and may not generate
                                            the results we expect to achieve.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            our platforms experience material errors, defects or security issues, we may lose our customers,
                                            fail to honor our obligations in respect of our contract liabilities, and incur significant
                                            remedial costs.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            brand is integral to our success. If we fail to effectively maintain, promote and enhance
                                            our brand, our business and competitive advantage may be harmed.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Security
                                            breaches and attacks against our systems and network, and any failure to otherwise protect
                                            personal, confidential and proprietary information, could damage our reputation and negatively
                                            impact our business, as well as materially and adversely affect our financial condition and
                                            results of operations.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            partially rely on third-party service providers to conduct our business and any interruption
                                            or delay in such third parties or our own failure may impair our customers&#8217; experience.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            products and solutions rely on the stable performance of servers, and any disruption to our
                                            servers due to internal and external factors could diminish demand for our products and solutions,
                                            harm our business, our reputation and results of operations and subject us to liability.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            and our business partners&#8217; business operations have been adversely affected by the
                                            COVID-19 outbreak, and may in the future continue to be affected by the COVID-19 outbreak.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            the adoption of our products and solutions by our customers are slower than we expected,
                                            our business, results of operations and financial condition may be adversely affected.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            may fail to conduct our sales and marketing activities in a cost-effective manner and we
                                            are subject to limitations in promoting our products and solutions.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            we fail to provide high quality customer services, our brand, business, and results of operations
                                            may be harmed.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            had a concentration of major customers during the years ended December 31, 2020, 2021 and
                                            2022 (the &#8220;Track Record Period&#8221;) and if our existing major customers cease to
                                            engage our services, we may be unable to find new customers with similar attributable revenue
                                            within a reasonable time or at all.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            intensifying competition, change in sector trend and landscape and government policies may
                                            have a direct impact on the industries where our clients operate their businesses, and negatively
                                            affect the stability of our clients, which may subsequently have negative impact on our business.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            reliance on a limited number of suppliers for certain essential services could adversely
                                            affect our ability to manage our business effectively and subsequently harm our business.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            may fail to obtain or maintain all required licenses, permits and approvals to operate our
                                            business.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            may fail to obtain, maintain and protect our intellectual property rights and proprietary
                                            information or prevent third parties from any unauthorized use of our technologies.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 10; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            may become subject to intellectual property disputes, which are costly and may subject us
                                            to significant liability and increased costs of business.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            and our management may from time to time be subject to claims, disputes, lawsuits and other
                                            legal and administrative proceedings.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Changes
                                            in laws and regulations related to the internet or changes in the internet infrastructure
                                            itself may diminish the demand for our products and solutions and have a negative impact
                                            on our business.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            are dependent on the continuous services of our senior management and other key employees.
                                            If we fail to attract, retain and motivate qualified personnel, our business could be materially
                                            and adversely affected.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Future
                                            strategic acquisitions and investments may fail and may result in material and adverse impact
                                            on our financial condition and results of operations.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            may, in the future, grow and expand our international operations, which may expose us to
                                            significant risks.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            may be unable to obtain any additional capital required in a timely manner or on acceptable
                                            terms, or at all. Moreover, our future capital needs may require us to sell additional equity
                                            or debt securities that may dilute our shareholders&#8217; shareholdings or subject us to
                                            covenants that may restrict our operations or our ability to pay dividends.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            have not independently verified the accuracy or completeness of data, estimates, and projections
                                            in this annual report that we obtained from third-party sources, and such information involves
                                            assumptions and liabilities.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            have identified two material weaknesses in our internal control over financial reporting.
                                            If our remediation of the material weaknesses is not effective, or if we experience additional
                                            material weaknesses in the future or otherwise fail to maintain proper and effective internal
                                            control over financial reporting, our ability to produce accurate and timely consolidated
                                            financial statements could be impaired, investors may lose confidence in our financial reporting
                                            and the trading price of the ADSs may decline.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            face risks related to natural disasters, health epidemics and other outbreaks, which could
                                            significantly disrupt our business operations.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Economic
                                            substance legislation of the Cayman Islands may adversely impact us or our operations.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
                                            is unclear what ramifications, if any, the addition of the Cayman Islands to the &#8220;FATF
                                            grey list&#8221; will have for us.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
                                            is unclear how long the designation of the Cayman Islands to the EU AML High-Risk Third Countries
                                            List will remain in place and what ramifications, if any, the designation will have for us.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to Our Corporate Structure</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            the following discussion of risks relating to our corporate structure, &#8220;we,&#8221;
                                            &#8220;us,&#8221; or &#8220;our&#8221; refer to Xiao-I.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            the PRC government finds that the agreements that establish the structure for operating our
                                            businesses in China do not comply with PRC regulations on foreign investment in internet
                                            and other related businesses, or if these regulations or their interpretation change in the
                                            future, we could be subject to severe penalties or be forced to relinquish our interests
                                            in those operations and our ADSs may decline in value dramatically or even become worthless.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 11; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            contractual arrangements with the VIE and its shareholders may not be as effective as equity
                                            ownership in providing operational control.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
                                            failure by the VIE or its shareholders to perform their obligations under our contractual
                                            arrangements with them would have a material and adverse effect on our business.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            contractual arrangements with the VIE are governed by PRC law. Accordingly, these contracts
                                            would be interpreted in accordance with PRC law, and any disputes would be resolved in accordance
                                            with PRC legal procedures, which may not protect you as much as those of other jurisdictions,
                                            such as the United States.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Contractual
                                            arrangements we have entered into with the VIE and its shareholders may be subject to scrutiny
                                            by the PRC tax authorities. A finding that we owe additional taxes could significantly reduce
                                            our consolidated net income and the value of your investment.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            are a holding company, and will rely on dividends paid by our subsidiaries for our cash needs.
                                            Any limitation on the ability of our subsidiaries to make dividend payments to us, or any
                                            tax implications of making dividend payments to us, could limit our ability to pay our parent
                                            company expenses or pay dividends to holders of our ADSs.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            the chops of our PRC subsidiary, the VIE, is not kept safely, is stolen or are used by unauthorized
                                            persons or for unauthorized purposes, the corporate governance of these entities could be
                                            severely and adversely compromised.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            may lose the ability to use and enjoy assets held by the VIE that are critical to the operation
                                            of our business if the VIE declares bankruptcy or become subject to a dissolution or liquidation
                                            proceeding.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantial
                                            uncertainties exist with respect to the interpretation and implementation of the newly enacted
                                            PRC Foreign Investment Law and how it may impact the viability of our current corporate structure
                                            and business operations.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Some
                                            of our shareholders are not in compliance with the PRC&#8217;s regulations relating to offshore
                                            investment activities by PRC residents, and as a result, the shareholders may be subject
                                            to penalties if we are not able to remediate the non-compliance.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to Doing Business in China</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            the following discussion of risks relating to doing business in China &#8220;we,&#8221; &#8220;us,&#8221;
                                            or &#8220;our&#8221; refer to the PRC operating entities.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China&#8217;s
                                            economic, political and social conditions, as well as changes in any government policies,
                                            laws and regulations may be quick with little advance notice and, could have a material adverse
                                            effect on our business and the value of Xiao-I&#8217;s ADSs.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Uncertainties
                                            in the interpretation and enforcement of PRC laws and regulations could limit the legal protections
                                            available to you and us.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Content
                                            posted or displayed on our platform may be found objectionable by PRC regulatory authorities
                                            and may subject us to penalties and other severe consequences.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Advertisements
                                            shown on our platform may subject us to penalties and other administrative actions.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
newly enacted Holding Foreign Companies Accountable Act (&#8220;HFCAA&#8221;) and the Accelerating Holding Foreign Companies Accountable
Act (&#8220;AHFCAA&#8221;) passed by the U.S.&#160;Senate, all call for additional and more stringent criteria to be applied to emerging
market companies upon assessing the qualification of their auditors, especially the&#160;non-U.S.&#160;auditors who are not inspected
by the Public Company Accounting Oversight Board (&#8220;PCAOB&#8221;).&#160;These developments could add uncertainties to our offering
and listing on the Nasdaq Global Market, and Nasdaq may determine to delist our securities if in the future the PCAOB determines that
it cannot inspect or fully investigate our auditor.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 12; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
                                            may be difficult for overseas regulators to conduct investigation or collect evidence within
                                            China.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#9679;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">The approval, filing or other requirements of the CSRC or other PRC
government authorities may be required under PRC laws.</td></tr>
                                                                                                                                          <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
                                                                                                                                          <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            Chinese government exerts substantial influence over the manner in which we must conduct
                                            our business activities and may intervene or influence our operations at any time, which
                                            could result in a material change in our operations and the value of Xiao-I&#8217;s ADSs.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            custodians or authorized users of our controlling non-tangible assets, including chops and
                                            seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
                                            the PRC Enterprise Income Tax Law, we may be classified as a PRC &#8220;resident enterprise,&#8221;
                                            which could result in unfavorable tax consequences to us and our shareholders and have a
                                            material adverse effect on our results of operations and the value of your investment.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            face uncertainty with respect to indirect transfer of equity interests in PRC resident enterprises
                                            by their non-PRC holding companies. We face uncertainties regarding the reporting on and
                                            consequences of previous private equity financing transactions involving the transfer and
                                            exchange of shares in our company by non-resident investors.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China&#8217;s
                                            M&amp;A Rules and certain other PRC regulations establish complex procedures for some acquisitions
                                            of Chinese companies by foreign investors, which could make it more difficult for us to pursue
                                            growth through acquisitions in China.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRC
                                            regulations relating to offshore investment activities by PRC residents may limit our PRC
                                            subsidiary&#8217;s ability to increase its registered capital or distribute profits to us
                                            or otherwise expose us to liability and penalties under PRC law.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Failure
                                            to comply with PRC regulations regarding the registration requirements for employee stock
                                            ownership plans or share option plans may subject the PRC plan participants or us to fines
                                            and other legal or administrative sanctions.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 our available funds
                                            to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional
                                            capital contributions to our PRC subsidiary, which could materially and adversely affect
                                            our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated
                                            affiliated entities.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fluctuation
                                            in the value of the RMB may have a material adverse effect on the value of your investment.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            additional remedial measures are imposed on major PRC-based accounting firms, including our
                                            independent registered public accounting firm, our financial statements could be determined
                                            not to be in compliance with the SEC requirements.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            face uncertainties with respect to the enactment, interpretation and implementation of draft
                                            Anti-Monopoly Guidelines for the Internet Platform Economy Sector.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 13; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to Doing Business in Hong Kong</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            may be subject to uncertainty about any changes in the economic, political and legal environment
                                            in Hong Kong, and it is possible that most of the legal and operational risks associated
                                            with operating in the PRC may also apply to operations in Hong Kong in the future.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            operations in Hong Kong are governed by the laws and regulations in Hong Kong. If there is
                                            significant change to current political arrangements between mainland China and Hong Kong,
                                            the PRC government may intervene or influence our Hong Kong operations, which could result
                                            in a material change in our operations in Hong Kong.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
                                            may incur additional costs and procedural obstacles in effecting service of legal process,
                                            enforcing foreign judgments or bringing actions in Hong Kong against Xiao-I or its management
                                            named in the annual report based on Hong Kong laws.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to the ADSs</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
                                            we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation
                                            of the ADSs for a return on your investment.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
                                            large, active trading market for the ADSs may not develop and you may not be able to resell
                                            your ADSs at or above the public offering price.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            trading price of the ADSs is likely to be volatile, which could result in substantial losses
                                            to investors.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            sale or availability for sale of substantial amounts of ADSs could adversely affect their
                                            market price.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Holders
                                            of ADSs have fewer rights than shareholders and must act through the depositary to exercise
                                            their rights.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
                                            in limited circumstances, the depositary for our ADSs will give us a discretionary proxy
                                            to vote the Ordinary Shares underlying your ADSs if you do not vote at shareholders&#8217;
                                            meetings, which could adversely affect your interests.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
                                            may not receive distributions on the ADSs or any value for them if such distribution is illegal
                                            or impractical or if any required government approval cannot be obtained in order to make
                                            such distribution available to you.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Your
                                            right to participate in any future rights offerings may be limited, which may cause dilution
                                            to your holdings.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
                                            may be subject to limitations on transfers of your ADSs.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Your
                                            rights to pursue claims against the depositary as a holder of ADSs are limited by the terms
                                            of the deposit agreement.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ADS
                                            holders may not be entitled to a jury trial with respect to claims arising under the deposit
                                            agreement, which could result in less favorable outcomes to the plaintiff(s) in any such
                                            action.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            deposit agreement may be amended or terminated without your consent.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Holders
                                            or beneficial owners of the ADSs have limited recourse if we or the depositary fail to meet
                                            our respective obligations under the deposit agreement.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 14; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Techniques
                                            employed by short sellers may drive down the market price of the ADSs.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
                                            securities or industry analysts do not publish research or publish inaccurate or unfavorable
                                            research about our business, the market price for the ADSs and trading volume could decline.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            failure to meet the continued listing requirements of Nasdaq could result in a delisting
                                            of the ADSs.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
                                            we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting
                                            your interests, and your ability to protect your rights through the U.S. Federal courts may
                                            be limited.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">United
                                            States civil liabilities and certain judgments obtained against us by our shareholders may
                                            not be enforceable.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            ability of U.S. authorities to bring actions for violations of U.S. securities law and regulations
                                            against us, our directors and executive officers named in this annual report (except H. David
                                            Sherman) may be limited. Therefore, you may not be afforded the same protection as provided
                                            to investors in U.S. domestic companies.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
                                            may experience difficulties in effecting service of legal process, enforcing foreign judgments
                                            or bringing original actions in the PRC, based on United States or other foreign laws, against
                                            us, our directors and executive officers named in this annual report (except H. David Sherman).
                                            Therefore, you may not be able to enjoy the protection of such laws in an effective manner.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
                                            a company incorporated in the Cayman Islands, we are permitted to adopt certain home country
                                            practices in relation to corporate governance matters that differ significantly from the
                                            Nasdaq corporate governance listing standards; these practices may afford less protection
                                            to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance
                                            listing standards.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            articles of association contain anti-takeover provisions that could discourage a third party
                                            from acquiring us, which could limit our shareholders&#8217; opportunity to sell their shares,
                                            including Ordinary Shares represented by the ADSs, at a premium, as a result, it could materially
                                            adversely affect the rights of holders of our ADSs.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            are an emerging growth company within the meaning of the Securities Act and may take advantage
                                            of certain reduced reporting requirements.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            are a foreign private issuer within the meaning of the rules under the Exchange Act, and
                                            as such we are exempt from certain provisions applicable to U.S. domestic public companies.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            will incur increased costs as a result of being a public company, particularly after we cease
                                            to qualify as an &#8220;emerging growth company.&#8221;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
                                            can be no assurance we will not be a passive foreign investment company (&#8220;PFIC&#8221;),
                                            for any taxable year, which could result in adverse U.S. federal income tax consequences
                                            to U.S. investors in our ADSs or Ordinary Shares.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            are not required to disclose compensation of Directors and Officers under Cayman Islands
                                            law.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Holding Foreign Companies Accountable Act</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the HFCAA if the SEC determines that
we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two
consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter
trading market in the United States. As a result of such trading prohibition, the Nasdaq Global Market may make a determination to delist
our securities. 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 Board 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 (the &#8220;Determinations&#8221;). 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 uncertainties and depends on a
number of factors out of our and our auditor&#8217;s control. The PCAOB continues to demand complete access in mainland China and Hong
Kong moving forward and is 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. Our financial statements contained in this annual report of Form 20-F have been
audited by Marcum Asia CPAs LLP (&#8220;Marcum Asia&#8221;), the independent registered public accounting firm that issues the audit report
included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered
with the PCAOB, is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with
the applicable professional standards. Marcum Asia, whose audit report is included in this annual report, is headquartered in New York,
New York. Marcum Asia&#8217;s audit working papers related to Xiao-I are located in China. With respect to audits of companies with operations
in China, such as the Company, there are uncertainties about the ability of Xiao-I&#8217;s auditor to fully cooperate with a request by
the PCAOB for audit working papers in China without the approval of Chinese authorities. As such, as of the date of this annual report,
Xiao-I&#8217;s auditor is not subject to the Determinations announced by the PCAOB. However, Xiao-I cannot assure you whether Nasdaq or
regulatory authorities would apply additional and more stringent criteria to it after considering the effectiveness of its auditor&#8217;s
audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or
experience as related to the audit of our financial statements. Furthermore, there is a risk that Xiao-I&#8217;s auditor cannot be inspected
by the PCAOB because of a position taken by an authority in a foreign jurisdiction in the future, and that the PCAOB may re-evaluate its
determination as a result of any obstruction with the implementation of the Statement of Protocol. Such lack of inspection or re-evaluation
could cause trading in Xiao-I&#8217;s securities to be prohibited on a national exchange or in the over-the-counter trading market under
the HFCAA, and, as a result, Nasdaq may determine to delist Xiao-I&#8217;s securities, which may cause the value of Xiao-I&#8217;s securities
to decline or become worthless. For more detailed information, see &#8220;Item 3. Key Information&#8212;D. Risk Factors &#8212;Risks Relating
to Doing Business in China&#8212; The newly enacted HFCCA and the AHFCCA passed by the U.S. Senate, all call for additional and more stringent
criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors
who are not inspected by the PCAOB. These developments could add uncertainties to our offering and listing on the Nasdaq Global Market,
and Nasdaq may determine to delist our securities if in the future the PCAOB determines that it cannot inspect or fully investigate our
auditor.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Permissions, Approvals, Licenses and Permits
Required from the PRC Government Authorities for Our Operations and for Offering of Our Securities to Foreign Investors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The PRC operating entities&#8217; operations in China are governed
by PRC laws and regulations. Xiao-I, its subsidiaries, the PRC operating entities have received all requisite permissions and approvals
from the PRC government authorities for their business operations currently conducted in China. Neither has Xiao-I&#160;nor its subsidiaries,
nor the PRC operating entities received any denial of permissions for&#160;their business operations currently conducted in China. These
permissions and approvals include (without limitation) License for Value-added&#160;Telecommunications Services, Business License, Record
Registration Form for Foreign Trade Business Operators, Customs Declaration Entity Registration Certificate. Xiao-I, its subsidiaries,
the PRC operating entities are currently not required to obtain permission from any of the PRC authorities to issue ADSs or Ordinary Shares
to foreign investors. However, Xiao-I&#160;is subject to the risks of uncertainty of any future actions of the PRC government in this
regard including the risk that Xiao-I&#160;inadvertently concludes that the permissions or approvals discussed here are not required,
that applicable laws, regulations or interpretations change such that Xiao-I&#160;is required to obtain approvals in the future, or that
the PRC government could disallow Xiao-I&#8217;s holding company structure, which would likely result in a material change in&#160;its
operations, including its ability to continue its existing holding company structure, carry on its current business, accept foreign investments,
and offer or continue to offer securities to its investors. These adverse actions could cause the value of Xiao-I&#8217;s ADSs to significantly
decline or become worthless. Xiao-I&#160;may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including
the CSRC, if it fails to comply with such rules and regulations, which would likely adversely affect the ability of Xiao-I&#8217;s securities
to be listed on a U.S. exchange, which would likely cause the value of Xiao-I&#8217;s securities to significantly decline or become worthless.
For more detailed information, see &#8220;Item 3. Key Information&#8212;D. Risk Factors &#8212;Risks Relating to Doing Business in China&#8212;The
approval, filing or other requirements of the CSRC or other PRC government authorities may be required under PRC laws.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Implications of Being an Emerging Growth Company and a Foreign Private
Issuer</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging
Growth Company</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are an &#8220;emerging growth company&#8221; as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such,
we may take advantage of specific exemptions from various reporting requirements that are applicable to other publicly traded entities
that are not emerging growth companies. These exemptions include:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">not
                                            being required to comply with the auditor attestation requirements of Section 404 of the
                                            Sarbanes-Oxley Act of 2002;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">not
                                            being required to comply with any requirement that may be adopted by the Public Company Accounting
                                            Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor&#8217;s
                                            report providing additional information about the audit and the financial statements (i.e.,
                                            an auditor discussion and analysis); not being required to submit some executive compensation
                                            matters to shareholder advisory votes, such as &#8220;say-on-pay,&#8221; &#8220;say-on-frequency&#8221;
                                            and &#8220;say-on-golden parachutes;&#8221; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">not
                                            being required to disclose some executive compensation related items such as the correlation
                                            between executive compensation and performance and comparisons of the chief executive officer&#8217;s
                                            compensation to median employee compensation.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result, we do not know if some investors will find our ADSs less attractive. The result may be a less active trading market for our
ADSs, and the price of our ADSs may become more volatile.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues
exceed $ $1.235billion; (ii) the last day of the fiscal year following the fifth anniversary of the completion of our initial public
offering; (iii) the date that we become a &#8220;large accelerated filer&#8221; as defined in Rule 12b-2 under the Exchange Act, which
would occur if the market value of our common equity held by non-affiliates exceeds $700 million as of the last business day of our most
recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1 billion in non-convertible debt securities
during any three-year period.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Foreign
Private Issuer</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
report under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging
growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from specific provisions
of the Exchange Act that are applicable to U.S. domestic public companies, including:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations
                                            in respect of a security registered under the Exchange Act;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form
                                            10-Q containing unaudited financial and other specific information, or current reports on
                                            Form 8-K, upon the occurrence of specified significant events.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            addition, we will not be required to file annual reports and consolidated financial statements
                                            with the SEC as promptly as U.S. domestic companies whose securities are registered under
                                            the Exchange Act, and we will not be required to comply with Regulation FD, which restricts
                                            the selective disclosure of material information.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Both
foreign private issuers and emerging growth companies also are exempt from some more stringent executive compensation disclosure rules.
Thus, even if we no longer qualify as an emerging growth company, but remain a foreign private issuer, we will continue to be exempt
from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private
issuer.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">RISK
FACTORS</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
investment in Xiao-I&#8217;s ADSs involves significant risks. You should carefully consider all of the information in this Annual Report,
including the risks and uncertainties described below, before making an investment in its ADSs. Any of the following risks could have
a material adverse effect on the business, financial condition and results of operations of Xiao-I, its subsidiaries and the PRC operating
entities. In any such case, the market price of Xiao-I&#8217;s ADSs could decline, and you may lose all or part of your investment.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>In
the following discussion of risks relating to of our business, operations and financial information, &#8220;we,&#8221; &#8220;us,&#8221;
or &#8220;our&#8221; refer to the PRC operating entities except where consolidated financial information is presented in which case &#8220;we&#8221;,
&#8220;us&#8221; or &#8220;our&#8221; refer to Xiao-I and its subsidiaries and the PRC operating entities on a consolidated basis.</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to Our Business and Industry</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have had net losses (except for 2021) and negative cash flows from operating activities in the past, and we may not achieve or sustain
profitability.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
had a net loss of US$7.1 million and negative cash flows from operations of US$3.5 million in 2020 and net income of US$3.4 million and
negative cash flows from operations of US$11.9 million in 2021. In 2022, we had net loss of US$6.0 million and negative cash flows from
operations of US$10.2 million. We cannot assure you that we will be able to generate net profit or positive cash flows from operating
activities in the future. Our future revenue growth and profitability will depend on a variety of factors, many of which are beyond our
control. These factors include market acceptance of our products, effectiveness of our monetization strategy, our ability to control
cost and expenses and to manage our growth effectively, market competition, macroeconomic and regulatory environment. We also expect
our costs and expenses to increase in the future as we continue to expand our operations and to increase our investments in research
and development, which will place significant demands on our management and our operational and financial resources. Continuous expansion
may increase the complexity of our business, and we may encounter various difficulties. We may fail to develop and improve our operational,
financial and managerial controls, enhance our financial reporting systems and procedures, recruit, train and retain skilled professional
personnel, or maintain customer satisfaction to effectively support and manage our growth. If we invest substantial time and resources
to expand our operations but fail to manage the growth of our business and capitalize on our growth opportunities effectively, we may
not be able to achieve profitability, and our business, financial condition, results of operations and prospects would be materially
and adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we fail to maintain and grow our customer base, keep our customers engaged through our products and solutions, our business growth may
not be sustainable.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
achieve the sustainable growth of our business, we must continuously attract new customers, retain existing customers and increase their
incremental spending on our products and solutions. To keep pace with our customers&#8217; evolving demands, we need to improve our existing
products and solutions, and launch new products and solutions, on a timely basis. If we fail to accurately identify our customers&#8217;
demands or continuously provide them with products and solutions that add value to their businesses, our customers may be reluctant to
increase their spending on our platform, and as a result, the growth of our business may be stalled.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we fail to maintain and enhance the functions, performance, reliability, design, security, and scalability of our platforms to meet our
customers&#8217; evolving needs, we may lose our customers.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
market for AI industry services in China is constantly changing with innovations. Our success has been based on our dedication to the
development of innovative and high-quality products and solutions on our platforms. Our ability to continue to attract and retain customers
and increase sales depends largely on our ability to continue improving and enhancing the functions, performance, reliability, design,
security, and scalability of our platforms.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may experience difficulties in developing new technologies as it is costly and time consuming, which in turn could delay or prevent the
development, introduction or implementation of new products and solutions. While we have invested a significant amount of time and money
in our service development to date, we may not have sufficient resources to invest at the same level going forward. To the extent we
are unable to improve and enhance the functions, performance, reliability, design, security, and scalability of our platforms in a manner
that timely and effectively responds to our customers&#8217; evolving needs, we may lose our customers and our business, financial condition,
results of operations, and prospects may be materially and adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
our products and solutions do not achieve sufficient market acceptance, our business and competitive position will suffer.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
meet our customers&#8217; rapidly evolving demands, we invest substantial resources in research and development to enhance our products
and solutions, as well as in improving our platforms. When we develop or acquire new or enhanced products and solutions, we typically
incur significant expenses and expend resources upfront to develop, market, promote and sell the new offerings. Therefore, when we develop
or acquire and introduce new or enhanced products and solutions, they must achieve high levels of market acceptance in order to justify
the amount of our investment in developing and bringing them to market. Our new products and solutions, or enhancements and changes to
our existing products and solutions, could fail to attain sufficient market acceptance for many reasons, including, among others:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">failure
                                            to predict market demand accurately in terms of functionality and a failure to supply products
                                            and solutions that meet this demand in a timely manner;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">defects,
                                            errors, or disruptions;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">negative
                                            publicity about our platform&#8217;s performance or effectiveness;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in the legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely
                                            affecting our platform;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">emergence
                                            of competitors that achieve market acceptance before we do;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">delays
                                            in releasing enhancements to our platform to the market; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">introduction
                                            or anticipated introduction of competing products or solutions by our competitors.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
our new products and solutions, or any enhancements, do not achieve adequate acceptance in the market, or if products and solutions developed
by others achieve greater acceptance in the market, our business could be harmed.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
our expansion into new industries is not successful, our business, prospects and growth momentum may be materially and adversely affected.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
products and solutions are specifically designed to address the diversified needs of our customers across different industries. Through
our platform resources and years of technology accumulation, we have a track record of successful expansion into and becoming a leader
in new industries. We cannot assure you, however, that we will be able to maintain this momentum in the future. Expanding into new industries
involves new risks and challenges. Our lack of familiarity with new industries may make it more difficult for us to keep pace with the
evolving customer needs and preferences. In addition, there may be one or more existing market leaders in any industry that we decide
to expand into. Such companies may be able to compete more effectively than us by leveraging their experience in doing business in that
market as well as their deeper industry insight and greater brand recognition among customers. We will need to comply with new laws and
regulations applicable to these businesses, the failure of which would adversely affect our reputation, business, results of operations
and financial condition. Expansion into any new vertical may place significant strain on our management and resources, and failure to
expand successfully could have a material adverse effect on our business and prospects.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
market in which we participate is competitive, and if we do not compete effectively, our business, operating results and financial condition
could be harmed.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
AI industry market is competitive and rapidly evolving. The principal competitive factors in our market include research and development
capabilities, industry know-how, continuous capital investment, product portfolio, among others. Some of our existing competitors might
have substantial competitive advantages, including larger scale, longer operating history, greater brand recognition, more established
relationships with customers, suppliers and partners, and greater financial, research and development, marketing and other resources.
As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies,
standards or customer requirements. In addition, some competitors may offer products, solutions and services that address one or more
number of functions at lower prices, with greater depth than our products, solutions and services or in different geographies. Our existing
and potential competitors may develop and market new products, solutions and services with functionality comparable to ours, and this
could force us to decrease prices in order to remain competitive. If we are unable to compete successfully against our current or potential
competitors, our business, financial condition, and results of operations may be materially and adversely impacted.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing
customer needs, requirements or preferences, our business may be materially and adversely affected.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
AI industry market is subject to rapid technological changes, evolving industry standards, regulations and customer needs, requirements
and preferences. The success of our business will depend, in part, on our ability to adapt and respond to these changes on an effective
and timely basis. If we fail to upgrade products and solutions that satisfy customers and end-users and provide enhancements and new
features for existing products that keep pace with rapid technological and industry changes, our business, operating results and financial
condition could be adversely affected. If new technologies emerge that are able to deliver competitive products, solutions and services
at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete
effectively.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
platforms must integrate with a variety of network, hardware, mobile and software platforms and technologies, and we need to continuously
modify and enhance our products and solutions to adapt to changes and innovation in these technologies. Any failure of our products and
solutions to function effectively with evolving technologies could reduce the demand for our products and solutions. If we are unable
to respond to these changes in a cost-effective and timely manner, our products and solutions may become less marketable and less competitive
or obsolete, and our business, operating results and financial condition could be adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
support our business growth, we continue to invest heavily in our research and development efforts, the expenses of which may negatively
impact our cash flow, and may not generate the results we expect to achieve.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
technological capabilities are critical to our success, and we have been continuously investing heavily in our research and development
efforts. Our R&amp;D expenses incurred were US$4.2 million, US$5.4 million and US$24.0 million, respectively, for the years ended December
31, 2020, 2021 and 2022, accounting for 29.2%, 32.2% and 70.7% of our operating expenses for each of the corresponding periods. The industry
in which we operate is subject to rapid technological changes and is evolving quickly in terms of technological innovation. We need to
invest significant resources, including financial and human resources, in research and development to lead technological advances in
order to make our products and solutions innovative and competitive in the market. As a result, we expect that our research and development
expenses will continue to increase.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
development activities are inherently uncertain, and we might encounter practical difficulties in commercializing our development results.
Our significant expenditures on research and development may not generate corresponding benefits. Given the fast pace with which the
technology has been and will continue to be developed, we may not be able to timely upgrade our technologies in an efficient and cost-effective
manner, or at all. New technologies in our industry could render our platforms, our products and solutions that we are developing or
expect to develop in the future obsolete, not commercially viable or unattractive, thereby limiting our ability to recover related development
costs, which could result in a decline in our revenues, profitability and market share.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
our platforms experience material errors, defects or security issues, we may lose our customers, fail to honor our obligations in respect
of our contract liabilities, and incur significant remedial costs.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Despite
repeated testing, our products and solutions by their nature may contain technical errors, defects or security issues that are difficult
to detect and rectify, particularly when first introduced or when new versions or upgrades are implemented. Due to the complexity of
our products and solutions, we may not be able to fix these errors, defects and security issues in a timely manner or at all. We may
incur significant expenses rectifying any material error or defect and compensating our customers who are affected by such error or defect.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Given
that many of our customers use our products and solutions in critical parts of their businesses, any error, defect or service interruption
on our platforms could result in significant losses for our customers. Our customers may seek significant compensation from us for any
losses they incur as result of such errors or cease using our products and solutions altogether. Such claims, even if unsuccessful, could
be costly, time-consuming and distracting to management, result in a diversion of significant resources, and have an adverse effect on
our business, operating results and financial condition. We cannot assure you that the disclaimers limiting our exposure to claims, which
we typically include in the agreements with our customers, will be enforceable or give us adequate protections against liabilities. Moreover,
our customers may share information about their poor experiences in the community, resulting in negative publicity about us. Such negative
publicity could damage our reputation and hurt our future sales.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
brand is integral to our success. If we fail to effectively maintain, promote and enhance our brand, our business and competitive advantage
may be harmed.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe that maintaining, promoting and enhancing our Xiao-i (Chinese: &#23567;i&#26426;&#22120;&#20154;) brand is critical to maintaining
and expanding our business. Maintaining and enhancing our brand depend largely on our ability to continue to provide high quality, well-designed,
useful, reliable, and innovative products and solutions, which we cannot assure you we will do successfully.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe the importance of brand recognition will increase as competition in our market increases. In addition to our ability to provide
reliable and useful AI solutions at competitive prices, the successful promotion of our brand will also depend on the effectiveness of
our marketing efforts. We primarily market our products and solutions through our sales and marketing force, and a number of free traffic
sources including developers&#8217; word-of-mouth referrals. Our efforts to market our brand have incurred significant costs and expenses
and we intend to continue such efforts. We cannot assure you, however, that our selling and marketing expenses will lead to increasing
revenue, and even if they did, such increases in revenue might not be sufficient to offset the expenses incurred.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Security
breaches and attacks against our systems and network, and any failure to otherwise protect personal, confidential and proprietary information,
could damage our reputation and negatively impact our business, as well as materially and adversely affect our financial condition and
results of operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have implemented various cybersecurity measures, but such measures may not detect, prevent or control all attempts to compromise our
systems, including distributed denial-of-service attacks, viruses, Trojan horses, malicious software, break-ins, phishing attacks, third-party
manipulation, security breaches, employee misconduct or negligence or other attacks, risks, data leakage and similar disruptions that
may cause service interruptions or jeopardize the security of data stored in and transmitted by our systems or that we otherwise maintain.
Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion
or modification of user information, or a denial-of-service or other interruption to our business operations. As techniques used to obtain
unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service
providers, there can be no assurance that we will be able to anticipate, or implement adequate measures to protect against these attacks.
If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liabilities, our
reputation and business would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
partially rely on third-party service providers to conduct our business and any interruption or delay in such third parties or our own
failure may impair our customers&#8217; experience.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
partially rely on third-party service providers with respect to our software and smart city business. For example, we rent an Internet
Data Center (IDC) server, which is a complete equipment (including high-speed Internet access bandwidth, high-performance local area
network, safe and reliable computer room environment, etc.), professional management, and perfect application service platform, to arrange
the software system required by customers. On the basis of this platform, IDC service providers provide customers with Internet basic
platform services (server hosting, virtual host, mail cache, virtual mail, etc.) and various value-added services (site rental services,
domain name system services, load balancing systems, database systems, data backup services, etc.). Customers need to be able to access
our platforms at any time, without interruption or degradation of performance, and we provide some customers with service-level commitments
with respect to uptime. Any limitation on the capacity of our data centers or cloud infrastructure could impede our ability to onboard
new customers or expand the usage of our existing customers, host our products or serve our customers, which could adversely affect our
business, financial condition and results of operations. In addition, any incident affecting our data centers or cloud infrastructure
that may be caused by cyberattacks, natural disasters, fire, flood, severe storm, earthquake, power loss, outbreaks of contagious diseases,
telecommunications failures, terrorist or other attacks, or other events beyond our control could negatively affect our platform. A prolonged
service disruption affecting our data centers or technology infrastructure for any of the foregoing reasons would negatively impact our
ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us
to lose customers or otherwise harm our business. We may also incur significant costs for using alternative providers or taking other
actions in preparation for, or in response to, events that damage the third-party hosting services we use.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furthermore,
these third-party service providers may not continue to be available to us on commercially reasonable terms, or at all. If we lose our
right to use any of these service providers, it could lead to significant increase in our expenses or otherwise result in a delay or
disruption in our solutions until equivalent technology is developed by us, or obtained from another third party, and integrated into
our solutions. If performance of the third parties that we work with proves unsatisfactory, or if any of them violates its contractual
obligations to us, we may need to replace such third party and/or take other remedial action, which could result in additional costs
and materially and adversely affect our offerings to customers. Moreover, the financial condition of our third-party service providers
may deteriorate over the course of our contract term, which may also impact the ability of such third party to continue providing their
services to us.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
products and solutions rely on the stable performance of servers, and any disruption to our servers due to internal and external factors
could diminish demand for our products and solutions, harm our business, our reputation and results of operations and subject us to liability.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
rely in part upon the stable performance of servers for provision of our products and solutions. Those servers may incur disruptions
due to internal and external factors, such as inappropriate maintenance, defects in the servers, cyberattacks, occurrence of catastrophic
events or human errors. Such disruptions could result in negative publicity, loss of or delay in market acceptance of our products and
solutions, loss of competitive position, lower customer retention or claims by customers for losses sustained by them. In such an event,
we may need to expend additional resources to help with recovering. In addition, we may not carry insurance to compensate us for any
losses that may result from claims arising from disruption in third-party servers. As a result, our reputation and our brand could be
harmed, and our business, results of operations and financial condition may be adversely affected.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
and our business partners&#8217; business operations have been adversely affected by the COVID-19 outbreak, and may in the future continue
to be affected by the COVID-19 outbreak.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beginning
in 2020, normal economic activity received a severe shock when many company offices, retail stores and production facilities across China
were forced to temporarily close as a result of the COVID-19 outbreak. The population in most of the major cities was locked down to
a greater or lesser extent at various times and opportunities for discretionary consumption were extremely limited. People are forced
to stay at home, and travel and social activities are restricted. </span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
took a series of measures to protect our employees, closing our offices, facilitating remote working arrangements for our employees,
and canceling business meetings and travels. The operations of some of our business partners and service providers were also constrained
and impacted. This has led to delays in the purchase decisions and sales and implementation cycles of our products and solutions for
existing or potential customers. Meanwhile it reduces our efficiency in product development, sales, marketing, and customer service work.
</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China
began to modify its zero-COVID policy at the end of 2022, which seems to have prompted a considerable degree of uncertainties about the
economic and market outlook. Thus, we have to be prepared for the possibility for a wide range of possible outcomes, some of which could
be highly unfavorable to our business. There is still uncertainty as to the future impact of the virus. The extent to which the pandemic
impacts our results of operations going forward will depend on future developments which are highly uncertain and unpredictable, including
the frequency, duration and extent of outbreaks of COVID-19, the appearance of new variants with different characteristics, the success
or failure of efforts to contain or treat cases, and future actions we or the authorities may take in response to these developments.
</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the adoption of our products and solutions by our customers are slower than we expected, our business, results of operations and financial
condition may be adversely affected.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business has relied on the adoption of our products and solutions by a broad array of customers. Our ability to further increase our
customer base, and achieve broader market acceptance of our products and solutions will depend, in part, on our ability to effectively
organize, focus and train our sales and marketing personnel. Our ability to achieve significant revenue growth in the future will depend,
in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals. Our recent hires and planned
hires may not become as productive and efficient as we expect and we may be unable to hire or retain sufficient numbers of qualified
individuals in the future in the markets where we do business.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
we seek to increase the adoption of our products and solutions by our customers, we may incur higher costs and longer sales cycles. The
decision to adopt our products and solutions may require the review and approval of multiple departments including product, human resources,
financial and legal departments. In addition, while customers may quickly deploy our products and solutions on a limited basis before
they will commit to deploying our products and solutions at scale, they often require extensive education about our products and solutions
and significant customer support time, engage in protracted pricing negotiations and seek to secure readily available development resources.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may fail to conduct our sales and marketing activities in a cost-effective manner and we are subject to limitations in promoting our
products and solutions.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Due
to the technical nature of AI solutions, we mainly rely on our sales and marketing forces to conduct marketing activities and drive sales
of our products and solutions. If we fail to conduct our sales and marketing activities in a cost-effective way, we may incur considerable
marketing expenses, which could adversely affect our business and operating results. Additionally, our brand promotion and marketing
activities may not be well received by customers and potential customers, and may not result in the levels of sales that we anticipate.
Meanwhile, marketing approaches and tools in the market for AI solutions in China are evolving, which may further require us to enhance
our marketing approaches and experiment with new marketing methods to keep pace with industry developments and customer preferences.
Failure to introduce new marketing approaches in an efficient and effective manner could reduce our market share and materially and adversely
affect our financial condition, results of operations and profitability.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we fail to provide high quality customer services, our brand, business, and results of operations may be harmed.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe our focus on customer services and support is critical to attracting new customers, retaining existing customers and growing
our business. We have invested in training our customer support team and improving the quality of our customer services. However, our
customer services team may not be able to maintain a high standard for themselves going forward for reasons such as budgetary constraints
and employee losses, which could adversely affect our reputation and ability to retain and bring in customers. As a result, our brand,
business, and results of operations may be harmed.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
had a concentration of major customers during the years ended December 31, 2020, 2021 and 2022 (the &#8220;Track Record Period&#8221;)
and if our existing major customers cease to engage our services, we may be unable to find new customers with similar attributable revenue
within a reasonable time or at all.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the years ended December 31, 2020, 2021 and 2022, the percentage of our revenue attributable to our largest customer amounted to 17.7%,
41.2% and 20.4%, respectively, while the percentage of our revenue attributable our five largest customers for the years ended December
31, 2021 and 2022 amounted to 42.8%, 67.1% and 58.4%, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
cannot assure you that there will not be any disputes between our major customers and us, or that we will be able to maintain business
relationships with our existing customers. As a substantial amount of revenues were generated from a relatively small number of major
customers during the Track Record Period, in the event that these existing major customers cease to engage our services and we are unable
to find new customers with similar attributable revenue within a reasonable period of time or at all, our business and profitability
may be adversely affected. In addition, if any of such customers default or delay on their payment or settlement of our trade and other
receivables, our liquidity, financial condition and results of operations may be adversely affected.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
intensifying competition, change in sector trend and landscape and government policies may have a direct impact on the industries where
our clients operate their businesses, and negatively affect the stability of our clients, which may subsequently have negative impact
on our business.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
significant portion of our revenues were derived from customers engaged in a few industries in China, some of which are emerging and
highly competitive, such as the contact center industry. Any change in the competitive landscape, market trend or user behaviors in such
sectors may have a negative impact on our customers, thus harm their ability to make payments and maintain and increase the usage of
our products and solutions. In addition, some of these industries in China are highly regulated by the PRC government and numerous regulatory
authorities of the central PRC government are empowered to issue and implement regulations governing various aspects of these industries.
As the laws and regulations are evolving and some of them are relatively new, changes to the current laws and regulations may harm our
business and results of operation. In addition, interpretation and enforcement of such laws and regulations involve significant uncertainty.
As a result, in certain circumstances, it may be difficult to determine what actions or omissions may be deemed to be in violations of
applicable laws and regulations. If these laws and regulations or the uncertainty associated with their interpretation negatively impact
the industries where our customers operate, our business may be adversely affected as well.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
reliance on a limited number of suppliers for certain essential services could adversely affect our ability to manage our business effectively
and subsequently harm our business.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
rely on a limited number of suppliers for certain essential services to operate our network and provide products and solutions to our
customers. Due to the limited number of relevant suppliers available in China, we rely on a limited number of suppliers for cloud, internet
data center services and hardware. Our purchase from top-three suppliers in aggregate accounted for 62.5%, 79.2% and 66.8% of total purchase
for the years ended December 31, 2020, 2021 and 2022, respectively. We may experience shortages in components or delays in delivery as
a result of natural disasters, increased demand in the industry or our suppliers&#8217; lacking sufficient rights to supply the servers
or other products or services.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
reliance on these suppliers exposes us to risks, including reduced control over costs and constraints based on the then current availability,
terms, and pricing of these services. We generally do not have any long-term contracts guaranteeing supply with these suppliers. If our
supply of certain services is disrupted or delayed, there can be no assurance that additional supplies or services can serve as adequate
replacements or that supplies will be available on terms that are favorable to us, if at all. Moreover, even if we can identify adequate
replacements on substantially similar terms, our business could be adversely affected until those efforts were completed. Any disruption
or delay in the supply of our hardware may cause delay or other constraints on our operations that could damage our customer relationships.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may fail to obtain or maintain all required licenses, permits and approvals to operate our business.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business and operations have been subject to extensive regulations. We are required to obtain and maintain applicable licenses, permits
and approvals from different regulatory authorities in order to conduct our existing or future business in connection with smart city
services. As we have been continually expanding into new business operations in the area of architectural design AI services, and the
interpretation and application of existing PRC laws and regulations and possible new laws and regulations relating to the telecommunication
services have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses
and activities of telecommunication services in China, including our business, we cannot assure you that we have obtained all the approvals,
permits or licenses required for conducting our business in China or areas where we operate, or will be able to maintain our existing
approvals, permits or licenses or obtain new ones. The government authorities may require us to obtain additional licenses, permits or
approvals so that we can continue to operate our existing or future businesses or otherwise prohibit our operation of the types of businesses
to which the new requirements apply. In addition, new regulations or new interpretations of existing regulations may increase our costs
of doing business and prevent us from efficiently delivering services and expose us to potential penalties and fines. Lastly, our existing
licenses may expire without proper renewal or be revoked due to violations of relevant licensure maintenance requirements. If any of
our entities is deemed by governmental authorities to be operating without appropriate permits and licenses or outside of their authorized
scopes of business or otherwise fail to comply with relevant laws and regulations, we may be subject to penalties and our business, financial
condition, and results of operation may be materially and adversely affected.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may fail to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from any
unauthorized use of our technologies.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
trade secrets, trademarks, copyrights, patents, and other intellectual property rights are critical to our success. We rely on, and expect
to continue to rely on, confidentiality agreements and non-compete agreements with our employees and third parties to protect our intellectual
properties. However, events beyond our control may pose threats to our intellectual property rights and the integrity of our products
and brand. Effective protection of our trademarks, copyrights, domain names, patent rights, and other intellectual property rights is
expensive and challenging. While we have taken measures to protect our intellectual property rights, including implementing a set of
comprehensive internal policies to establish robust management over our intellectual property rights, and deploying a special team to
guide, manage, supervise and monitor our daily work regarding intellectual property rights, we cannot assure you that such efforts are
adequate to guard against any potential infringement and misappropriation. In addition, our intellectual property rights may be declared
invalid or unenforceable by the courts. We cannot assure you that any of our intellectual property rights applications will ultimately
proceed to registration or will result in registration with adequate scope for our business. Some of our pending applications or registrations
may be successfully challenged or invalidated by others. If our intellectual property rights applications are not successful, we may
have to use different intellectual property rights for our affected products or services, or seek to enter into arrangements with any
third parties who may have prior registrations, applications or rights, which might not be available on commercially reasonable terms,
if at all. If we fail to protect or enforce our intellectual property rights, our competitors may copy or reverse-engineer our products
and services without authorization and compete with us. As a result, our customers and partners may devalue our services, and our ability
to compete effectively may be impaired, which could have a material adverse effect on our business, financial condition and results of
operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Similarly,
to protect our unpatented proprietary information and technology, such as trade secrets, we rely on our agreements with employees and
third parties that contain restrictions on the use and disclosure of such information or technology. For example, our employees and third
parties are required to keep confidential of any unpatented proprietary information and technology during the contract term and after
the termination of the employment agreement. In addition, the agreements with our employees and third parties explicitly provide for
all rights and obligations regarding the ownership and protection of intellectual property rights. These agreements may be inadequate
or may be breached, either of which could potentially result in unauthorized use or disclosure of our trade secrets and other proprietary
information to third parties, including our competitors. As a result, we may lose our competitive advantages derived from such intellectual
property. Significant impairments on our intellectual property rights may result in a material and adverse effect on our business.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs
of business.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
compete in markets where there are a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary
rights, as well as disputes regarding infringement of these rights. Our competitors and other third parties may, whether rightly or falsely,
bring legal claims against us for infringing on their intellectual property rights. The intellectual property laws in China, which cover
the validity, enforceability and scope of protection of intellectual property rights, are evolving, and litigation is becoming a more
popular means to resolve commercial disputes. We are exposed to a higher litigation risk. Any intellectual property lawsuits against
us, whether successful or not, may harm our brand and reputation.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Defending
intellectual property claims is costly and can impose a significant burden on our management and resources. Any intellectual property
litigation to which we become a party may require us to do one or more of the following:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">cease
                                            selling, licensing, or using products or features that incorporate the intellectual property
                                            rights that we allegedly infringe, misappropriate, or violate;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">make
                                            substantial payments for legal fees, settlement payments, or other costs or damages, including
                                            indemnification of third parties;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">obtain
                                            a license or enter into a royalty agreement, either of which may not be available on reasonable
                                            terms or at all, in order to obtain the right to sell or use the relevant intellectual property;
                                            or</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">redesign
                                            the allegedly infringing products to avoid infringement, misappropriation, or violation,
                                            which could be costly, time-consuming, or impossible.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Further,
there is no guarantee that we can obtain favorable judgment in all legal cases, in which case we may need to pay damages or be forced
to cease using certain technologies or content that are critical to our products and solutions. Any resulting liabilities or expenses
or any changes to our products or solutions that we have to make to limit future liabilities may have a material adverse effect on our
business, results of operations, and prospects.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
and our management may from time to time be subject to claims, disputes, lawsuits and other legal and administrative proceedings.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are currently not party to any material legal or
administrative proceedings except for the ones described in Item 8. See &#8220;Item 8.A. Consolidated Statements and Other Financial Information&#8212;Litigation.&#8221;
However, in light of the nature of our business, we and our management are susceptible to potential claims or disputes. We and our management
have been, and may from time to time in the future be, subject to or involved in various claims, disputes, lawsuits and other legal and
administrative proceedings. Lawsuits and litigations may cause us to incur defense costs, utilize a significant portion of our resources
and divert management&#8217;s attention from our day-to-day operations, any of which could harm our business. Claims arising out of actual
or alleged violations of law, breach of contract or torts could be asserted against us by customers, business partners, suppliers, competitors,
employees or governmental entities in investigations and legal proceedings. In particular, according to the PRC Social Insurance Law and
the Administrative Measures on Housing Fund, employers are required, together with their employees or separately, to pay the social insurance
premiums and housing funds for their employees. Employers that fail to make adequate social insurance and housing fund contributions may
be subject to fines and legal sanctions. A few of our PRC operating entities engaged third-party human resources agencies to pay social
insurance premium and housing funds for some of their employees. This is because such employees worked outside of the cities where the
operating entities are registered and third-party human resources agencies were engaged to pay social insurance premium and housing provident
funds for such employees in cities where they worked. If the relevant PRC authorities determine that this third-party agency arrangement
does not satisfy the requirements under the relevant PRC laws and regulations, that we shall make supplemental contributions, that we
are not in compliance with labor laws and regulations, or that we are subject to fines or other legal sanctions, such as order of timely
rectification, and our business, financial condition and results of operation may be adversely affected.</p><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Changes
in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our products
and solutions and have a negative impact on our business.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
future success of our business depends upon the continued use of the internet as a primary medium for commerce, communication and business
solutions. The PRC government has in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet
as a commercial medium. Changes in these laws or regulations could require us to modify our products in order to comply with these changes.
In addition, government agencies may begin to impose taxes, fees or other charges for accessing the internet or e-commerce. These laws
and changes could limit the growth of internet-related commerce or communications generally and reduce the demand for internet-based
services such as ours.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, use of the internet as a business tool could be adversely affected. The performance of the internet and its acceptance as a
business tool has been adversely affected by &#8220;viruses,&#8221; &#8220;worms&#8221; and similar malicious programs and the internet
has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the internet
is adversely affected by the above issues, our business, financial condition, and results of operations could suffer.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Complying
with evolving privacy and other data related laws and requirements may be expensive and force us to make adverse changes to our business,
and failure to comply with such laws and requirements could result in substantial harm to our business and results of operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Laws
and regulations governing data privacy and protection, the use of the internet as a commercial medium, the use of data in artificial
intelligence and machine learning, and data sovereignty requirements are rapidly evolving, extensive, complex, and include inconsistencies
and uncertainties. These and other similar legal and regulatory developments could contribute to legal and economic uncertainty, affect
how we design, market, sell, and operate our platform, how our customers process and share data, how we process and use data, and how
we transfer personal data from one jurisdiction to another, which could negatively impact demand for our platform. We may incur substantial
costs to comply with such laws and regulations, to meet the demands of our customers relating to their own compliance with applicable
laws and regulations, and to establish and maintain internal compliance policies.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have established privacy policies and other documentation regarding our collection, processing, use, and disclosure of personal information
or other confidential information. Although we endeavor to comply with our policies, we may at times fail to do so or may be perceived
to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees or vendors
fail to comply with our policies. Such failures could subject us to claims and proceedings, which could be costly and time-consuming.
Our business, financial condition and results of operations could be adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are dependent on the continuous services of our senior management and other key employees. If we fail to attract, retain and motivate
qualified personnel, our business could be materially and adversely affected.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
future performance depends on the continued services and contributions of our senior management to oversee and execute our business plans
and to identify and pursue new opportunities and innovations. Any loss of service of our senior management or other key employees can
significantly delay or prevent us from achieving our strategic business objectives, and adversely affect our business, financial condition
and operating results. From time to time, there may be changes in our senior management team, resulting from the hiring or departure
of executives, which could also disrupt our business. Hiring suitable replacements and integrating them into our existing teams also
requires significant amount of time, training and resources, and may impact our existing corporate culture.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Future
strategic acquisitions and investments may fail and may result in material and adverse impact on our financial condition and results
of operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may, in the future, acquire businesses or platforms that we believe can improve our products and solutions, enhance our technological
capacities, and expand our customer coverage. Our ability to implement our acquisition strategy will depend on our ability to identify
suitable targets, our ability to reach agreements with them on commercially reasonable terms, and within a desired timeframe, and the
availability of financing to complete acquisitions, as well as our ability to obtain any required shareholder or government approvals.
Our strategic acquisitions and investments could subject us to uncertainties and risks, including high acquisition and financing costs,
potential ongoing financial obligations and unforeseen or hidden liabilities, failure to achieve our intended objectives, benefits or
revenue-enhancing opportunities, uncertainty of entering into markets in which we have limited or no experience, costs associated with
and difficulties in integrating acquired businesses, and diversion of our resources and management attention. Our failure to address
these uncertainties and risks may have a material adverse effect on our business, financial condition, and results of operations. Even
if we are able to successfully acquire or invest in suitable businesses, we cannot assure you that we will achieve our expected returns
on such acquisitions or investments through successful integration. As of the date of this annual report, we had not identified or pursued
any acquisition or investment targets. If we fail to achieve our expected returns on such acquisitions or investments in the future,
our business, financial conditions, results of operations and prospects may be materially and adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Acquisitions
also pose the risk that we may be exposed to successor liability relating to the actions by an acquired company and its management before
and after the acquisition. The due diligence that we conduct in connection with an acquisition or investment may not be sufficient to
discover unknown liabilities, and any contractual guarantees or indemnities that we receive from the sellers of the acquired companies
or investment target companies or their shareholders may not be sufficient to protect us from, or compensate us for, actual liabilities.
A material liability associated with an acquisition or investment could adversely affect our reputation and reduce the benefits of the
acquisition or investment. In addition, if the management team or key employees of an acquired company fail to perform as expected, this
may affect the business performance of such acquired company and, in turn, have a material adverse effect on our business, financial
conditions, and results of operations.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may, in the future, grow and expand our international operations, which may expose us to significant risks.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may, in the future, further expand our operations and customer base worldwide. We may adapt to and develop strategies to address international
markets but there is no guarantee that such efforts will have the desired effect. As a result, we may be required to devote significant
management attention and financial resources worldwide. In connection with such expansion, we may face difficulties including costs associated
with varying seasonality patterns, potential adverse movement of currency exchange rates, longer payment cycle difficulties in collecting
accounts receivable in some countries, tariffs and trade barriers, a variety of regulatory or contractual limitations on our ability
to operate, adverse tax events, reduced protection of intellectual property rights in some countries, political risks and a geographically
and culturally diverse workforce and customer base. Failure to overcome any of these difficulties could harm our business.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country. We cannot
assure you that we are able to fully comply with the legal requirements of each foreign jurisdiction and successfully adapt our business
models to local market conditions. Due to the complexity involved in our international business expansion, we cannot assure you that
we are or will be in compliance with all local laws.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may be unable to obtain any additional capital required in a timely manner or on acceptable terms, or at all. Moreover, our future capital
needs may require us to sell additional equity or debt securities that may dilute our shareholders&#8217; shareholdings or subject us
to covenants that may restrict our operations or our ability to pay dividends.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To
grow our business and remain competitive, we may require additional capital from time to time for our daily operations. Our ability to
obtain additional capital is subject to a variety of uncertainties, including:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            market position and competitiveness in the industries in which we operate;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            future profitability, overall financial condition, results of operations and cash flows;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">general
                                            market conditions for capital-raising activities by our competitors in China; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">economic,
                                            political and other conditions in China and internationally.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may be unable to obtain additional capital in a timely manner or on acceptable terms, or at all. In addition, our future capital or other
business needs could require us to sell additional equity or debt securities, or to obtain a credit facility. The sale of additional
equity or equity-linked securities could dilute our shareholders&#8217; shareholdings. Any incurrence of indebtedness will also lead
to increased debt service obligations, and could result in operating and financing covenants that may restrict our operations or our
ability to pay dividends to our shareholders.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have not independently verified the accuracy or completeness of data, estimates, and projections in this annual report that we obtained
from third-party sources, and such information involves assumptions and liabilities.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain
facts, forecasts, and other statistics contained in this annual report relating to the industry in which we operate have been derived
from various public data sources and industry reports of third-party industry consultants. In deriving the market size of these industries,
these industry consultants may have adopted different assumptions and estimates for certain metrics. While we generally believe such
reports to be reliable, we have not independently verified the accuracy or completeness of such information. Such reports may not be
prepared on a comparable basis or may not be consistent with other sources.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Industry
data and projections involve a number of assumptions and limitations. Our industry data and market share data should be interpreted in
light of the industries in which we operate. Any discrepancy in the interpretation of such data could lead to different measurements
and projections, and actual results could differ from the projections.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have identified two material weaknesses in our internal control over financial reporting. If our remediation of the material weaknesses
is not effective, or if we experience additional material weaknesses in the future or otherwise fail to maintain proper and effective
internal control over financial reporting, our ability to produce accurate and timely consolidated financial statements could be impaired,
investors may lose confidence in our financial reporting and the trading price of the ADSs may decline.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to Section 404 of Sarbanes-Oxley, our management will be required to report upon the effectiveness of our internal control over financial
reporting beginning with the annual report for our fiscal year ending December 31, 2025. When we lose our status as an &#8220;emerging
growth company&#8221; and reach an accelerated filer threshold, our independent registered public accounting firm will be required to
attest to the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for
management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible
remediation. To comply with the requirements of being a reporting company under the Exchange Act, we will need to upgrade our information
technology systems, implement additional financial and management controls, reporting systems and procedures and hire additional accounting
and finance staff. If we or, if required, our auditor is unable to conclude that our internal control over financial reporting is effective,
investors may lose confidence in our financial reporting and the trading price of the ADSs may decline.&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the audit of our consolidated
financial statements, as of and for the years ended December 31,2020, 2021 and 2022, we identified two material weaknesses in our internal
control over the financial statement closing process. 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 consolidated
financial statements will not be prevented or detected on a timely basis. The material weakness that have been identified relates to (i)
our lack of sufficient and competent financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and reporting
requirements set forth by the SEC to address complex U.S. GAAP technical accounting issues, and to prepare and review consolidated financial
statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements and (ii) our lack of internal file management
procedures and effective recognition procedures to recognize revenue and costs timely.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are working to remediate these material weaknesses
and are taking steps to strengthen our internal control. Specifically, we are working to develop and implement a staffing plan for hiring
additional accounting and finance personnel in 2023, hire additional qualified resources with appropriate knowledge and expertise to handle
complex accounting issues and effectively prepare financial statements and conduct regular and continuous U.S. GAAP accounting and financial
reporting training programs for our financial reporting and accounting personnel. In order to maintain and improve the effectiveness of
our disclosure controls and procedures and internal controls over financial reporting, we will need to expend significant resources and
provide significant management oversight. We plan to adopt measures to improve our internal file management procedures and an effective
recognition procedure by (i) establishing internal document management policies and systems, (ii) continuing our efforts to implement
necessary review and controls at relevant levels and all important documents and contracts will be submitted to the office of our chief
administrative officers for retention and review, and (iii) establishing standard procedures to recognize revenue and costs based on the
contracts service periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Implementing
any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial
costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management&#8217;s
attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal control.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
cannot assure you that there will not be additional material weaknesses or any significant deficiencies in our internal control over
financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability
to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control
over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness
or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, investors may
lose confidence in the accuracy and completeness of our financial reports, the market price of the ADSs could decline, and we could be
subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in
our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies,
could also restrict our future access to the capital markets.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our business operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business could be adversely affected by the effects of epidemics. In recent years, there have been breakouts of epidemics in and outside
China. Our business operations could be disrupted if any of our employees is suspected of having H1N1 flu, COVID-19, avian flu or another
epidemic, since it could require our employees to be quarantined and/or our offices to be disinfected. In addition, our results of operations
could be adversely affected to the extent that the outbreak harms the Chinese or global economy or our business environment in particular.
We are also vulnerable to natural disasters and other calamities, which may give rise to server interruptions, breakdowns, system failures,
technology platform failures or internet failures, and may adversely affect our ability to provide advertising services through our products.
See &#8220;<i>Risk Factors &#8212; Risks Relating to Our Business and Industry &#8212; Our and our business partners&#8217; business
operations have been adversely affected by the COVID-19 outbreak, and may in the future continue to be affected by the COVID-19 outbreak.</i>&#8221;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Economic
substance legislation of the Cayman Islands may adversely impact us or our operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing
concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without
real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Act of the Cayman Islands
(the &#8220;Substance Act&#8221;) came into force in the Cayman Islands introducing certain economic substance requirements for in-scope
Cayman Islands entities which are engaged in certain &#8220;relevant activities,&#8221; which in the case of exempted companies incorporated
before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. As we are a Cayman Islands company,
compliance obligations include filing annual notifications for the Company, which need to state whether we are carrying out any relevant
activities and if so, whether we have satisfied economic substance tests to the extent required under the Substance Act. As it is a new
regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. We may need to allocate
additional resources to keep updated with these developments, and may have to make changes to our operations in order to comply with
all requirements under the Substance Act. Failure to satisfy these requirements may subject us to penalties under the Substance Act.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
is unclear what ramifications, if any, the addition of the Cayman Islands to the &#8220;FATF grey list&#8221; will have for us.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
February 2021, the Cayman Islands was added to the Financial Action Task Force (&#8220;FATF&#8221;) list of jurisdictions whose anti-money
laundering practices are under increased monitoring, commonly referred to as the &#8220;FATF grey list.&#8221; When the FATF places a
jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies
within agreed timeframes and is subject to increased monitoring during that timeframe. It is unclear how long this designation will remain
in place and what ramifications, if any, the designation will have for the Company.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
is unclear how long the designation of the Cayman Islands to the EU AML High-Risk Third Countries List will remain in place and what
ramifications, if any, the designation will have for us.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March&#160;13, 2022, the European Commission (&#8220;EC&#8221;) updated its list of &#8216;high-risk third countries&#8217; (&#8220;EU
AML List&#8221;) identified as having strategic deficiencies in their anti-money laundering/counter-terrorist financing regimes. The
EC has noted it is committed to greater alignment with the FATF listing process and the addition of the Cayman Islands to the EU AML
List is a direct result of the inclusion of the Cayman Islands on the FATF grey list in February 2021. It is unclear how long this designation
will remain in place and what ramifications, if any, the designation will have for us.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to Our Corporate Structure</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>In
the following discussion of risks relating to our corporate structure, &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221; refer
to Xiao-I.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC
regulations on foreign investment in internet and other related businesses, or if these regulations or their interpretation change in
the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations and our ADSs may decline
in value dramatically or even become worthless.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Foreign
ownership of internet-based businesses, such as provider of internet data centers services, are subject to restrictions under current
PRC laws and regulations. Neither we nor our subsidiaries own any equity interest in Shanghai Xiao-i. Instead, we control and receive
the economic benefits of Shanghai Xiao-i&#8217;s business operation through the VIE Agreements. We, through our WFOE, have the full and
exclusive right to manage and direct all cash flow and assets of the VIE and to direct and administrate the financial affairs and daily
operation of Shanghai Xiao-i. Shanghai Xiao-i pays service fees to WFOE in an amount determined by WFOE in WFOE&#8217;s sole discretion.
If Shanghai Xiao-i is unable to pay the service fees due to the actual managing situation, with the written consent of WFOE, the unpaid
part of the service fees in the previous fiscal year can be deferred to the end of the next year and settled together. During the validity
of the VIE Agreements, we will bear all the economic benefits and risks arising from the business of Shanghai Xiao-i and its subsidiaries.
WFOE will provide financial support to Shanghai Xiao-i or its subsidiaries in the event of a loss or serious operational difficulties.
The VIE structure is used to provide investors with exposure to foreign investment in China-base companies where Chinese law prohibits
direct foreign investments in certain industries. The VIE Agreements allow Xiao-I to (i) exercise control over the VIE, (ii) receive
all of the economic benefits of the VIE and the VIE&#8217;s subsidiaries (excluding non-controlling interests) and bears all the economic
risks arising from the business of the VIE and the VIE&#8217;s subsidiaries (excluding non-controlling interests), (iii) provide financial
support to the VIE or the VIE&#8217;s subsidiaries, and (iv) have an exclusive option to purchase all or part of the equity interests
and assets in the VIE when and to the extent permitted by PRC law.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of these contractual arrangements, we are regarded as the primary beneficiary of the VIE for accounting purposes and hence consolidate
financial results of the VIE and its subsidiaries into our consolidated financial statements under U.S. GAAP. For the avoidance of any
doubt, any references to control or benefits that accrue to us because of Shanghai Xiao-i refer only to the conditions satisfied for
consolidation of Shanghai Xiao-i under U.S. GAAP and it is not an entity in which we own any equity.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
(i) the applicable PRC authorities invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) any
VIE Agreements are terminated with the consent of Zhizhen Technology or (iii) the VIE or its shareholders fail to perform its/his/her
obligations under these contractual arrangements, our business operations in China would be materially and adversely affected, and the
value of your ADSs would substantially decrease. Further, if we fail to renew these contractual arrangements upon their expiration, we
would not be able to continue our business operations unless the then current PRC law allows us to directly operate businesses in China.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, if any VIE or all or part of its 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. If any of the variable interest entities undergoes a voluntary or involuntary liquidation proceeding, its shareholders or
unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business,
which could materially and adversely affect our business and our ability to generate revenues.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC.
The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties
in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these
contractual arrangements, we may not be able to exert effective control over the PRC operating entities and we may be precluded from
operating our business, which would have a material adverse effect on our financial condition and results of operations. Additionally,
our ADSs may decline in value dramatically or even become worthless should we become unable to assert our contractual rights over the
assets of the VIE that conducts all or substantially our operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
contractual arrangements may not be as effective as equity ownership in providing us with control over the VIE. For example, the VIE
and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations
in an acceptable manner or taking other actions that are detrimental to our interests. If we had equity ownership of 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, under the current contractual
arrangements, we rely on the performance by the VIE and its shareholders of its obligations under the contracts to exercise control over
the VIE. The shareholders of the VIE may not act in the best interests of our company or may not perform their obligations under these
contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the contractual
arrangements with the VIE.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial
costs and expend additional resources to enforce such arrangements. For example, if the shareholders of the VIE refuse to transfer their
equity interest in the VIE to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if
they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.
In addition, if any third parties claim any interest in such shareholders&#8217; equity interests in the VIE, our ability to exercise
shareholders&#8217; rights or foreclose the share pledge according to the contractual arrangements may be impaired. If these or other
disputes between the shareholders of the VIE and third parties were to impair our control over the VIE, our ability to consolidate the
financial results of the VIE would be affected, which would in turn result in a material adverse effect on our business, operations and
financial condition. As a result, our ADSs may decline in value dramatically or even become worthless.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
our opinion is that (i) the ownership structures of our WFOE and the VIE in China, currently are not in violation of any explicit provisions
of PRC laws and regulations currently in effect; and (ii) the agreements under the contractual arrangements between our WFOE, the VIE
and its shareholders governed by PRC law are valid, binding and enforceable against each party thereto in accordance with their terms,
there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules.
Thus, the PRC regulatory authorities may take a view contrary to our opinion. It is uncertain whether any new PRC laws or regulations
relating to variable interest entity structure will be adopted or if adopted, what they would provide. If the ownership structures, contractual
arrangements and business of our company, our PRC subsidiary, the VIE or subsidiaries of the VIE are found to be in violation of any
existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals to operate our business,
the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">revoking
                                            the business licenses and/or operating licenses of such entities;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">imposing
                                            fines on us;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">confiscating
                                            any of our income that they deem to be obtained through illegal operations;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">discontinuing
                                            or placing restrictions or onerous conditions on our operations;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">placing
                                            restrictions on our right to collect revenues;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">shutting
                                            down our servers or blocking our app/websites;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">requiring
                                            us to restructure our ownership structure or operations;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">restricting
                                            or prohibiting our use our available funds or the proceeds from any future financings;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">activities
                                            to finance the business and operations of the VIE and its subsidiaries; or</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">taking
                                            other regulatory or enforcement actions that could be harmful to our business.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
of these events could cause significant disruption to our business operations and severely damage our reputation, which would in turn
have a material adverse effect on our financial condition and results of operations. If occurrences of any of these events results in
our inability to direct the activities of the VIE and its subsidiaries in China that most significantly impact its economic performance,
and/or our failure to receive the economic benefits and residual returns from the VIE and its subsidiaries, and we are not able to restructure
our ownership structure and operations in a satisfactory manner, we may not be able to consolidate the financial results of the VIE or
its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
contractual arrangements with the VIE and its shareholders may not be as effective as equity ownership in providing operational control.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have to rely on the contractual arrangements with the VIE and its shareholders to operate our business in China. These contractual arrangements,
however, may not be as effective as equity ownership in providing us with control over the VIE. For example, the VIE and its shareholders
could breach their contractual arrangements with us by, among other things, failing to conduct the operations of the VIE in an acceptable
manner or taking other actions that are detrimental to our interests. And any economic losses as a result would be absorbed by us as
we bear all economic risks arising from the businesses of the VIE under the contractual arrangements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we had equity ownership of the VIE in China, 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, under the current contractual arrangements, we rely on the performance by the VIE and its shareholders of
their obligations under the contracts to exercise control over the VIE. The shareholders of the VIE may not act in the best interests
of our company or may not perform their obligations under these contracts. If any dispute relating to these contracts remains unresolved,
we will have to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal
proceedings and therefore will be subject to uncertainties in the PRC legal system.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material
and adverse effect on our business.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we could be limited in our
ability to enforce the contractual arrangements that give us operational control over our business operations in China and may have to
incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under
PRC law, including seeking specific performance or injunctive relief, and contractual remedies, which we cannot assure you will be sufficient
or effective under PRC law. For example, if the shareholders of the VIE were to refuse to transfer their equity interests in the VIE
to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act
in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition,
if there are any disputes or governmental proceedings involving any interest in such shareholders&#8217; equity interests in the VIE,
our ability to exercise shareholders&#8217; rights or foreclose the share pledges according to the contractual arrangements may be impaired.
If these disputes or proceedings were to impair our control over the VIE, we may not be able to maintain operational control over our
business operations in the PRC and thus would not be able to continue to consolidate the VIE&#8217;s financial results, which would in
turn result in a material adverse effect on our business, operations and financial condition.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
the agreements under the contractual arrangements with the VIE are governed by PRC laws and provide for the resolution of disputes through
arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved
in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the
United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements.
Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a consolidated
variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate
outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties
cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing
parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration
awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event
that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of
enforcing these contractual arrangements, we may not be able to exert operational control over the consolidated variable interest entity,
and our ability to conduct our business may be negatively affected. As a result, our ADSs may decline in value dramatically or even become
worthless should we become unable to assert our contractual rights over the assets of the VIE that conducts all or substantially our
operations.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
contractual arrangements with the VIE are governed by PRC law. Accordingly, these contracts would be interpreted in accordance with PRC
law, and any disputes would be resolved in accordance with PRC legal procedures, which may not protect you as much as those of other
jurisdictions, such as the United States.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
the agreements under the contractual arrangements with the VIE are governed by PRC law and provide for the resolution of disputes through
arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved
in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the
United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements.
Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a consolidated
variable interest entity should be interpreted or enforced under PRC law. There remain significant uncertainties regarding the ultimate
outcome of such arbitration should legal action become necessary. In addition, under PRC law, rulings by arbitrators are final, parties
cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed
time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings,
which would require additional expenses and delay. In the event we are unable to enforce these contractual arrangements, or if we suffer
significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert operational
control over the VIE, and our ability to conduct our business may be negatively affected.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Contractual
arrangements we have entered into with the VIE and its shareholders may be subject to scrutiny by the PRC tax authorities. A finding
that we owe additional taxes could significantly reduce our consolidated net income and the value of your investment.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the
PRC tax authorities. We may be subject to adverse tax consequences if the PRC tax authorities determine that the contractual arrangements
among our PRC subsidiary, the VIE and its shareholders are not on an arm&#8217;s length basis and therefore constitute favorable transfer
pricing. As a result, the PRC tax authorities could require that the VIE adjust its taxable income upward for PRC tax purposes. Such
an adjustment could adversely affect us by increasing our consolidated affiliated entities&#8217; tax expenses without reducing the tax
expenses of our PRC subsidiary, subjecting the VIE to late payment fees and other penalties for under-payment of taxes, and resulting
in our PRC subsidiary&#8217;s loss of its preferential tax treatment. Our consolidated results of operations may be adversely affected
if the VIE&#8217;s tax liabilities increase or if it is subject to late payment fees or other penalties.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a holding company, and will rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of our subsidiaries
to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent
company expenses or pay dividends to holders of our ADSs.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a holding company and conduct substantially all of our business through the VIE and its subsidiaries. We may rely on dividends to
be paid by the VIE to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions
to our shareholders, to service any debt we may incur and to pay our operating expenses. If the VIE 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.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
PRC laws and regulations, our WFOE, which is a wholly foreign-owned enterprise in China, may pay dividends only out of its accumulated
profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is
required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund,
until the aggregate amount of such fund reaches 50% of its registered capital.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
WFOE generates primarily all of its revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction
on currency exchange may limit the ability of our WFOE to use its Renminbi revenues to pay dividends to us. The PRC government may continue
to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by State Administration
of Foreign Exchange (the &#8220;SAFE&#8221;) for cross-border transactions falling under both the current account and the capital account.
Any limitation on the ability of our WFOE to pay dividends or make other kinds of payments to us could materially and adversely limit
our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and
conduct our business.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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. Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially
and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or
otherwise fund and conduct our business.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the chops of our PRC subsidiary, the VIE, is not kept safely, is stolen or are used by unauthorized persons or for unauthorized purposes,
the corporate governance of these entities could be severely and adversely compromised.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature.
Each legally registered company in China is required to maintain a company chop, which must be registered with the local Public Security
Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The
chops of our PRC subsidiary, the VIE and its subsidiaries generally held securely by personnel designated or approved by us in accordance
with our internal control procedures. To the extent those chops are not kept safe, are stolen or are used by unauthorized persons or
for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate
entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite
power and authority to do so.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may lose the ability to use and enjoy assets held by the VIE that are critical to the operation of our business if the VIE declares bankruptcy
or become subject to a dissolution or liquidation proceeding.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
VIE holds certain assets that may be critical to the operation of our business, including permits, domain names and most of our intellectual
property rights. If the shareholders of the VIE breach the contractual arrangements and voluntarily liquidate the VIE or its subsidiaries,
or if the VIE or its subsidiaries declare bankruptcy and all or part of their assets become subject to liens or rights of third-party
creditors or are otherwise disposed of without our consent, we may be unable to continue some or all of our business activities, which
could materially and adversely affect our business, financial condition and results of operations. In addition, if the VIE or its subsidiaries
undergo an involuntary liquidation proceeding, third-party creditors may claim rights to some or all of their assets, thereby hindering
our ability to operate our business, which could materially or adversely affect our business, financial condition and results of operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantial
uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it
may impact the viability of our current corporate structure and business operations.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
National People&#8217;s Congress approved the Foreign Investment Law (the &#8220;FIL&#8221;) on March&#160;15, 2019 and the State Council
approved the Regulation on Implementing the Foreign Investment Law (the &#8220;Implementation Regulations&#8221;) on December 12, 2019,
effective from January 1, 2020, which replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign
Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise
Law, together with their implementation rules and ancillary regulations. The Supreme People&#8217;s Court of China issued a judicial
interpretation on the Foreign Investment Law on December 26, 2019, effective from January 1, 2020, to ensure fair and efficient implementation
of the Foreign Investment Law. According to this judicial interpretation, courts in China shall not, among other things, support contracted
parties to claim foreign investment contracts in sectors not on the Special Administrative Measures for Access to Foreign Investment
(Negative List) (2021) (the &#8220;Negative List (2021)&#8221;), as void because the contracts have not been approved or registered by
administrative authorities. The Foreign Investment Law grants national treatment to foreign invested enterprises, except for those operating
in &#8220;restricted&#8221; or &#8220;prohibited&#8221; industries in the &#8220;negative list&#8221;, where if a foreign invested enterprise
proposes to conduct business in an industry subject to foreign investment &#8220;restrictions&#8221; in the &#8220;negative list,&#8221;
the foreign invested enterprise must go through a MOFCOM pre-approval process. The internet content service, internet audio-visual program
services and online culture activities that we conduct through the VIE, is subject to foreign investment restrictions set forth in the
Negative List (2021). The Foreign Investment Law and Implementation Regulations embody an expected PRC regulatory trend to rationalize
its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate
legal requirements for both foreign and domestic investments.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
since these rules are relatively new, uncertainties still exist in relation to their interpretation. For instance, under the Foreign
Investment Law, &#8220;foreign investment&#8221; refers to the investment activities directly or indirectly conducted by foreign individuals,
enterprises or other entities in China. Though it does not explicitly classify contractual arrangements as a form of foreign investment,
there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment
activities under the definition in the future. In addition, the definition contains a catch-all provision which includes investments
made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council.
Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the State Council to provide
for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether the contractual arrangements
with the VIE will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations.
Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council 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, corporate governance and business operations.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Some
of our shareholders are not in compliance with the PRC&#8217;s regulations relating to offshore investment activities by PRC residents,
and as a result, currently WFOE is unable to open a new capital account with banks within China, and may be restricted from remitting
funds or handling other foreign exchange businesses within China unless and until we remediate the non-compliance.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
July 2014, the State Administration of Foreign Exchange promulgated the Circular on Issues Concerning Foreign Exchange Administration
over the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents via Special Purpose Vehicles (&#8220;Circular
37&#8221;). According to Circular 37, prior registration with the local SAFE branch is required for Chinese residents to contribute domestic
assets or interests to offshore companies, known as SPVs. Circular 37 further requires amendment to a PRC resident&#8217;s registration
in the event of any significant changes with respect to the SPV, such as an increase or decrease in the capital contributed by PRC individuals,
share transfer or exchange, merger, division, or other material event. Further, foreign investment enterprises established by way of
round-tripping shall complete the relevant foreign exchange registration formalities pursuant to the prevailing foreign exchange control
provisions for direct investments by foreign investors, and disclose the relevant information such as actual controlling party of the
shareholders truthfully.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
most of our shareholders have completed Circular 37 Registration and are in compliance. Some of our beneficial owners, who are PRC residents,
have not completed the Circular 37 Registration. All our significant shareholders, directors and officers have completed Circular 37
Registration. We have asked our shareholders who are Chinese residents to make the necessary applications and filings as required by
Circular 37. We attempt to comply and attempt to ensure that our shareholders who are subject to these rules comply, with the relevant
requirements. We cannot, however, provide any assurances that all of our and future shareholders who are Chinese residents will comply
with our request to make or obtain any applicable registration or comply with other requirements required by Circular 37 or other related
rules. The Chinese resident shareholders&#8217; failure to comply with Circular 37 registration may result in restrictions being imposed
on part of foreign exchange activities of the offshore special purpose vehicles, including restrictions on its ability to receive registered
capital as well as additional capital from Chinese resident shareholders who fail to complete Circular 37 registration; and repatriation
of profits and dividends derived from special purpose vehicles to China, by the Chinese resident shareholders who fail to complete Circular
37 registration, are also illegal. In addition, the failure of the Chinese resident shareholders to complete Circular 37 registration
may subject each of the shareholders to fines less than RMB50,000. We cannot assure you that each of our Chinese resident shareholders
will in the future complete the registration process as required by Circular 37. In addition, seven of our shareholders did not register
according to the registration procedures stipulated in Circular 37 Registration of the SAFE when they conducted their other external
investment activities unrelated to us. As a result, WFOE is unable to open a new capital account with banks within China, and may be
restricted from remitting funds or handling other foreign exchange businesses within China. Currently, we are unable to use most of the
IPO proceeds (for product development and company operations because we are unable to transfer the funds from Xiao-I Corporation to WFOE
and then to the VIE due to WFOE&#8217;s inability to open a new capital account as discussed above. We are trying to assist these shareholders
with remedying their non-compliance with Circular 37, but we are not sure when we will be able to accomplish it.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to Doing Business in China</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>In
the following discussion of risks relating to doing business in China &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221; refer
to the PRC operating entities.</b></span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China&#8217;s
economic, political and social conditions, as well as changes in any government policies, laws and regulations may be quick with little
advance notice and, could have a material adverse effect on our business and the value of Xiao-I&#8217;s ADSs.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
principal offices are based in China. Accordingly, our operating results, financial condition and prospects are influenced by economic,
political and legal developments in China. Economic reforms begun in the late 1970s have resulted in significant economic growth. However,
any economic reform policies or measures in China may from time to time be modified or revised. China&#8217;s economy differs from the
economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the
past 30 years, growth has been uneven across different regions and among different economic sectors. In addition, the rate of growth
has been slowing since 2012, and the impact of COVID-19 on the Chinese and global economies in 2021 and 2022 is likely to be severe.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC government exercises significant control over China&#8217;s economic growth through strategically allocating resources, controlling
the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries
or companies. Although the Chinese economy has grown significantly in the past decade, that growth may not continue, as evidenced by
the slowing of the growth of the Chinese economy in recent years. 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 reduction in demand for our services and
adversely affect our competitive position.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Uncertainties
in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC legal system is based on written statutes and court decisions have limited precedential value. The PRC legal system evolves rapidly,
and the interpretations of many laws, regulations and rules may contain inconsistencies and enforcement of these laws, regulations and
rules involves uncertainties.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC judicial
and administrative authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be
more difficult to predict the outcome of a judicial or administrative proceeding than in more developed legal systems. Furthermore, the
PRC legal system is based, in part, on government policies and internal rules, some of which are not published in a timely manner but
which may have retroactive effect. As a result, we may not always be aware of any potential violation of these policies and rules. Such
unpredictability towards our contractual, property (including intellectual property) and procedural rights could adversely affect our
business and impede our ability to continue our operations.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Content
posted or displayed on our platform may be found objectionable by PRC regulatory authorities and may subject us to penalties and other
severe consequences.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC government has adopted regulations governing internet and wireless access and the distribution of information over the internet and
wireless telecommunication networks. Under these regulations, internet content providers and internet publishers are prohibited from
posting or displaying over the internet or wireless networks content that, among other things, violates PRC laws and regulations, impairs
the public interest, or is obscene, superstitious, fraudulent or defamatory. Furthermore, internet content providers are also prohibited
from displaying content that may be deemed by relevant government authorities as &#8220;socially destabilizing&#8221; or leaking &#8220;state
secrets&#8221; of the PRC. Failure to comply with these requirements may result in the revocation of licenses to provide internet content
or other licenses, the closure of the concerned platforms and reputational harm. The operator may also be held liable for any censored
information displayed on or linked to their platform.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
operate a number of portfolio products in China. We have implemented procedures to monitor the content displayed on our products in order
to comply with relevant laws and regulations. However, it may not be possible to determine in all cases the types of content that could
result in our liability as a distributor of such content and, if any of the content posted or displayed on our products is deemed by
the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject
to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially
and adversely affect our business, financial condition and results of operations.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may also be subject to potential liability for any unlawful actions by our users on our products. It may be difficult to determine the
type of content or actions that may result in liability to us and, if we are found to be liable, we may be prevented from operating our
business in China. Moreover, the costs of compliance with these regulations may continue to increase as a result of more content being
made available by an increasing number of users of our platform, which may adversely affect our results of operations. Although we have
adopted internal procedures to monitor content and to remove offending content once we become aware of any potential or alleged violation,
we may not be able to identify all the content that may violate relevant laws and regulations or third-party intellectual property rights.
Even if we manage to identify and remove offensive content, we may still be held liable. As of the date of this annual report, we have
not received government sanctions in connection with content posted on our platform. However, we cannot assure you that our business
and operations will be immune from government actions or sanctions in the future. To the extent that PRC regulatory authorities find
any content displayed on our platform objectionable, they may require us to limit or eliminate the dissemination of such content on our
platform in the form of take-down orders or otherwise. In addition, these laws and regulations are subject to interpretation by the relevant
authorities, and it may not be possible to determine in all cases the types of content that could result in our liability as a platform
operator.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Advertisements
shown on our platform may subject us to penalties and other administrative actions.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
PRC advertising laws and regulations, we are obligated to monitor the advertising content shown on our platform to ensure that such content
is true and accurate and in full compliance with applicable laws and regulations. Advertisements shall not hinder public order, violate
social morality or contain illegal contents, including but not limited to obscenity, pornography, gambling, superstition, terror and
violence contents. Otherwise, the administration of market regulation may (1) order to stop publishing of the advertisement and; (2)
confiscate the advertising fees; (3) impose a penalty ranging from RMB200,000 to RMB1,000,000; or (4) in serious cases, cancel the business
license and cancel the registration certificate for publishing advertisements. In addition, where a special government review is required
for specific types of advertisements prior to internet posting, such as advertisements relating to pharmaceuticals, medical instruments,
agrochemicals and veterinary pharmaceuticals, we are obligated to confirm that such review has been performed and approval has been obtained.
Violation of these laws and regulations may subject us to penalties, including fines, confiscation of our advertising income, orders
to cease dissemination of the advertisements and orders to publish an announcement correcting the misleading information. In circumstances
involving serious violations by us, PRC governmental authorities may force us to terminate our advertising operations or revoke our licenses.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
we have made significant efforts to ensure that the advertisements shown on our platform are in full compliance with applicable PRC laws
and regulations, we cannot assure you that all the content contained in such advertisements or offers is true and accurate as required
by the advertising laws and regulations or otherwise in full compliance with applicable PRC laws and regulations, especially given the
uncertainty in the interpretation of these PRC laws and regulations. If we are found to be in violation of applicable PRC advertising
laws and regulations, we may be subject to penalties and our reputation may be harmed, which may negatively affect our business, financial
condition, and results of operations and prospects. Although the advertisements displayed on our platform may not directly contain sensitive
or illegal contents, including but not limited to gambling and pyramid selling, the advertisers may use inducing words to indirectly
attract advertisement viewers to participate in gambling, pyramid selling, or other illegal activities. If we receive a complaint that
any superficially compliant advertisement is linked to one or more webpages that feature non-compliant advertising content, we will remove
the related advertisement. Although our agreements with the advertising agencies provide that the advertisements provided by the advertisers
shall comply with the requirements of relevant laws and regulations, we cannot control or supervise advertising contents and the linked
webpages all the time. Therefore, we cannot guarantee you that all of the advertisements displayed on our platform will comply with relevant
laws and regulations.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
April 2015, the SCNPC promulgated the PRC Advertising Law, effective on September 1, 2015 and amended on October 26, 2018. According
to the Advertising Law, advertisements shall not have any false or misleading content, or defraud or mislead consumers. Furthermore,
an advertisement will be deemed as a &#8220;false advertisement&#8221; if any of the following situations exist: (1) the advertised product
or service does not exist; (2) there is any inconsistency that has a material impact on the decision to purchase in what is included
in the advertisement with the actual circumstances with respect to the product&#8217;s performance, function, place of production, usage,
quality, specification, ingredient, price, producer, term of validity, sales condition and honors received, among others, or the service&#8217;s
content, provider, form, quality, price, sales condition, and honors received, among others, or any commitments, among others, made on
the product or service; (3) using fabricated, forged or unverifiable scientific research results, statistical data, investigation results,
excerpts, quotations or other information as supporting material; (4) effect or results of using the good or receiving the service are
fabricated; or (5) other circumstances where consumers are defrauded or misled by any false or misleading content.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
laws and regulations of advertising are relatively new and evolving and there is substantial uncertainty as to the interpretation of
&#8220;false advertisement&#8221; by the State Administration for Market Regulation (formerly known as the State Administration for Industry
and Commerce), or the SAMR.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>The
newly enacted HFCCA and the AHFCCA passed by the U.S.&#160;Senate, all call for additional and more stringent criteria to be applied
to emerging market companies upon assessing the qualification of their auditors, especially the&#160;non-U.S.&#160;auditors who are not
inspected by the PCAOB.&#160;These developments could add uncertainties to our offering and listing on the Nasdaq Global Market, and
Nasdaq may determine to delist our securities if in the future the PCAOB determines that it cannot inspect or fully investigate our auditor.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
April&#160;21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D.&#160;Duhnke&#160;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.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
May&#160;18, 2020, Nasdaq filed three proposals with the SEC to (i)&#160;apply minimum offering size requirement for companies primarily
operating in &#8220;Restrictive Market&#8221;, (ii)&#160;adopt a new requirement relating to the qualification of management or board
of director for Restrictive Market companies, and (iii)&#160;apply additional and more stringent criteria to an applicant or listed company
based on the qualifications of the company&#8217;s auditors. On December&#160;18, 2020, the HFCAA was signed by President Donald Trump
and became law. This legislation requires certain issuers of securities to establish that they are not owned or controlled by a foreign
government. Specifically, an issuer must make this certification if the PCAOB is unable to audit specified reports because the issuer
has retained a foreign public accounting firm not subject to inspection by the PCAOB.&#160;Furthermore, if the PCAOB is unable to inspect
the issuer&#8217;s public accounting firm for three consecutive&#160;years beginning in 2021, the issuer&#8217;s securities are banned
from trade on a national exchange or through other methods.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
June&#160;22, 2021, the U.S.&#160;Senate passed the AHFCAA, which, if passed by the U.S.&#160;House of Representatives and signed into
law by the President, would decrease the number of non-inspection&#160;years for foreign companies to comply with PCAOB audits from three
to two&#160;years, thus reducing the time period before their securities may be prohibited from trading or delisted.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
November&#160;5, 2021, the SEC approved the PCAOB&#8217;s Rule&#160;6100, Board Determinations Under the HFCAA. Rule&#160;6100 provides
a framework for the PCAOB to use to determine whether it is unable to inspect or investigate registered public accounting firms located
in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December&#160;2, 2021, The SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA.&#160;The
rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting
firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December&#160;16, 2021, the PCAOB issued the Determination Report which found that the Board is unable to inspect or investigate completely
PCAOB-registered&#160;public accounting firms headquartered in mainland China and in Hong&#160;Kong, a Special Administrative Region
of the People&#8217;s Republic of China (the &#8220;PRC&#8221;), because of positions taken by PRC authorities in those jurisdictions
(the &#8220;Determination&#8221;). Furthermore, the Determination Report identified the specific registered public accounting firms which
are subject to these determinations, i.e., PCAOB Identified Firms. The Board made these determinations pursuant to PCAOB Rule&#160;6100,
which provides a framework for how the PCAOB fulfills its responsibilities under the HFCAA.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the
auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB
to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms&#8217; audit
procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could
cause existing and potential investors to lose confidence in audit procedures and reported financial information and the quality of financial
statements of China-based&#160;companies.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiao-I&#8217;s
current auditor, Marcum Asia CPAs LLP (&#8220;Marcum Asia&#8221;), the independent registered public accounting firm that issues the
audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United&#160;States
and a firm registered with the PCAOB, is subject to laws in the U.S.&#160;pursuant to which the PCAOB conducts regular inspections to
assess its compliance with the applicable professional standards. Marcum Asia, whose audit report is included in this annual report,
is headquartered in New&#160;York, New&#160;York, and, as of the date of this annual report, was not included in the list of PCAOB Identified
Firms in the Determination Report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August&#160;26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the &#8220;Protocol&#8221;) with the China Securities
Regulatory Commission (the &#8220;CSRC&#8221;) and the Ministry of Finance (&#8220;MOF&#8221;) of the People&#8217;s Republic of China,
governing inspections and investigations of audit firms based in mainland China and Hong Kong. The Protocol remains unpublished and is
subject to further explanation and implementation. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the
PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and the unfettered ability to transfer
information to the SEC.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
December&#160;15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect
or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination
Report. On December&#160;29, 2022, the CAA was signed into law by President Biden. The CAA contained, among other things, an identical
provision to the AHFCAA, which reduces the number of consecutive non-inspection&#160;years required for triggering the prohibitions under
the HFCA Act from three years to two. Xiao-I&#8217;s ability to retain an auditor subject to the PCAOB inspection and investigation,
including but not limited to inspection of the audit working papers related to Xiao-I, may depend on the relevant positions of U.S. and
Chinese regulators. Marcum Asia&#8217;s audit working papers related to Xiao-I&#160;are located in China. With respect to audits of companies
with operations in China, such as the Company, there are uncertainties about the ability of Xiao-I&#8217;s auditor to fully cooperate
with a request by the PCAOB for audit working papers in China without the approval of Chinese authorities. As such, as of the date of
this annual report, Xiao-I&#8217;s auditor is not subject to the Determinations announced by the PCAOB. However, Xiao-I&#160;cannot assure
you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to it after considering the effectiveness
of its auditor&#8217;s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources,
geographic reach or experience as related to the audit of our financial statements. Furthermore, there is a risk that Xiao-I&#8217;s
auditor cannot be inspected by the PCAOB because of a position taken by an authority in a foreign jurisdiction in the future, and that
the PCAOB may re-evaluate&#160;its determination as a result of any obstruction with the implementation of the Statement of Protocol.
Such lack of inspection or re-evaluation&#160;could cause trading in Xiao-I&#8217;s securities to be prohibited on a national exchange
or in the over-the-counter&#160;trading market under the HFCAA, and, as a result, Nasdaq may determine to delist Xiao-I&#8217;s securities,
which may cause the value of Xiao-I&#8217;s securities to decline or become worthless.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">It
may be difficult for overseas regulators to conduct investigation or collect evidence within China.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shareholder
claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality
in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations
or litigations initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities
regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the
securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism.
Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March&#160;2020, no overseas securities regulator
is allowed to directly conduct investigation or evidence collection activities within the PRC territory. While detailed interpretation
of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly
conduct investigation or evidence collection activities within China may further increase the difficulties you face in protecting your
interests.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Chinese government exerts substantial influence over the manner in which we must conduct our business activities and may intervene or
influence our operations at any time, which could result in a material change in our operations and the value of Xiao-I&#8217;s ADSs.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 harmed by changes in its laws and regulations, including those
relating to securities regulation, data protection, cybersecurity and mergers and acquisitions and other matters. The central or local
governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Government
actions in the future could significantly affect economic conditions in China or particular regions thereof, and could require us to
materially change our operating activities or divest ourselves of any interests we hold in Chinese assets. Our business may be subject
to various government and regulatory interference in the provinces in which we operate. We may incur increased costs necessary to comply
with existing and newly adopted laws and regulations or penalties for any failure to comply. Our operations could be adversely affected,
directly or indirectly, by existing or future laws and regulations relating to our business or industry.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Given
recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted
overseas and/or foreign investment in China-based issuers, any such action 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 become worthless.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Recently,
the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued
the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the Opinions, which was made available to
the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and
the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction
of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed companies. As of
the date of this report, we have not received any inquiry, notice, warning, or sanctions from PRC government authorities in connection
with the Opinions.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes
data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification
and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will
cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered
with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure
for data activities that may affect national security and imposes export restrictions on certain data an information.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
early July 2021, regulatory authorities in China launched cybersecurity investigations with regard to several China-based companies that
are listed in the United States. The Chinese cybersecurity regulator announced on July 2 that it had begun an investigation of Didi Global
Inc. (NYSE: DIDI) and two days later ordered that the company&#8217;s app be removed from smartphone app stores. On July 5, 2021, the
Chinese cybersecurity regulator launched the same investigation on two other Internet platforms, China&#8217;s Full Truck Alliance of
Full Truck Alliance Co. Ltd. (NYSE: YMM) and Boss of KANZHUN LIMITED (Nasdaq: BZ). On July 24, 2021, the General Office of the Central
Committee of the Communist Party of China Central Committee and the General Office of the State Council jointly released the Guidelines
for Further Easing the Burden of Excessive Homework and Off-campus Tutoring for Students at the Stage of Compulsory Education, pursuant
to which foreign investment in such firms via mergers and acquisitions, franchise development, and variable interest entities are banned
from this sector.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
November 14, 2021, the CAC released the Regulations on the Network Data Security Management (Draft for Comments), or the Data Security
Management Regulations Draft, to solicit public opinion and comments. Pursuant to the Data Security Management Regulations Draft, data
processor holding more than one million users/users&#8217; individual information shall be subject to cybersecurity review before listing
abroad. Data processing activities refers to activities such as the collection, retention, use, processing, transmission, provision,
disclosure, or deletion of data. According to the latest amended Cybersecurity Review Measures, which was promulgated on December 28,
2021 and became effective on February 15, 2022, and replaced the Cybersecurity Review Measures promulgated on April 13, 2020, online
platform operator holding more than one million users/users&#8217; individual information shall be subject to cybersecurity review before
listing abroad. Since the Cybersecurity Review Measures is new, the implementation and interpretation thereof is not yet clear. Shanghai
Xiao-i has applied for a cybersecurity review organized by the Center, which is authorized by the Cybersecurity Review Office of the
CAC to accept public consultation and cybersecurity review submissions, pursuant to the Cybersecurity Review Measures, which became effective
on February 15, 2022.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 17, 2021, the State Council promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure,
or the Regulations, which took effect on September 1, 2021. The Regulations supplement and specify the provisions on the security of
critical information infrastructure as stated in the Cybersecurity Review Measures. The Regulations provide, among others, that protection
department of certain industry or sector shall notify the operator of the critical information infrastructure in time after the identification
of certain critical information infrastructure.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC (the &#8220;Personal Information Protection
Law&#8221;), which took effect in November 2021. As the first systematic and comprehensive law specifically for the protection of personal
information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual&#8217;s consent shall
be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal
information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual&#8217;s
rights, and (iii) where personal information operators reject an individual&#8217;s request to exercise his or her rights, the individual
may file a lawsuit with a People&#8217;s Court. Given that the above mentioned newly promulgated laws, regulations and policies were
recently promulgated or issued, and have not yet taken effect (as applicable), their interpretation, application and enforcement are
subject to substantial uncertainties.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities,
or misappropriate or misuse these assets.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the PRC law, legal documents for corporate transactions, including agreements and contracts are executed using the chop or seal of the
signing entity or with the signature of a legal representative whose designation is registered and filed with relevant PRC market regulation
administrative authorities.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
order to secure the use of our chops and seals, we have established internal control procedures and rules for using these chops and seals.
In any event that the chops and seals are intended to be used, the responsible personnel will submit a formal application, which will
be verified and approved by authorized employees in accordance with our internal control procedures and rules. In addition, in order
to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to authorized employees.
Although we monitor such authorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence.
There is a risk that our employees could abuse their authority, for example, by entering into a contract not approved by us or seeking
to gain control of one of our subsidiaries or our affiliated entities or their subsidiaries. If any employee obtains, misuses or misappropriates
our chops and seals or other controlling non-tangible assets for whatever reason, we could experience disruption to our normal business
operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management
from our operations, and we may not be able to recover our loss due to such misuse or misappropriation if the third party relies on the
apparent authority of such employees and acts in good faith.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>In
the following discussion of risks relating to doing business in China &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221; refer
to Xiao-I.</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
approval, filing or other requirements of the CSRC or other PRC government authorities may be required under PRC laws.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
CSRC promulgated Overseas Listing Trial Measures and five relevant guidelines on February 17, 2023, which became effective on March&#160;31,
2023. According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets,
either in direct or indirect means, are required to complete the filing procedure with the CSRC and report relevant information. The
Overseas Listing Trial Measures provide that if the issuer meets both of the following criteria, the overseas securities offering and
listing conducted by such issuer will be deemed as an indirect overseas offering subject to the filing procedure set forth under the
Overseas Listing Trial Measures: (i) 50% or more of the issuer&#8217;s operating revenue, total profit, total assets or net assets as
documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and
(ii) the issuer&#8217;s business activities are substantially conducted in mainland China, or its principal place(s) of business are
located in mainland China, or the senior managers in charge of its business operations and management are mostly Chinese citizens or
domiciled in Mainland China. Where an issuer submits an application for an initial public offering to competent overseas regulators,
such issuer must file with the CSRC within three business days after such application is submitted. Officials from the CSRC clarified
at a press conference held for these new regulations that the domestic companies that have already been listed overseas on or before
the effective date of the Overseas Listing Trial Measures (i.e. March&#160;31, 2023) shall be deemed as existing issuers (the &#8220;Existing
Issuers&#8221;). Existing Issuers are required to file with the CSRC only when subsequent corporate actions are involved. Domestic companies
that have obtained approval from overseas regulatory authorities or securities exchanges (for example, a contemplated offering and/or
listing in United States received the final approval for the listing on the Nasdaq) for their indirect overseas offering and listing
prior to the effective date of the Overseas Listing Trial Measures (i.e. March&#160;31, 2023) but have not yet completed their indirect
overseas issuance and listing, are granted a six-month transition period from March&#160;31, 2023. Those who complete their overseas
offering and listing within such six-month period are deemed as Existing Issuers and are not required to file with the CSRC for their
overseas offering and listing. Within such six-month transition period, however, if such domestic companies need to reapply for offering
and listing procedures to the overseas regulatory authority or securities exchanges, or if they fail to complete their indirect overseas
issuance and listing, such domestic companies shall complete the filling procedures with the CSRC.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the PRC Enterprise Income Tax Law, we may be classified as a PRC &#8220;resident enterprise,&#8221; which could result in unfavorable
tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the PRC Enterprise Income Tax Law, or the EIT Law, which became effective in January 2008 and most recently amended in December 2018,
an enterprise established outside the PRC with &#8220;<i>de facto</i> management bodies&#8221; within the PRC is considered a &#8220;resident
enterprise&#8221; for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its
worldwide income. In 2009, the State Administration of Taxation, or the SAT, issued the Notice Regarding the Determination of Chinese-Controlled
Overseas Incorporated Enterprises as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies, or SAT Circular 82, which
provides certain specific criteria for determining whether the &#8220;<i>de facto</i> management body&#8221; of a PRC-controlled enterprise
that is incorporated offshore is located in China. Further to SAT Circular 82, in 2011, the SAT issued the Administrative Measures for
Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial), or SAT Bulletin 45, amended in 2018,
to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 clarified certain issues in the areas of resident
status determination, post-determination administration and competent tax authorities&#8217; procedures.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">According
to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered as
a PRC tax resident enterprise by virtue of having its &#8220;<i>de facto</i> management body&#8221; in China and will be subject to PRC
enterprise income tax on its worldwide income only if all of the following conditions are met: (1) the senior management and core management
departments in charge of its daily operations function have their presence mainly in the PRC; (2) its financial and human resources decisions
are subject to determination or approval by persons or bodies in the PRC; (3) its major assets, accounting books, company seals, and
minutes and files of its board and shareholders&#8217; meetings are located or kept in the PRC; and (4) more than half of the enterprise&#8217;s
directors or senior management with voting rights habitually reside in the PRC. SAT Bulletin 45 specifies that when provided with a copy
of Chinese tax resident determination certificate from a resident Chinese controlled offshore incorporated enterprise, the payer should
not withhold 10% income tax when paying the Chinese-sourced dividends, interest, royalties, etc. to the Chinese controlled offshore incorporated
enterprise.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Although
SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups
and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT&#8217;s general
position on how the term &#8220;<i>de facto </i>management body&#8221; could be applied in determining the tax resident status of offshore
enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, the SAT issued the Announcement of the State Administration of Taxation on Issues concerning the Determination of Resident
Enterprises Based on the Standards of Actual Management Institutions in January 2014 to provide more guidance on the implementation of
SAT Circular 82. This bulletin further provides that, among other things, an entity that is classified as a &#8220;resident enterprise&#8221;
in accordance with the circular shall file the application for classifying its status of residential enterprise with the local tax authorities
where its main domestic investors are registered. From the year in which the entity is determined to be a &#8220;resident enterprise,&#8221;
any dividend, profit and other equity investment gain shall be taxed in accordance with the enterprise income tax law and its implementing
rules.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Although
our offshore holding entity is not controlled by PRC enterprises or a PRC enterprise group and our revenues are primarily generated from
business operations conducted outside of China, we cannot rule out the possibility that the PRC tax authorities determine that we or
any of our non-PRC subsidiaries is a PRC resident enterprise for PRC enterprise income tax purposes, which could subject our company
or any of our non-PRC subsidiaries to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income.
In addition, we may also be subject to PRC enterprise income tax reporting obligations.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
the PRC tax authorities determine that our company is a PRC resident enterprise for PRC enterprise income tax purposes, gains realized
on the sale or other disposition of the ADSs may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in
the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be
from PRC sources. Any such tax may reduce the returns on your investment in the ADSs.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the EIT Law and its implementation rules, the profits of a foreign-invested enterprise generated through operations, which are distributed
to its immediate holding company outside China, will be subject to a withholding tax rate of 10.0%. Pursuant to a special arrangement
between Hong Kong and China, such rate may be reduced to 5.0% if a Hong Kong resident enterprise owns more than 25.0% of the equity interest
in the PRC company. Our current PRC subsidiary is wholly owned by Xiao-i Technology. Accordingly, Xiao-i Technology may qualify for a
5.0% tax rate in respect of distributions from its PRC subsidiary. Under the Notice of the State Administration of Taxation on Issues
regarding the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the taxpayer needs to satisfy
certain conditions to 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 SAT promulgated
the Notice on How to Understand and Recognize the &#8220;Beneficial Owner&#8221; in Tax Treaties in 2009, most recently amended on February
3, 2018 and effective from April 1, 2018, which sets forth several non-rebuttable presumptions to be a &#8220;beneficial owner&#8221;,
and certain detailed factors in determining the &#8220;beneficial owner&#8221; status, 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 annual report, we have not commenced the application process
for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance that we will be granted
such a Hong Kong tax resident certificate.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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. Xiao-i Technology 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 Xiao-i Technology.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
face uncertainty with respect to indirect transfer of equity interests in PRC resident enterprises by their non-PRC holding companies.
We face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transfer
and exchange of shares in our company by non-resident investors.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transfer
and exchange of shares in our company by non-resident investors.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
February 2015, the SAT issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises,
or Bulletin 7. Pursuant to Bulletin 7, an &#8220;indirect transfer&#8221; of PRC assets, including a transfer of equity interests in
an unlisted non-PRC holding company of a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated
as a direct transfer of the underlying PRC assets, if such arrangement does not have a reasonable commercial purpose and was established
for the purpose of avoiding payment of PRC enterprise income 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. Bulletin 7 also introduced
safe harbors for internal group restructurings and the purchase and sale of equity securities through a public securities market. On
October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Nonresident
Enterprise Income Tax at Source, or Bulletin 37, which came into effect on December 1, 2017. The Bulletin 37 further clarifies the practice
and procedure of the withholding of nonresident enterprise income tax.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
face uncertainties on the reporting and consequences of future private equity financing transactions, share exchanges or other transactions
involving the transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue
such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC
subsidiary to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject
to filing obligations or being taxed under Bulletin 7 and Bulletin 37, and may be required to expend valuable resources to comply with
them or to establish that we and our non-resident enterprises should not be taxed under these regulations, which may have a material
adverse effect on our financial condition and results of operations.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China&#8217;s
M&amp;A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors,
which could make it more difficult for us to pursue growth through acquisitions in China.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&amp;A Rules, and other recently adopted
regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and
acquisition activities by foreign investors more time consuming and complex. For example, the M&amp;A Rules require that MOFCOM be notified
in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (1) any important
industry is concerned, (2) such transaction involves factors that impact or may impact national economic security, or (3) such transaction
will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly
Law promulgated by the SCNPC in August 2007 and effective in August 2008 requires that transactions which are deemed concentrations and
involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (1) the total global turnover of all operators
participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of more than RMB400 million
within China, or (2) the total turnover within China of all the operators participating in the concentration exceeded RMB2 billion, and
at least two of these operators each had a turnover of more than RMB400 million within China) must be cleared by MOFCOM before they can
be completed. In addition, in February 2011, the General Office of the State Council promulgated a Notice on Establishing the Security
Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the Circular 6, which officially established
a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, in August 2011, MOFCOM promulgated
the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors,
or the MOFCOM Security Review Regulations, to implement the Circular 6. Under Circular 6, a security review is required for mergers and
acquisitions by foreign investors having &#8220;national defense and security&#8221; concerns and mergers and acquisitions by which foreign
investors may acquire the &#8220;<i>de facto</i> control&#8221; of domestic enterprises with &#8220;national security&#8221; concerns.
Under the MOFCOM Security Review Regulations, MOFCOM will focus on the substance and actual impact of the transaction when deciding whether
a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition is subject to
security review, it will submit it to the Inter-Ministerial Panel, an authority established under the Circular 6 led by the National
Development and Reform Commission, or NDRC, and MOFCOM under the leadership of the State Council, to carry out security review. The regulations
prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases,
loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating
that the merging or acquisition of a company engaged in the internet information services, online games, online audio-visual program
services and related businesses requires security review, and there is no requirement that acquisitions completed prior to the promulgation
of the Security Review Circular are subject to MOFCOM review.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations
and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining
approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether
our business would be deemed to be in an industry that raises &#8220;national defense and security&#8221; or &#8220;national security&#8221;
concerns. However, MOFCOM or other government agencies may publish explanations in the future determining that our business is in an
industry subject to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual
control arrangements with target entities, may be closely scrutinized or prohibited.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRC
regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary&#8217;s ability to increase its
registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
July 2014, the SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident&#8217;s Investment and Financing and Roundtrip
Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the Relevant Issues Concerning Foreign Exchange Control
on Domestic Residents&#8217; Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, or Circular 75.
Circular 37 requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control
of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must
update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information
(including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers
or exchanges of shares, or mergers or divisions. According to the Notice on Further Simplifying and Improving Policies for the Foreign
Exchange Administration of Direct Investment released on February 13, 2015 by the SAFE, as amended in 2019, local banks will examine
and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment
registration, under SAFE Circular 37 from June 1, 2015.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">If our shareholders who
are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiary may be prohibited from
distributing its profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in
our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above
could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. See &#8220;Item 3. Key Information&#8212;D.
Risk Factors &#8212;Risks Related to Our Corporate Structure&#8212; Some of our shareholders are not in compliance with the PRC&#8217;s
regulations relating to offshore investment activities by PRC residents, and as a result, currently WFOE is unable to open a new capital
account with banks within China, and may be restricted from remitting funds or handling other foreign exchange businesses within China
unless and until we remediate the non-compliance,&#8221; and &#8220;Item 3. Key Information&#8212;D. Risk Factors &#8212;Risks Related
to Doing Business in China&#8212;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 our available funds to make loans to our PRC subsidiary and consolidated
affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our
liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities.&#8221;</p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Failure
to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject
the PRC plan participants or us to fines and other legal or administrative sanctions.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies due to their position
as director, senior management or employees of the PRC subsidiaries of the overseas companies may submit applications to SAFE or its
local branches for the foreign exchange registration with respect to offshore special purpose companies. Our directors, executive officers
and other employees who are PRC residents and who have been granted options may follow SAFE Circular 37 to apply for the foreign exchange
registration before our company becomes an overseas listed company. In February 2012, SAFE promulgated the Notices on Issues Concerning
the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies,
or the Stock Option Rules. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock
incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other
procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary
of such overseas publicly listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration
and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas
entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks
or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive
plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material
changes. The PRC operating entities and their PRC employees who have been granted stock options are subject to these regulations. The
VIE has completed such SAFE registrations for its PRC stock option holder employees in March&#160;2019. However, we cannot assure you
that the VIE will be able to complete the relevant registration for new employees who participate in such stock incentive plan in the
future in a timely manner or at all. Failure of the VIE&#8217;s PRC stock option holders to complete their SAFE registrations may subject
these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary,
limit our PRC subsidiary&#8217;s ability to distribute dividends to us, or otherwise materially adversely affect our business.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 our available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional
capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand
the business of our PRC subsidiary and consolidated affiliated entities.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are an offshore holding company conducting our operations in China through our PRC subsidiary and consolidated affiliated entities. We
may make loans to our PRC subsidiary and consolidated affiliated entities, or we may make additional capital contributions to our PRC
subsidiary, or we may establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, or we may acquire
offshore entities with business operations in China in an offshore transaction.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Most
of these ways are subject to PRC regulations and approvals. For example, loans by us to our wholly owned PRC subsidiary to finance its
activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE. If we decide to finance our wholly
owned PRC subsidiary by means of capital contributions, these capital contributions are subject to the requirement of making necessary
filings with the MOFCOM and registration with other governmental authorities in China. Due to the restrictions imposed on loans in foreign
currencies extended to any PRC domestic companies, we are not likely to make such loans to our consolidated affiliated entities, which
are PRC domestic company. Further, we are not likely to finance the activities of our consolidated affiliated entities by means of capital
contributions due to regulatory restrictions relating to foreign investment in PRC domestic enterprises engaged in internet information
services, online games, online audio-visual program services and related businesses.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement
of Capital of Foreign-invested Enterprises, or SAFE Circular 19, effective in June 2015. According to SAFE Circular 19, the flow and
use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such
that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of
banks loans that have been transferred to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated
registered capital of a foreign-invested enterprise to be used for equity investments within the PRC, it also reiterates the principle
that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used
for purposes beyond its business scope. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and
Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective in June 2016, which
reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign
currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such
capital to issue loans to non-associated enterprises. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer
any foreign currency we hold, including the net proceeds from our initial public offering, to our PRC subsidiary, which may adversely
affect our liquidity and our ability to fund and expand our business in the PRC. On October 23, 2019, SAFE issued Notice of the State
Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or the Circular 28. Circular
28 allows non-investment foreign-invested enterprises to use their capital funds to make equity investments in China, provided that such
investments do not violate the Negative List and the target investment projects are genuine and in compliance with PRC laws. Since Circular
28 was issued only recently, its interpretation and implementation in practice are still subject to substantial uncertainties.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,
and the fact that the PRC government may at its discretion restrict access to foreign currencies for current account transactions in
the future, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government
approvals on a timely basis, if at all, with respect to future loans to PRC subsidiaries or future capital contributions by us to our
PRC subsidiary. As a result, uncertainties exist as to our ability to provide prompt financial support to our subsidiaries when needed.
If we fail to complete such registrations or obtain such approvals, our ability to use our available funds to capitalize or otherwise
fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund
and expand our business of our PRC subsidiary and consolidated affiliated entities.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fluctuation
in the value of the RMB may have a material adverse effect on the value of your investment.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People&#8217;s Bank of China. The
Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar
and other currencies is affected by changes in China&#8217;s political and economic conditions and by China&#8217;s foreign exchange
policies, among other things. We cannot assure you that 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 the PRC or U.S. government policy may impact the exchange
rate between Renminbi and the U.S. dollar in the future.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Any significant depreciation of the RMB may materially
adversely affect the value of, and any dividends payable on, our Ordinary Shares in U.S. Dollars. To the extent that we need to convert
U.S. Dollars we received from our initial public 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 would receive from the conversion. Conversely, if we decide to convert our RMB into
U.S. Dollars for the purpose of paying dividends to the holders of our ADSs or for other business purposes, appreciation of the U.S. Dollar
against the RMB would have an adverse effect on the U.S. Dollar amount available to us.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 adverse effect
on your investment.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
additional remedial measures are imposed on major PRC-based accounting firms, including our independent registered public accounting
firm, our financial statements could be determined not to be in compliance with the SEC requirements.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beginning
in 2011, the Chinese affiliates of the &#8220;big four&#8221; accounting firms (including our independent registered public accounting
firm) were affected by a conflict between the U.S. and Chinese law. Specifically, for certain U.S. listed companies operating and audited
in the PRC, the SEC and the PCAOB sought to obtain access to the audit work papers and related documents of the Chinese affiliates of
the &#8220;big four&#8221; accounting firms. The accounting firms were, however, advised and directed that, under Chinese law, they could
not respond directly to the requests of the SEC and the PCAOB and that such requests, and similar requests by foreign regulators for
access to such papers in the PRC, had to be channelled through the CSRC.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
late 2012, this impasse led the SEC to commence administrative proceedings under Rule 102(e) of its Rules of Practice and also under
the Sarbanes-Oxley Act of 2002 against the &#8220;big four&#8221; accounting firms (including our independent registered public accounting
firm). A first instance trial of these proceedings in July 2013 in the SEC&#8217;s internal administrative court resulted in an adverse
judgment against the firms. The administrative law judge proposed penalties on the firms, including a temporary suspension of their right
to practice before the SEC. Implementation of the latter penalty was postponed pending review by the SEC Commissioners. On February 6,
2015, before a review by the SEC Commissioners had taken place, the firms reached a settlement with the SEC. Under the settlement, the
SEC accepts that future requests by the SEC for the production of documents will normally be made to the CSRC. The firms will receive
matching Section 106 requests, and are required to abide by a detailed set of procedures with respect to such requests, which in substance
require them to facilitate production via the CSRC. If the firms fail to follow these procedures and meet certain other specified criteria,
the SEC retains the authority to impose a variety of additional remedial measures, including, as appropriate, an automatic six-month
bar on a firm&#8217;s ability to perform certain audit work, commencement of new proceedings against a firm or, in extreme cases, the
resumption of the current administrative proceeding against all four firms.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the event that the SEC restarts administrative proceedings, depending upon the final outcome, listed companies in the U.S. with major
PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in
their financial statements being determined to not be in compliance with the requirements of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, including possible delisting. Moreover, any negative news about any such future proceedings against the
firms may cause investor uncertainty regarding PRC-based, U.S.-listed companies and the market price of their shares may be adversely
affected.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable
to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements
could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to
the delisting of our ADSs from Nasdaq or deregistration from the SEC, or both, which would substantially reduce or effectively terminate
the trading of our shares in the U.S.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
face uncertainties with respect to the enactment, interpretation and implementation of draft Anti-Monopoly Guidelines for the Internet
Platform Economy Sector.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
early November 2020, the State Administration for Market Regulation further published a draft Anti-Monopoly Guidelines for the Internet
Platform Economy Sector that aims at specifying some of the circumstances under which an activity of Internet platform may be identified
as monopolistic act as well as setting out merger controlling filing procedures involving variable interest entities. These draft guidelines
are now open for public comment and are pending finalization and enactment, and we cannot assure you that there will not be any material
changes in the final form of these draft guidelines. Due to the uncertainties associated with the evolving legislative activities and
varied local implementation practices of anti-monopoly and competition laws and regulations in the PRC, it may be costly to adjust some
of our business practice in order to comply with these laws, regulations, rules, guidelines and implementations, and any incompliance
or associated inquiries, investigations and other governmental actions may divert significant management time and attention and our financial
resources, bring negative publicity, subject us to liabilities or administrative penalties, and/or materially and adversely affect our
financial conditions, operations and business prospects.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to Doing Business in Hong Kong</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>In
the following discussion of risks relating to doing business in Hong Kong &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221; refer
to the PRC operating entities.</b></span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may be subject to uncertainty about any changes in the economic, political and legal environment in Hong Kong, and it is possible that
most of the legal and operational risks associated with operating in the PRC may also apply to operations in Hong Kong in the future.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
generated approximately 11.7%, 2.3% and 0.9% of our revenues from Hong Kong in fiscal year 2020,2021 and 2022, respectively. Hong Kong
is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely,
Hong Kong&#8217;s constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent
judicial powers, including that of final adjudication under the principle of &#8220;one country, two systems&#8221;. We cannot assure
you that there will not be any changes in the economic, political and legal environment in Hong Kong. We may be subject to uncertainty
about any future actions of the PRC government and is possible that most of the legal and operational risks associated with operating
in the PRC may also apply to our operations in Hong Kong in the future. The PRC government may intervene or influence our current and
future operations in Hong Kong at any time and exert more influence over the manner in which we must conduct our business activities.
Such government actions, if and when they occur, could result in a material change in our operations in Hong Kong.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
operations in Hong Kong are governed by the laws and regulations in Hong Kong. If there is significant change to current political arrangements
between mainland China and Hong Kong, the PRC government may intervene or influence our Hong Kong operations, which could result in a
material change in our operations in Hong Kong.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
Hong Kong, the collection of personal data, their use and disclosure, retention and granting of access to and correction of personal
data is governed by the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong). See &#8220;Regulations in Hong Kong
&#8212; Personal data law in Hong Kong&#8221; for further details. The competition law in Hong Kong is primarily governed by the Competition
Ordinance (Chapter 619 of the Laws of Hong Kong), which prohibits three principal types of anti-competitive conducts, namely (a) anti-competitive
agreements or practices; (b) abuse of market power; and (c) merger control of arrangements that could substantially reduce the level
of competition in telecommunication industry. The Merger Rule in the Competition Ordinance prohibits undertakings from directly or indirectly
carrying out a merger that has, or is likely to have, the effect of substantially reduce the level of competition in Hong Kong. This
rule is only applicable to telecommunication carrier licensees. There is no general merger control regime in Hong Kong. See &#8220;Regulations
in Hong Kong &#8212; Competition law in Hong Kong&#8221; for further details.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this annual report, our business operations in Hong Kong, which are relatively insignificant as compared to our business
as a whole, are only required to comply with the Hong Kong laws and regulations. The PRC government has recently initiated a series of
regulatory actions and statements to regulate business operations in mainland China with little advance notice. We do not expect such
statements by the PRC government would have any specific impact on our business operations in Hong Kong. If there is any change in political
arrangements between mainland China and Hong Kong, it would affect the business environment in Hong Kong generally.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions
in Hong Kong against Xiao-I or its management named in the annual report based on Hong Kong laws.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Currently,
all of Xiao-I&#8217;s operations are conducted outside the United States, and all of its assets are located outside the United States.
You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing
actions in Hong Kong against Xiao-I or its management named in the annual report, as judgments entered in the United States can be enforced
in Hong Kong only at common law. If you want to enforce a judgment of the United States in Hong Kong, it must be a final judgment conclusive
upon the merits of the claim, for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties, or similar charges,
the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary
to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also come from a &#8220;competent&#8221; court as determined
by the private international law rules applied by the Hong Kong courts.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risks
Relating to the ADSs</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>In
the following discussion of risks relating to the ADSs &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221; refer to Xiao-I.</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our
business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment
in the ADSs as a source for any future dividend income.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
large, active trading market for the ADSs may not develop and you may not be able to resell your ADSs at or above the public offering
price.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
cannot assure you that a liquid public market for the ADSs will develop. If a large, active public market for the ADSs does not develop,
the market price and liquidity of the ADSs may be materially adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. Such volatility may
be unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors
to assess the rapidly changing value of our ADSs. This may happen because of broad market and industry factors, including the performance
and fluctuation of the market prices of other companies with operations located mainly in China that have listed their securities in
the United States. In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors
specific to our own operations, including the following:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">variations
                                            in our net revenue, earnings and cash flows;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">announcements
                                            of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">announcements
                                            of new offerings and expansions by us or our competitors;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
                                            in financial estimates by securities analysts;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">detrimental
                                            adverse publicity about us, our shareholders, affiliates, directors, officers or employees,
                                            our business model, our services or our industry;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">announcements
                                            of new regulations, rules or policies relevant for our business;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">additions
                                            or departures of key personnel;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">release
                                            of lock-up or other transfer restrictions on our outstanding equity securities or sales of
                                            additional equity securities; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">potential
                                            litigation or regulatory investigations.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade. In addition, if the trading
volumes of our ADSs are low, persons buying or selling in relatively small quantities may easily influence prices of our ADSs. This low
volume of trades could also cause the price of our ADSs to fluctuate greatly, with large percentage changes in price occurring in any
trading day session. Holders of our ADSs may also not be able to readily liquidate their investment or may be forced to sell at depressed
prices due to low volume trading.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of this volatility, investors may experience losses on their investment in our ADSs. A decline in the market price of our ADSs
also could adversely affect our ability to issue additional ADSs or other securities and our ability to obtain additional financing in
the future. No assurance can be given that an active market in our ADSs will develop or be sustained. If an active market does not develop,
holders of our ADSs may be unable to readily sell the securities they hold or may not be able to sell their securities at all.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the past, shareholders of public companies have often brought securities class action suits against those companies following periods
of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount
of our management&#8217;s attention and other resources from our business and require us to incur significant expenses to defend the
suit, which could harm our results of operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future.
In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could materially adversely
affect our financial condition and results of operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
sale or availability for sale of substantial amounts of ADSs could adversely affect their market price.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Future
sales of substantial amounts of the ADSs in the public market, or the perception that these sales could occur, could adversely affect
the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. Shares
held by our existing shareholders may be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701
under the Securities Act and the applicable lockup agreements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other holders or the availability
of these securities for future sale will have on the market price of the ADSs.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Holders
of ADSs have fewer rights than shareholders and must act through the depositary to exercise their rights.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Holders
of ADSs do not have the same rights as our registered shareholders. As a holder of the ADSs, you will not have any direct right to attend
general meetings of our shareholders or to cast any votes at such meetings. As an ADS holder, you will only be able to exercise the voting
rights carried by the underlying Ordinary Shares which are represented by your ADSs indirectly by giving voting instructions to the depositary
in accordance with the provisions of the deposit agreement. Upon receipt of your voting instructions, the depositary will try, as far
as is practicable, to vote the Ordinary Shares underlying your ADSs in accordance with your instructions. If we ask for your instructions,
then upon receipt of your voting instructions, the depositary will try to vote the underlying Ordinary Shares in accordance with these
instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions
you give, but it is not required to do so. You will not be able to directly exercise your right to vote with respect to the underlying
Ordinary Shares unless you withdraw the shares, and become the registered holder of such shares prior to the record date for the general
meeting. When a general meeting is convened, you may not receive sufficient advance notice of the meeting to withdraw the Ordinary Shares
underlying your ADSs and become the registered holder of such shares to allow you to attend the general meeting and to vote directly
with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our memorandum
and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting,
our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register
of members or the setting of such a record date may prevent you from withdrawing the Ordinary Shares underlying your ADSs and becoming
the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote
directly. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting
materials to you. We have agreed to give the depositary notice of shareholder meetings sufficiently in advance of such meetings. Nevertheless,
we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying
Ordinary Shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting
instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right
to direct how the Ordinary Shares underlying your ADSs are voted and you may have no legal remedy if the shares underlying your ADSs
are not voted as you requested. In addition, in your capacity as an ADS holder, you will not be able to call a shareholders&#8217; meeting.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote the Ordinary Shares underlying your
ADSs if you do not vote at shareholders&#8217; meetings, which could adversely affect your interests.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the deposit agreement for the ADSs, if you do not vote, the depositary will deem that you have instructed the depositary to give us a
discretionary proxy to vote the Ordinary Shares underlying your ADSs at shareholders&#8217; meetings unless we have timely provided the
depositary with notice of meeting and related voting materials and</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we
                                            have instructed the depositary that we do not wish a discretionary proxy to be given;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we
                                            have informed the depositary that there is substantial opposition as to a matter to be voted
                                            on at the meeting;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
                                            matter to be voted on at the meeting would have a material adverse impact on shareholders;
                                            or</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            voting at the meeting is to be conducted via a show of hands unless voting by poll is required
                                            by the applicable listing rules or our articles of association.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
effect of this discretionary proxy is that you cannot prevent our Ordinary Shares underlying your ADSs from being voted, except under
the circumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders
of our Ordinary Shares will not be subject to this discretionary proxy.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
may not receive distributions on the ADSs or any value for them if such distribution is illegal or impractical or if any required government
approval cannot be obtained in order to make such distribution available to you.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Although
we do not have any present plan to pay any dividends, the depositary of the ADSs has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on Ordinary Shares or other deposited securities underlying the ADSs, after deducting its
fees and expenses and any applicable taxes and governmental charges. You will receive these distributions in proportion to the number
of Ordinary Shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to
make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if
it consists of securities whose offering would require registration under the Securities Act but are not so properly registered or distributed
under an applicable exemption from registration. The depositary may also determine that it is not reasonably practicable to distribute
certain property. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under
the U.S. securities laws any offering of ADSs, Ordinary Shares, rights or other securities received through such distributions. We also
have no obligation to take any other action to permit the distribution of ADSs, Ordinary Shares, rights or anything else to holders of
ADSs. This means that you may not receive distributions we make on our Ordinary Shares or any value for them if it is illegal or impractical
for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Your
right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights
available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities
Act or an exemption from the registration requirements is available. Also, under the deposit agreement, the depositary will not make
rights available to you unless either both the rights and any related securities are registered under the Securities Act, or the distribution
of them to ADS holders is exempted from registration under the Securities Act. We are under no obligation to file a registration statement
with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover,
we may not be able to establish an exemption from registration under the Securities Act. If the depositary does not distribute the rights,
it may, under the deposit agreement, either sell them, if possible, or allow them to lapse. Accordingly, you may be unable to participate
in our rights offerings and may experience dilution in your holdings.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
may be subject to limitations on transfers of your ADSs.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Your
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to
time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer
or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary
deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the
deposit agreement, or for any other reason.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Your
rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the deposit agreement
or the transactions contemplated thereby or by virtue of owning the ADSs, including without limitation claims under the Securities Act
of 1933, may only be instituted in the United States District Court for the Southern District of New York (or, if the Southern District
of New York lacks subject matter jurisdiction over a particular dispute, in the state courts of New York County, New York), and you,
as a holder of the ADSs, will have irrevocably waived any objection which you may have to the laying of venue of any such proceeding,
and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding. See &#8220;Description of American
Depositary Shares&#8221; for more information.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ADS
holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable
outcomes to the plaintiff(s) in any such action.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
deposit agreement governing the ADSs representing our Ordinary Shares provides that the federal or state courts in the City of New York
have exclusive jurisdiction to hear and determine claims arising under the deposit agreement and in that regard, to the fullest extent
permitted by law, ADS holders, including purchasers of ADSs in secondary transactions, waive the right to a jury trial of any claim they
may have against us or the depositary arising out of or relating to our Ordinary Shares, the ADSs or the deposit agreement, including
any claim under the U.S. federal securities laws.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based
on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability
of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally
adjudicated by the United States Supreme Court. In determining whether to enforce a contractual pre-dispute jury trial waiver provision,
courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe
that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York,
which govern the deposit agreement. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable
that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under
the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not
be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or
the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge
or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different
outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Nevertheless,
if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit
agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder
or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws
and the rules and regulations promulgated thereunder.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
deposit agreement may be amended or terminated without your consent.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
and the depositary may amend or terminate the deposit agreement without your consent. Such amendment or termination may be done in favor
of our company. Holders of the ADSs, subject to the terms of the deposit agreement, will receive notice in the event of an amendment
that prejudices a substantial existing right or a termination. If you continue to hold your ADSs after an amendment to the deposit agreement,
you agree to be bound by the deposit agreement as amended. The deposit agreement may be terminated at any time upon a prior written notice.
Upon the termination of the deposit agreement, our company will be discharged from all obligations under the deposit agreement, except
for our obligations to the depositary thereunder. See &#8220;Description of American Depositary Shares&#8221; for more information.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Holders
or beneficial owners of the ADSs have limited recourse if we or the depositary fail to meet our respective obligations under the deposit
agreement.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
deposit agreement expressly limits the obligations and liability of us and the depositary. For example, the depositary is not liable
if any of us or our respective controlling persons or agents are prevented or forbidden from, or subjected to any civil or criminal penalty
or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the deposit agreement and any
American Depositary Receipt (&#8220;ADR&#8221;), by reason of any provision of any present or future law or regulation of the United
States or any state thereof, the Cayman Islands or any other country, or of any other governmental authority or regulatory authority
or stock exchange, or on account of the possible criminal or civil penalties or restraint, or by reason of any provision, present or
future, of our memorandum and articles of association or any provision of or governing any deposited securities, or by reason of any
act of God or war or other circumstances beyond its control (including, without limitation, nationalization, expropriation, currency
restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions, explosions and computer failure). See &#8220;Description
of American Depositary Shares&#8221; for more information. In addition, the depositary and any of its agents also disclaim any liability
for (i) any failure to carry out any instructions to vote, the manner in which any vote is cast or the effect of any vote or failure
to determine that any distribution or action may be lawful or reasonably practicable or for allowing any rights to lapse in accordance
with the provisions of the deposit agreement, (ii) the failure or timeliness of any notice from us, the content of any information submitted
to it by us for distribution to you or for any inaccuracy of any translation thereof, (iii) any investment risk associated with the acquisition
of an interest in the deposited securities, the validity or worth of the deposited securities or the credit-worthiness of any third party,
(iv) any tax consequences that may result from ownership of ADSs, Ordinary Shares or deposited securities, or (v) any acts or omissions
made by a successor depositary whether in connection with a previous act or omission of the depositary or in connection with any matter
arising wholly after the removal or resignation of the depositary, provided that in connection with the issue out of which such potential
liability arises the depositary performed its obligations without gross negligence or willful misconduct while it acted as depositary.
These provisions of the deposit agreement will limit the ability of holders or beneficial owners of the ADSs to obtain recourse if we
or the depositary fail to meet our respective obligations under the deposit agreement.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Techniques
employed by short sellers may drive down the market price of the ADSs.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Short
selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention
of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value
of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects
to pay less in that purchase than it received in the sale.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
it is in the short seller&#8217;s interest for the price of the security to decline, many short sellers publish, or arrange for the publication
of, negative opinions regarding the relevant issuer and its prospects to create negative market momentum and generate profits for themselves
after selling a security short. These short attacks have, in the past, led to selling of shares in the market.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Public
companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative
publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting
irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations
of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the
interim, are subject to shareholder lawsuits and/or SEC enforcement actions. It is not clear what effect such negative publicity could
have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue,
we could have to expend significant resources to investigate such allegations and/or defend ourselves.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the
relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation
could be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately
proven to be groundless, allegations against us could severely impact our business, and any investment in the ADSs could be greatly reduced
or even rendered worthless.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market
price for the ADSs and trading volume could decline.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
trading market for the ADSs will depend in part on the research and reports that securities or industry analysts publish about us or
our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers
us downgrades the ADSs or publishes inaccurate or unfavorable research about our business, the market price for the ADSs would likely
decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility
in the financial markets, which, in turn, could cause the market price or trading volume for the ADSs to decline.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
failure to meet the continued listing requirements of Nasdaq could result in a delisting of the ADSs.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If,
after listing, we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the
minimum closing bid price requirement, Nasdaq may take steps to delist the ADSs. Such a delisting would likely have a negative effect
on the price of the ADSs and would impair your ability to sell or purchase the ADSs when you wish to do so. In the event of a delisting,
we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow the ADSs to become
listed again, stabilize the market price or improve the liquidity of the ADSs, prevent the ADSs from dropping below the Nasdaq minimum
bid price requirement or prevent future non-compliance with Nasdaq&#8217;s listing requirements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to
protect your rights through the U.S. Federal courts may be limited.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have been advised by Conyers, Dill and Pearman, our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely
(i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the
federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities
against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as
the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in
the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign
money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a
competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain
conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a
liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the
same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural
justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public
policy). A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">United
States civil liabilities and certain judgments obtained against us by our shareholders may not be enforceable.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, all
of our directors and officers (except H. David Sherman) are nationals and residents of countries other than the United States. A substantial
portion of the assets of our officers and directors is located outside of the United States. As a result, it may be difficult to effect
service of process within the United States upon our officers and directors (except H. David Sherman). It may also be difficult to enforce
in U.S. courts judgments obtained in liability provisions of the U.S. federal securities laws against us and our officers and directors
who are not resident in the United States and the substantial majority of whose assets are located outside of the United States.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Further,
it is unclear if original actions predicated on civil liabilities based solely upon U.S. federal securities laws are enforceable in courts
outside the United States, including in the Cayman Islands. Courts of the Cayman Islands may not, in an original action in the Cayman
Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United
States or any state of the United States on the grounds that such provisions are penal in nature. Although there is no statutory enforcement
in the Cayman Islands of judgments obtained in the United States, courts of the Cayman Islands would recognize a final and conclusive
judgment in the federal or state courts of the United States based on agreements to which we are a party and under which a sum of money
is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of
a fine or other penalty) or, in certain circumstances, an in personam judgment for non-monetary relief, and would give a judgment based
thereon provided that (i) such courts had proper jurisdiction over the parties subject to such judgment; (ii) such courts did not contravene
the rules of natural justice of the Cayman Islands; (iii) such judgment was not obtained by fraud; (iv) the enforcement of the judgment
would not be contrary to the public policy of the Cayman Islands; (v) no new admissible evidence relevant to the action is submitted
prior to the rendering of the judgment by the courts of the Cayman Islands; and (vi) there is due compliance with the correct procedures
under the laws of the Cayman Islands.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Further,
there is uncertainty as to whether the courts of China would:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">recognize
                                            or enforce judgments of United States courts obtained against us or our directors or officers
                                            predicated upon the civil liability provisions of the securities laws of the United States
                                            or any state in the United States; or</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">entertain
                                            original actions brought in each respective jurisdiction against us or our directors or officers
                                            predicated upon the securities laws of the United States or any state in the United States.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law, PRC courts may recognize and
enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law and other applicable laws and regulations
based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions.
China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal
recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not
enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of
PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would
enforce a judgment rendered by a court in the United States or in the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders
may originate actions based on PRC law against a company in China for disputes if they can establish sufficient nexus to the PRC for
a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest
in the case, and there must be a concrete claim, a factual basis and a cause for the suit. It will be, however, difficult for U.S. shareholders
to originate actions against us in the PRC in accordance with PRC laws because we are incorporated under the laws of the Cayman Islands
and it will be difficult for U.S. shareholders, by virtue only of holding ADSs or Ordinary Shares, to establish a connection to the PRC
for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Further,
there is uncertainty as to whether the courts of Hong Kong would (i) recognize or enforce judgments of United States courts obtained
against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or
any state in the United States or (ii) entertain original actions brought in Hong Kong against us or our directors or officers predicated
upon the securities laws of the United States or any state in the United States.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, foreign judgments of United States courts will not be directly enforced in Hong Kong as there are currently no treaties or
other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States. However, the common
law permits an action to be brought upon a foreign judgment. That is to say, a foreign judgment itself may form the basis of a cause
of action since the judgment may be regarded as creating a debt between the parties to it. In a common law action for enforcement of
a foreign judgment in Hong Kong, the enforcement is subject to various conditions, including but not limited to, that the foreign judgment
is a final judgment conclusive upon the merits of the claim, the judgment is for a liquidated amount in civil matter and not in respect
of taxes, fines, penalties, or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice,
and the enforcement of the judgment is not contrary to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also
come from a &#8220;competent&#8221; court as determined by the private international law rules applied by the Hong Kong courts. The defenses
that are available to a defendant in a common law action brought on the basis of a foreign judgment include lack of jurisdiction, breach
of natural justice, fraud, and contrary to public policy. However, a separate legal action for debt must be commenced in Hong Kong in
order to recover such debt from the judgment debtor. As a result, subject to the conditions with regard to enforcement of judgments of
United States courts being met, including but not limited to the above, a foreign judgment of the United States of civil liabilities
predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the United
States could be enforceable in Hong Kong.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
ability of U.S. authorities to bring actions for violations of U.S. securities law and regulations against us, our directors and executive
officers named in this annual report (except H. David Sherman) may be limited. Therefore, you may not be afforded the same protection
as provided to investors in U.S. domestic companies.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SEC, the U.S. Department of Justice, or the DOJ, and other U.S. authorities often have substantial difficulties in bringing and enforcing
actions against non-U.S. companies such as us, and non-U.S. persons, such as our directors and executive officers in the PRC. Due to
jurisdictional limitations, matters of comity and various other factors, the SEC, the DOJ and other U.S. authorities may be limited in
their ability to pursue bad actors, including in instances of fraud, in emerging markets such as the PRC. We conduct our operations mainly
in the PRC and our assets are mainly located in the PRC. There are significant legal and other obstacles for U.S. authorities to obtain
information needed for investigations or litigation against us or our directors, executive officers (except H. David Sherman) or other
gatekeepers in case we or any of these individuals engage in fraud or other wrongdoing. In addition, local authorities in the PRC may
be constrained in their ability to assist U.S. authorities and overseas investors in connection with legal proceedings. As a result,
if we, our directors, executive officers or other gatekeepers commit any securities law violation, fraud or other financial misconduct,
the U.S. authorities may not be able to conduct effective investigations or bring and enforce actions against us, our directors, executive
officers (except H. David Sherman) or other gatekeepers. Therefore, you may not be able to enjoy the same protection provided by various
U.S. authorities as it is provided to investors in U.S. domestic companies.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC,
based on United States or other foreign laws, against us, our directors and executive officers named in this annual report (except H.
David Sherman). Therefore, you may not be able to enjoy the protection of such laws in an effective manner.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a company incorporated under the laws of the Cayman Islands, we conduct our operations mainly in the PRC, and our assets are mainly
located in the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside the
PRC upon us, our directors and executive officers (except H. David Sherman), including with respect to matters arising under U.S. federal
securities laws or applicable state securities laws. Even if you obtain a judgment against us, our directors and executive officers named
in this annual report (except H. David Sherman) in a U.S. court or other court outside the PRC, you may not be able to enforce such judgment
against us or them in the PRC. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of
courts in the United States, the United Kingdom, Japan or most other western countries. Therefore, recognition and enforcement in the
PRC of judgments of a court in any of these jurisdictions may be difficult or impossible. In addition, you may not be able to bring original
actions in the PRC based on the U.S. or other foreign laws against us, our directors and executive officers named in this annual report
(except H. David Sherman). As a result, shareholder claims that are common in the United States, including class actions based on securities
law and fraud claims, are difficult or impossible to pursue as a matter of law and practicality in the PRC.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
example, in the PRC, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or
litigation outside the PRC or otherwise with respect to foreign entities. Although the local authorities in the PRC 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&#160;2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within
the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization
or individual may provide the documents and materials relating to securities business activities to overseas parties. While detailed
interpretation of or implementation rules under Article 177 of the PRC Securities Law is not yet available, the inability for an overseas
securities regulator to directly conduct investigation or evidence collection activities within the PRC may further increase difficulties
faced by investors in protecting your interests. Therefore, you may not be able to effectively enjoy the protection offered by the U.S.
laws and regulations that are intended to protect public investors.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance
matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection
to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a Cayman Islands exempted company listed on Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq
rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance
practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards.
We have chosen, and may from time to time choose, to follow home country exemptions with respect to certain corporate matters.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
articles of association contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our
shareholders&#8217; opportunity to sell their shares, including Ordinary Shares represented by the ADSs, at a premium, as a result, it
could materially adversely affect the rights of holders of our ADSs.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have adopted a set of amended and restated articles of association that contains provisions to limit the ability of others to acquire
control of our company. These provisions could deprive our shareholders of an opportunity to sell their shares at a premium over prevailing
market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors has the authority to issue preferred shares in one or more series and to fix their designations, powers, preferences,
privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the
rights associated with our Ordinary Shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated
to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides
to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our Ordinary Shares and ADSs
may be materially adversely affected.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are an &#8220;emerging growth company,&#8221; 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. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take
advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended (the &#8220;Exchange
Act&#8221;), for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption
of certain accounting standards until those standards would otherwise apply to private companies. We elect to use this extended period.
transition period, as a result, our financial statements may not be comparable to companies that comply with public company effective
dates.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to U.S. domestic public companies.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations
in the United States that are applicable to U.S. domestic issuers, including:</span></p><div>

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</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form
                                            10-Q or current reports on Form 8-K;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations
                                            in respect of a security registered under the Exchange Act;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            selective disclosure rules by issuers of material nonpublic information under Regulation
                                            FD.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish
our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating
to financial results and material events will also be furnished to the SEC on Form 6-K.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to
be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be
made available to you were you investing in a U.S. domestic issuer.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
will incur increased costs as a result of being a public company, particularly after we cease to qualify as an &#8220;emerging growth
company.&#8221;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a public company, we expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The
Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate
governance practices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs
and to make some corporate activities more time-consuming and costly.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal
controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more
expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage
or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with
our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors
or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we
cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, after we are no longer an &#8220;emerging growth company,&#8221; we expect to incur significant expenses and devote substantial
management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules
and regulations of the SEC.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
can be no assurance we will not be a passive foreign investment company (&#8220;PFIC&#8221;), for any taxable year, which could result
in adverse U.S. federal income tax consequences to U.S. investors in our ADSs or Ordinary Shares.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year in
which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average value of its assets (generally
determined on a quarterly basis) consists of assets that produce passive income or are held for the production of passive income. For
purposes of these calculations, we will be treated as earning our proportionate share of the income and owning our proportionate share
of the assets of any other corporation in which we own, directly or indirectly, 25% (by value) of the stock. Although the law in this
regard is not entirely clear, we treat the VIE and its subsidiaries as being owned by us for U.S. federal income tax purposes because
we control their management decisions and are entitled to all of the economic benefits associated with them (excluding non-controlling
interests). As a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined,
however, that we are not the owner of the VIE and its subsidiaries for U.S. federal income tax purposes, we may be treated as a PFIC
for the current taxable year and any subsequent taxable year.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Assuming
that we are the owner of the VIE and its subsidiaries for U.S. federal income tax purposes, and based upon the manner in which we currently
operate our business through the VIE, the expected composition of our income and assets and the value of our assets, we do not presently
expect to be a PFIC for the current taxable year or the foreseeable future. However, this is a factual determination that must be made
annually after the close of each taxable year, and the application of the PFIC rules is subject to uncertainty in several respects. The
value of our assets for purposes of the PFIC determination generally will be determined by reference to the market price of our Ordinary
Shares and ADSs, which could fluctuate significantly. In addition, our PFIC status will depend on the manner we operate our business.
Furthermore, it is not entirely clear how the contractual arrangements between us, the VIE and its nominal shareholders will be treated
for purposes of the PFIC rules, and we may be or become a PFIC if the VIE is not treated as owned by us. Because of these uncertainties,
there can be no assurance that we will not be a PFIC for the current taxable year or future taxable years.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we were a PFIC for any taxable year during which a U.S. holder (as defined in &#8220;Taxation &#8212; United States Federal Income Tax
Considerations &#8212; <i>General</i>&#8221;) owns our ADSs or Ordinary Shares, certain adverse U.S. federal income tax consequences
could apply to such U.S. holder. See &#8220;Taxation &#8212; United States Federal Income Tax Considerations &#8212; <i>Passive Foreign
Investment Considerations; Passive Foreign Investment Rules.</i>&#8221;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are not required to disclose compensation of Directors and Officers under Cayman Islands law.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
Cayman Islands law, the Company is not required to disclose compensation paid to our senior management on an individual basis and the
Company has not otherwise publicly disclosed this information elsewhere. The executive officers, directors and management of the Company
receive fixed and variable compensation. They also receive benefits in line with market practice. The fixed component of their compensation
is set on market terms and adjusted annually. The variable component consists of cash bonuses and awards of shares (or the cash equivalent).
Cash bonuses are paid to executive officers and members of management based on previously agreed targets for the business. Shares (or
the cash equivalent) are awarded under share options.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_012"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
4.  Information on the Company.</span></p><div>

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</div><div><a id="a_013"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
<b><i>History and Development of the Company.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the following discussion of corporate history, &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221; refer to Xiao-I.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiao-I
Corporation</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
were incorporated in the Cayman Islands on August 13, 2018, with limited liability under the Companies Act. Upon incorporation, the authorized
share capital of our company was US$50,000 divided into 1,000,000,000 shares, par value of US$0.00005 each, comprising of 1,000,000,000
Ordinary Shares of a par value of US$0.00005 each.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 30, 2018, we established our wholly-owned subsidiary AI Plus Holding Limited (&#8220;AI Plus&#8221;), under the law of British
Virgin Islands, as our intermediate holding company, which then established its wholly-owned subsidiary, Xiao-i Technology Limited (&#8220;Xiao-i
Technology&#8221;) under the law of Hong Kong, which in turn established a wholly-owned PRC subsidiary, Zhizhen Artificial Technology
(Shanghai) Company Limited (&#8220;Zhizhen Technology&#8221;) or the WFOE, on March&#160;29, 2019. Subsequently, we, through our WFOE,
entered into a series of contractual arrangements with Shanghai Xiao-i and its shareholders whereby we were established as the primary
beneficiary of Shanghai Xiao-i for accounting purposes. We have recognized the net assets of Shanghai Xiao-i at historical cost with
no change in basis in the consolidated financial statements upon the completion of this reorganization.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this annual report, Al Plus, Xiao-i Technology and Zhizhen Technology do not have any substantive business operations.
As a result of our indirect ownership in Zhizhen Technology and the variable interest entity contractual arrangements, we are regarded
as the primary beneficiary of the VIE for accounting purposes. We treat the PRC operating entities as our consolidated affiliated entities
under U.S. GAAP, and have consolidated the financial results of these entities in our consolidated financial statements in accordance
with U.S. GAAP.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_014"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.
<b><i>Business Overview.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the following discussion of business, &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221; refer to Shanghai Xiao-i and its subsidiaries.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Overview</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiao-I
is a holding company incorporated in Cayman Islands. As a holding company with no material operation of its own, it conducts substantially
all our operations in China through a variable interest entity, or the VIE, Shanghai Xiao-i Robot Technology Co., Ltd., (&#8220;Shanghai
Xiao-i&#8221;) and its subsidiaries.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shanghai
Yingsi Software Technology Co., Ltd. (&#8220;Incesoft&#8221;) was founded in 2001. Incesoft established the Xiaoi robot brand (Chinese:
&#23567;i&#26426;&#22120;&#20154;) and developed AI technology used to support its consumer-to-consumer business model. In 2009, Incesoft
transformed its business model from consumer-to-consumer to business-to-business. At the same time, founders of Incesoft founded Shanghai
Xiao-i, the VIE, which acquired the Xiaoi robot brand and Incesoft&#8217;s core AI technology. Following the acquisition, Incesoft was
dissolved by de-registering with local company registrar in accordance with PRC law in 2012. Since 2009, Shanghai Xiao-i has become a
leading artificial intelligence (&#8220;AI&#8221;) company by building on its wide technology commercialization, brand recognition and
culture of innovation in China.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Milestone
Accomplishments over 20 Years History</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_002.jpg" style="height: 315px; width: 650px"/><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
our founding in 2001, we have developed a portfolio of cognitive intelligence technologies for businesses based on our natural language
processing and AI implementation. Leveraging our cutting-edge technologies, dedicated services, and long-standing customer base, we have
become a leading customer service solution company in China according to Frost &amp; Sullivan. We focus on the development and promotion
of cognitive intelligence technology and products with natural language processing as the core, and we use cognitive intelligence products
and services to enable and promote industrial digitization and intelligent upgrading and transformation.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a leading cognitive intelligence enterprise in China, integrating parts of perceptive intelligence like natural language processing
and computer vision. We offer a wide range of business services in AI, covering natural language processing, computer vision, machine
learning and cloud computing. We have multi-field data resources and multiple industry standards, a cutting-edge talent team training
system and strong experience in resource integration. We primarily provide smart city, software business and architectural design AI
services to our customers.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img alt="" src="image_003.jpg" style="height: 335px; width: 650px"/>&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have comprehensive business lines covering fundamental tech platform, conversation bot, cloud services, industry solutions and robotics
solutions.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img alt="" src="image_004.jpg" style="height: 316px; width: 650px"/>&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
CIAI platform products and services are marketed and sold primarily to customers in the following industries: (1) Contact Center, (2)
Finance, (3) Urban Public Service, (4) Construction, (5) Metaverse, (6) Manufacturing and (7) Smart Healthcare.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Product
and Technology Overview</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Overall
Architecture of Xiao-i Products and Technologies</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img alt="" src="image_005.jpg" style="height: 321px; width: 650px"/>&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
overall architecture of our products and technologies are divided into three layers: (1) infrastructure, (2) aggregation empowerment
platform and (3) domain application.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Infrastructure
Layer</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
infrastructure layer provides the informational support for our products and technologies. Typically built with third-party products
and technologies, we integrate the information into the infrastructure layer. Additional properties include:</span></p><div>

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<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Compatibility
                                            with cloud native and private or third-party cloud platforms;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ubiquitous
                                            perception layer connection enabling integration with the Internet of Things, the Internet,
                                            5G, and dedicated networks; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Multidimensional
                                            data collection and integration, including spatiotemporal, channels, and community.</span></td></tr></table><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Aggregation
Empowerment Platform Layer</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">AI
Core Technology Platform &#8212; Cognitive Intelligence Artificial Intelligence (CIAI)</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img alt="" src="image_006.jpg" style="height: 348px; width: 650px"/>&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Using
proprietary intellectual property technologies, we have independently developed CIAI, our core technology platform. To date, we have
developed and commercialized six core technologies based on CIAI: (1) natural language processing, (2) speech processing, (3) computer
vision, (4) machine learning, (5) affective computing and (6) data intelligence and hyperautomation.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Natural
                                            Language Processing</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CIAI&#8217;s
                                            multilingual, natural language processing capability extracts and analyzes information, mines
                                            text, constructs knowledge, and performs knowledge representation and reasoning based on
                                            words, phrases, sentences, and text, providing solutions to the human-computer interaction
                                            needs of diverse enterprises and professional users.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Speech
                                            Processing</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            hybrid architecture of Time-Delay Neural Network + Deep Feedforward Sequential Memory Network
                                            + attention, in combination with our vast corpus accumulation of more than ten years, has
                                            enabled us to train our intelligent voice technology for end-to-end application across various
                                            scenarios in numerous fields. Based on these technologies, we have built a variety of intelligent
                                            voice solutions under the Aviation Industry Computer-Based Training Committee framework,
                                            including intelligent Interactive Voice Response navigation, intelligent outbound call, intelligent
                                            agent assistance, intelligent voice quality inspection, and intelligent coaching.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Computer
                                            Vision</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            offer various computer vision capabilities, including face recognition and analysis, multi-target
                                            tracking, human posture and action recognition, and scene analysis capabilities such as semantic
                                            and instance segmentation. In terms of Optical Character Recognition (&#8220;OCR&#8221;),
                                            we have general OCR and customized OCR for all types of cards, invoice, receipts, tickets,
                                            and more. In terms of construction drawing analysis, we apply various capabilities including
                                            pattern recognition and computer vision to comprehensively analyze and process CAD drawings,
                                            bringing to life standard review capability for construction drawings. Relating to engineering,
                                            we provide rapid engineering customization through its internally-developed deep learning
                                            framework. We also offer model distillation and pruning solutions to meet clients&#8217;
                                            model compression requirements. This high performance framework is adaptable to various environments.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Machine
                                            Learning</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Machine
                                            learning methods offered by us include everything from traditional machine learning to the
                                            latest deep learning, reinforcement learning, active learning, transfer learning, and generative
                                            adversarial networks (&#8220;GAN&#8221;). These methods are applied across multiple fields
                                            such as natural language processing, speech recognition, vision recognition and analysis,
                                            and in business scenarios such as precision marketing, personalized recommendation, and risk
                                            assessment in combination with massive data and distribution processing algorithms to form
                                            an efficient human-computer collaborative learning system.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Affective
                                            Computing</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deep
                                            learning technology is used to recognize, understand, process, and simulate human emotions,
                                            so as to realize multi-dimensional and multimodal affective computing capabilities such as
                                            text, voice and vision. We have built affective computing, analysis, and interactive processing
                                            capabilities that process real-time perception, intelligent planning, automatic simulation,
                                            and this technology has been widely used in various practical business scenarios.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Data
                                            Intelligence and Hyperautomation</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large-scale
                                            machine learning technology mines, analyzes, and processes massive amounts of data, the assets
                                            of which are comprehensively integrated to extract information contained therein. Business
                                            processes are automatically and quickly identified, reviewed, and executed in combination
                                            with innovative technologies such as process automation and low code. The results enable
                                            enterprises to delegate simple tasks with high repeatability, as well as complex tasks, to</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">AI
                                            and data enhancement, thereby improving the quality and efficiency of business operations.
                                            Applications include data monitoring, data analysis, user profiling, business process automation,
                                            financing business automation, financial business automation, supply chain business automation,
                                            IT operation, and maintenance and integration automation.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Product Platforms</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have commercialized our six core technologies to create the following product platforms: (1) Conversational AI, (2) Knowledge Fusion,
(3) Intelligence Voice, (4) Hyperautomation, (5) Data Intelligence, (6) Cloud, (7) Intelligent Construction Support, (8) Vision Analysis,
(9) Intelligent Hardware Support, and (10) Metaverse.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Conversational
                                            AI Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            conversational AI platform makes full use of deep learning, data enhancement, and active
                                            learning technologies, employing flexible and diverse dialog management and context processing
                                            mechanisms, and driven by a powerful learning system, the results of which achieve in-depth
                                            scenario dialog processing, intent recognition, and complex logic reasoning in combination
                                            with structured knowledge and semantic analysis capabilities. Additionally, the platform
                                            realizes the business value of conversational AI in a variety of application scenarios, including
                                            intelligent customer service, smart marketing, intelligent hardware, intelligent assistant,
                                            agent assistance, and intelligent human-computer training.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Knowledge
                                            Fusion Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            knowledge fusion platform integrates various types of knowledge such as Q&amp;A, documents,
                                            multimedia, information forms, business processes, knowledge graphs, and multimodal to assist
                                            enterprises in improving knowledge management capabilities, building intelligent service
                                            cores, supporting intelligent knowledge management, retrieval, recommendation, application
                                            assistance, cognitive reasoning, and other capabilities. It helps enterprise-level intelligent
                                            applications, improves work efficiency, optimizes user experience, and reduces enterprise
                                            operating costs.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Intelligent
                                            Voice Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            intelligent voice platform (&#8220;IVP&#8221;) uses natural language processing (&#8220;NLP&#8221;),
                                            automatic speech recognition, voiceprint recognition, and text-to-speech technologies with
                                            human-computer interaction as its core, in combination with various business scenarios, to
                                            comprehensively create or enhance business capabilities such as intelligent speech solutions,
                                            thereby realizing the macro processes of intelligent IVP, intelligent outbound calls, speech
                                            analysis, agent assistance, and human-computer interaction.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Hyperautomation
                                            Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            hyperautomation platform innovatively uses low code technology in combination with agents
                                            to realize and expand vast capabilities of the traditional low code platform and Robotic
                                            Process Automation. It integrates technologies such as OCR, NLP, and visualized data mining
                                            and analysis, enables users to realize business and process automation, combines capabilities
                                            of knowledge base and imitation learning, and enables realization of business and process
                                            intelligence with intelligent planning capabilities.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Data
                                            Intelligence Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            data intelligence platform comprehensively integrates data assets, manages the entire life
                                            cycle of data, realizes the entire cycles of data integration, processing, transformation,
                                            analysis, and mining through What You See Is What You Get with the support of component-based
                                            data visualization technology. It also helps clients extract valuable information contained
                                            in data, and provides assistance in business and process automation, business prediction,
                                            decision support, among others, and improves the efficiency of data-driven business intelligence
                                            and business intelligence services.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Cloud
                                            Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            cloud platform is a comprehensive platform that integrates our various core technical capabilities,
                                            such as NLP capability, speech recognition capability, image recognition capability, data
                                            analysis capability, etc. The platform can provide fast and simple access to different technical
                                            capabilities for various customers and can also provide independent technical capabilities
                                            for customers of different types and even industries. Enterprises can flexibly configure
                                            according to the technical capabilities of the platform. The platform has features such as
                                            rich capabilities, simple and easy to use, flexible structure, and strong scalability. Whether
                                            it is improving customer service level, increasing service types and content, or expanding
                                            technical capabilities, the platform can easily expand and support.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Intelligent
                                            Construction Support Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            intelligent construction support platform offers many capabilities such as parsing, reconstruction,
                                            visualization, and multi-dimensional analysis of construction drawings. Combined with a variety
                                            of construction application scenarios, the platform can realize intelligent construction
                                            drawings review, design assistance, online collaborative design, among other applications.
                                            It enables the construction industry to reduce the cost of drawing review, improve per-capita
                                            energy efficiency, empowers the construction industry value chain, and facilitates the transformation
                                            and upgrading of intelligence and automation.</span></td></tr></table><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Vision
                                            Analysis Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            vision analysis platform uses a variety of computer vision-related technologies to apply
                                            OCR, detection, video, and image analysis, helps clients extract and mine valuable information
                                            contained in images, and realizes business automation, industrial defect detection, monitoring
                                            analysis, and other innovative applications encountered in specific business scenarios.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Intelligent
                                            Hardware Support Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            intelligent hardware support platform provides the framework of signal collection, processing,
                                            analysis, prediction, and more. This framework can be combined with various sensors to quickly
                                            process signal, select and adapt appropriate machine learning algorithms for business modeling
                                            according to the intelligent requirements of various types of hardware, make full use of
                                            various machine learning capabilities to make the equipment be more intelligent.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Metaverse
                                            Platform</span></span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            developed the first virtual digital human in 2016 and released it for the first time at the
                                            Guiyang Digital Expo in 2017. We continue to innovate and develop more advanced and smarter
                                            digital human products. Digital human with multimodal emotional interaction capabilities
                                            can be widely used in various business scenarios including film and television production,
                                            media, games, financial services, culture, tourism, education, healthcare, and retail.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Domain
Application Layer</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
more than 20 years, we have applied our aggregation platform to form a number of mature application fields designed to address the business
needs of various fields, including (1) AI + Contact Center, (2) AI + Finance, (3) AI + Urban Public Service, (4) AI + Construction, (5)
AI + Metaverse, (6) AI + Manufacturing and (7) AI + Smart Healthcare.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
technologies are based, in significant part, upon our proprietary intellectual property portfolio. As of December 1, 2022, we have applied
for 554 patents, 281 of which have been granted and we have obtained 225 registered trademarks and 130 computer software copyrights.
In June 2020, the company passed the national intellectual property management system certification and obtained the certificate. This
certificate represents that the company&#8217;s intellectual property management system conforms to the GB/T 29490-2013 standard. We
continue to develop and improve our intellectual property portfolio through our deep R&amp;D department. As of March&#160;31, 2023, we
have 214 R&amp;D personnel, accounting for about 60.8% of our personnel, including 143 with bachelor&#8217;s degrees, 17 with master&#8217;s
degrees and 7 with doctorates.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
primary services are software services provided by our cloud platform. Software services refer to the sales of software products corresponding
to the Company&#8217;s obtained patents or software copyrights to customers for meeting the needs of different customers in different
industries for artificial intelligence:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Contact
Center</i>: We leverage contact center AI solutions to improve customer experience and operational efficiency. We offer AI-based platforms,
software tools and services that leverage voice-based assistants to facilitate strong interactions and engagement in different industries,
including both small and medium enterprises and large enterprises.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Architectural
                                            Design AI services</i> We provide professional architectural drawing review solutions. By
                                            using computer vision, natural language processing technology and our unique map, image morphology
                                            processing, pattern recognition, image segmentation, image target detection, path planning,
                                            OCR and many other independent research and development technologies, combined with the rich
                                            professional experience in architectural design, we have launched AI products for blueprint
                                            review to achieve automation and intelligence, enabling the architecture industry to reduce
                                            the cost of reviewing blueprints, improving the efficiency, and cross-institution collaborative
                                            drawing review.</span></td></tr></table><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Smart
                                            City</i> We use natural language processing, data intelligence and other technologies to
                                            build a cognitive brain for smart city public services, and continuously improves the level
                                            of urban intelligence from social service efficiency and public experience. We provide solutions
                                            such as smart city service hotline, smart public service and smart legal services.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
generate revenue primarily from (i) sale of cloud platform products, (ii) technology development service, (iii) sale of software products,
and (iv) M&amp;S service. For the years ended December 31, 2020, 2021 and 2022, the total revenue was US$13.86 million, US$32.52 million,
and US$48.18 million, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            cloud platform products consist of standardized software products uploaded to our cloud platform.
                                            The revenue from sales of cloud platform products increased from nil for the year ended December
                                            31, 2020 to US$5.55 million for the year ended December 31, 2021. The revenue from sales
                                            of cloud platform products increased by 363.7% from US$5.55 million for the year ended December
                                            31, 2021 to US$25.74 million for the year ended December 31, 2022 primarily due to the promotion
                                            of our AI super automation platform in 2022.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            technology development service provided to customers comprises customized technology development
                                            services for specific needs. The revenue from technology development service increased by
                                            44.4% from US$6.40 million for the year ended December 31, 2020 to US$9.25 million for the
                                            year ended December 31, 2021, primarily due to one major contract to provide specific software
                                            upgrades for drawing review platform. The revenue from technology development service increased
                                            by 77.6% from US$9.25 million for the year ended December 31, 2021 to US$16.42 million for
                                            the year ended December 31, 2022. Our revenue generated from technology development services
                                            was primarily due from three major contracts, including one to provide specific software
                                            upgrades for drawing review platform, and two for developing and delivering the intelligent
                                            education products.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            software products sold to customers comprising customized software products for specific
                                            needs. The revenue from sales of software products increased by 191.8% from US$5.10 million
                                            for the year ended December 31, 2020 to US$14.88 million for the year ended December 31,
                                            2021, primarily due to one major contract signed in 2021, providing smart graphic review
                                            software products amounted to US$11.88 million. The revenue from sales of software products
                                            decreased by 76.2% from US$14.88 million for the year ended December 31, 2021 to US$3.55
                                            million for the year ended December 31, 2022. The significant amount in 2021 was primarily
                                            due to the major contract of smart graphic review software products sales signed in 2021
                                            amounted to US$11.88 million and the revenue was fully recognized in 2021.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            provide M&amp;S services for software products contracts which consist of future software
                                            updates, upgrades, and enhancements as well as technical product support services, and the
                                            provision of updates and upgrades on a when-and-if-available basis. The revenue from sales
                                            of M&amp;S service increased by 43.1% from US$1.94 million for the year ended December 31,
                                            2020 to US$2.77 million for the year ended December 31, 2021, primarily due to more residence
                                            service provided to customers in 2021. The revenue from sales of M&amp;S service decreased
                                            by 12.4% from US$2.77 million for the year ended December 31, 2021 to US$2.43 million for
                                            the year ended December 31, 2022, primarily due to the decrease of sale of software products,
                                            and the accompanying M&amp;S services also decreased.</span></td></tr></table><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
sell our products and services to end customers through our sales ecosystem. Sales to customers in Mainland China accounted for approximately
88.3%, 97.7% and 99.1% of their total revenue in the fiscal years 2020, 2021 and 2022, respectively. Sales to customers in Hong Kong,
Macao, Taiwan and other countries accounted for approximately 11.7%, 2.3% and 0.9% of their total revenue in the fiscal years 2020, 2021
and 2022, respectively.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Competitive Advantages</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe we have the following competitive advantages and they distinguish us from our competitors:</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Our
Pioneer Position in AI Technology and Focus on R&amp;D</span></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            believe that we pioneered the industry&#8217;s first cognitive intelligence and narrow artificial
                                            intelligence technology and have built on our culture of innovation.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Since
                                            its establishment in 2001, Xiao-i has focused on developing cognitive intelligence technologies
                                            based on its natural language processing and &#8220;AI&#8221; implementation in businesses,
                                            enjoying a privileged reputation in the &#8220;AI&#8221; industry. As a leading AI technology
                                            and industrialization service platform in China, through years of operation, Xiao-I has established
                                            cooperation with many leading companies amongst various industry verticals according to Frost
                                            &amp; Sullivan. Our industry leadership is built on our pioneering research to commercialize
                                            AI technology.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            first-mover advantage in natural language processing has made us a pioneer in formulating
                                            AI industry standards and creating more than 500 patents granted or pending. To protect its
                                            technology, in June 2012, Shanghai Xiao-i sued Apple Computer Trading (Shanghai) Co., Ltd.,
                                            a subsidiary of Apple, Inc. for patent infringement and received the Supreme People&#8217;s
                                            Court Supreme Court Administrative Judgment, a final judgement confirming the validity of
                                            our patent in June 2020, but did not make a ruling on whether Apple infringed our patent.
                                            Specifically, according to the Patent Administration (Patent) Retrial Administrative Judgment
                                            issued by the Supreme People&#8217;s Court of China ((2017) ZGFXZ No. 34), in the retrial
                                            case of Shanghai Xiao-i and Apple Computer Trading (Shanghai) Co., Ltd. and the China National
                                            Intellectual Property Administration, the Supreme People&#8217;s Court determined that the
                                            invention patent named &#8220;A Chatbot System (Patent No.: 200410053749.9)&#8221; held by
                                            Shanghai Xiao-i is a valid patent. On August 3, 2020, after obtaining the final judgment
                                            confirming the validity of its patent, Shanghai Xiao-i filed another infringement lawsuit
                                            against Apple Computer Trading (Shanghai) Co., Ltd., Apple, Inc., and Apple Computer Trading
                                            (Shanghai) Co., Ltd. (together, &#8220;Apple&#8221;), demanding Apple to stop the infringement
                                            and compensate for the losses. As of the date of this annual report, the case is still pending.
                                            </span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            are a pioneer in AI + with over 20 years of development and innovation with 4 R&amp;D centers,
                                            280+ engineers, 50+ external experts, and 10+ university partners.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Advantages
of Our Products and Services</span></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            develop and commercialize Metaverse-related offerings, including Virtual Humans and AR/VR.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            help our clients with their digital transformation using our cognitive intelligence and AI
                                            technologies.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            enable our customers to reap economies of scale by providing one-stop shop service from our
                                            extensive network of service hubs in their vicinity.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            deep-rooted attention to quality assurance in our product and service offerings puts us ahead
                                            of our competitors.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            have a proven monetization model based on product differentiation, revenue source diversification,
                                            and customer loyalty.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            products and services meet the needs of different customers and we maintain frequent client
                                            engagement for continuous business development and customer loyalty cultivation.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
                                            our customer contracts vary, they generally represent multi-year engagements, giving us visibility
                                            into future revenue. We have master similar commercial arrangements in place with many of
                                            our customers, retaining customers over the long term.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 69; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->61<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Our
Robust Ecosystem of Partnerships</span></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            have various regional sales teams including Shanghai, Beijing and Hong Kong.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            maintain good relationships with suppliers that have a good record of performance.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            products cover large and medium-sized contact centers, financial institutions, communication
                                            operators, government services, industrial manufacturing, healthcare, and other customer
                                            groups.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            build strong and long-standing customer relationships with large enterprises in China. Our
                                            client list includes nearly all the industry giants in the banking and telecom industries
                                            in China.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Our
Visionary and Seasoned Management</span></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            CEO Mr. Hui Yuan is a recognized AI industry Key Opinion Leader and domain expert.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
                                            team has deep technical expertise and proven track record of constant innovation.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
                                            have proven ability to attract and retain highly qualified talent.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Challenges
and Opportunities</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unique
challenges and opportunities are presented for us to achieve continued growth in sales in each of the customer industries in which we
operate.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Challenges,
generally we found:</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            the contact center industry, high labor costs and the requirement for continuous improvement
                                            create constant margin challenges. The low gross profit can also cause a decline in service
                                            quality, which limits the innovation ability of the industry.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            the financial industry, banks lack AI technology capabilities and independent wholly-owned
                                            technology subsidiaries.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            the architecture industry, the degree of digitization is low, the architectural knowledge
                                            system is unstructured and the digital drawing review is a mere formality. A lot of manpower,
                                            material and financial resources are wasted.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            Metaverse, there are great differences in technical paths and the product form and the industry
                                            is far from mature. Many concepts have not reached an industry consensus.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            the manufacturing industry, many companies lack information technology talent and coordination
                                            and integration ability across departments, fields and enterprises.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            the healthcare industry, the level of information technology talent in urban and rural areas
                                            is unevenly distributed. Between urban and rural areas, the number of health technicians
                                            in cities is almost twice that in rural areas.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
                                            city public services, the traditional urban public service supply model cannot meet new requirements
                                            of modern residents for the convenience, speed, efficiency and real-time urban government
                                            public services.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
                                            an AI solution company, we also face many other challenges. For example: (i) the AI industry
                                            is highly competitive, Baidu, Alibaba and Tencent are all in this field, (ii) urban public
                                            services cover a wide range of areas which makes it difficult to fully and deeply understand
                                            customers&#8217; businesses and their needs and (iii) the company&#8217;s investment may
                                            be insufficient.</span></td></tr></table><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Opportunities</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">These
                                            challenges have created tremendous and growing market opportunities for artificial intelligence
                                            solution services in China. We believe we are well-positioned to capture the growing market
                                            opportunities due to the infrastructure we have created. Our CIAI platform products and services
                                            are marketed and sold primarily to customers in the following industries: (1) Contact Center,
                                            (2) Finance, (3) Urban Public Service, (4) Construction, (5) Metaverse, (6) Manufacturing
                                            and (7) Smart Healthcare.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            following diagram shows the estimated market size of the artificial intelligence market in
                                            2026 in China, according to Frost &amp; Sullivan:</span></td></tr></table><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Solutions</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
provide our AI solutions and services to the following industries:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the contact center industry, we provide internet service intelligent solutions, hotline intelligent solutions and artificial intelligence
solutions. Based on the scale and characteristics of customers, we have launched an enterprise-level model for large enterprises and
an intelligent cloud contact center service model for small and medium-sized enterprises.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the financial industry, we provide intelligent customer service with a 24-hour uninterrupted intelligent question-and-answer function.
Leveraging our natural language understanding and speech recognition technology, our solutions can address the real-time online question-and-answer
needs of different types of financial institutions and different types of customers.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
marketing professionals, we provide intelligent marketing services, continuously analyzing user data and cluster user characteristics
to form user portraits.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
also cooperate with large, medium, and small domestic insurance companies to provide intelligent insurance consulting services and provide
independent service functions such as business consulting and business queries for insurance users.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the architecture industry, we provide professional architectural drawing review solutions. By using computer vision, natural language
processing technology and Xiao-i&#8217;s unique map, image morphology processing, pattern recognition, image segmentation, image target
detection, path planning, OCR and many other independent research and development technologies, combined with the rich professional experience
in architectural design, we have launched AI products for blueprint review to achieve automation and intelligence, enabling the architecture
industry to reduce the cost of reviewing blueprints, improving the efficiency, and cross-institution collaborative drawing review.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
Metaverse, Xiao-i Robot invented intelligent robots and virtual humans, which are widely applied in various business scenarios such as
exhibitions, customer services, property management, care and companionship, and transaction processing.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the manufacturing industry, we provide intelligent research and design, intelligent production process, intelligent logistics management,
intelligent marketing service and intelligent management.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the healthcare industry, we provide intelligent hospital services, with all-round services for patients before, during and after diagnosis.
We also provide smart clinic services with auxiliary decision-making and interdisciplinary diagnosis and treatment and intelligent scientific
research services. Based on the patient&#8217;s condition, our robots generate a model to predict the clinical events, and automatically
query similar cases and diagnosis and treatment plans in the clinical case database for doctors&#8217; reference, providing real-time
support for the doctor&#8217;s diagnosis process. We connect patients, doctors, experts and medical record managers via personal computers,
tablets, mobile phones, and other collaborative standard videos, breaking the distance barrier and enabling them to provide patient-centered
care through video anytime and anywhere.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
city public services, we integrate urban service resources, providing urban residents with a multi-modal human-computer interaction interface
on all media channels, and comprehensively improve the intelligence level of urban services.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Growth Strategy</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
intend to achieve our mission and further grow our business by pursuing the following strategies:</span></p><div>

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</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Continue
                                            to improve cognitive technology capability</b>. We have set up a technology research institute
                                            to conduct in-depth communication on technological innovation with experts and scholars from
                                            top universities, such as Duke University, Hong Kong University of science and technology
                                            and Columbia University. We have also carried out in-depth cooperation with well-known domestic
                                            universities to jointly develop the latest and cutting-edge technologies.</span></td></tr></table><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Further
                                            develop and create long-term sustainable commercialization opportunities through technology
                                            innovation, application combination innovation, and AI product diversificatio</b>n. For example,
                                            our commercialization in the field of intelligent drawing review has met the needs of the
                                            construction industry for drawing review through our artificial intelligence technology.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Further
                                            strengthen the leading position in the metaverse related product</b>s. We began to design
                                            and produce a virtual human in 2016. Our first mover advantage in the metaverse will help
                                            us continue to succeed in this field.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Expand
                                            our customer base and make full use of existing customers through market segmentation and
                                            personalization. </b> We will gradually expand our target customers from the previous major
                                            customers to small and medium-sized customers, to provide services for a wider range of customer
                                            groups.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Increase
                                            hardware product</b>s. As a company mainly engaged in software sales and services, we will
                                            increase integrated software and hardware products in the future.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Further
                                            expand our global footprint strategically</b>. The goal of the company is to become a global
                                            artificial intelligence enterprise. We are committed to internationalizing our products and
                                            services and providing high-quality products and services to customers around the world.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Customers</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
provide our products and services to hundreds of enterprises across various industries, including contact center, financial sector, government
and healthcare. Our customers include 80% of the top 10 banks in China in terms of asset size, as well as 60% of the top 10 insurance
companies in China. Our customers also include many leading enterprises in aviation, automobile, logistics, computer, communication,
consumer and other industries and China&#8217;s top 500 enterprises.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the year ended December 31, 2020, our total sales to our top 2 customers accounted for 17.7% and 12.8% of our revenues, respectively.
For the year ended December 31, 2021, our total sales to our top 2 customers accounted for 41.2% and 10.3% of our revenues, respectively.
For the year ended December 31, 2022, our total sales to our top 3 customers accounted for 20.4%, 11.1% and 10.3% of our revenues, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China
Construction Third Engineering Bureau Group Limited, a government owned enterprise (&#8220;China Construction&#8221;) accounted for 41.2%
and 11.1% of our revenue for the year ended December 31, 2021 and 2022. Pursuant to the terms of the Intelligent Drawing Review Platform
License Agreement (the &#8220;License Agreement&#8221;) between the VIE, as licensor, and China Construction, as licensee, the VIE agreed
to provide China Construction with an intelligent drawing review platform (the &#8220;Drawing Platform&#8221;). The Drawing Platform
was delivered, installed and commissioned in accordance with the License Agreement in 2021. The revenue recognized for license of the
Drawing Platform was US$11.88 million in 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
connection with the License Agreement, the VIE and China Construction entered into an Intelligent Drawing Platform Operation and Technical
Support Agreement (the &#8220;Support Agreement&#8221;) pursuant to which the VIE has agreed to provide technical support and co-operation
of the Drawing Platform for a term of three years. During the term of the Support Agreement, China Construction, with the consent of
the VIE, may license the use of the Drawing Platform to third parties. In such event, the VIE shall be entitled to receive 30% of the
license fee paid to China Construction by any third party. The revenue recognized of technical services for the Drawing Platform was
US$1.51 million in 2021 and US$3.24 million in 2022, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Suppliers</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
maintain good relationships with suppliers that have a good record of performance. Beijing Blanstar Technology Co., Ltd., a company established
and existing under the laws of the PRC (&#8220;Blanstar&#8221;), was the VIE&#8217;s major service provider for the year ended December
31, 2021 and 2022 accounting for 73.8% and 34.6% of the Company&#8217;s total purchases, respectively. Pursuant to the terms of the Cloud
Computing Technical Services Cooperation Agreement effective as of January 1, 2021 (the &#8220;Services Agreement&#8221;) between the
VIE and Blanstar, Blanstar agreed to provide the VIE with cloud computing technical services consisting of various products and services
including computing, storage, network, security, management and cloud database to meet the different needs of the VIE&#8217;s various
websites, applications and other products and services. Blanstar agreed to provide the VIE with response, technical support and maintenance
services 24 hours a day 7 days a week. Pursuant to the Services Agreement the VIE paid $3.8 million and $13.3 million to Blanstar for
the year ended December 31, 2021, and 2022, respectively. The Service Agreement expires December 31, 2022, subject to the right of the
parties to negotiate a renewal one month prior to the expiration date.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
the twelve months ended December 31, 2020, we have three significant suppliers which represent 39.5%, 13.0% and 10.0% of our total purchase,
respectively. For the year ended December 31, 2021, we have one significant supplier which is Blanstar, representing 73.8% of our total
purchase. For the year ended December 31, 2022, we have three significant suppliers including Blanstar, representing 34.6%, 21.9% and
10.3% of our total purchase, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Marketing
and Sales</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have built our Xiao-i (Chinese: &#23567;i&#26426;&#22120;&#20154;) brand through a multitude sales channels, including:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">industry
                                            trade shows,</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">academic
                                            seminars,</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">publicity
                                            of major milestones and achievements, and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">collaboration
                                            with relevant academic, governmental and industrial parties.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">With
these approaches, we have successfully built our brand and expanded customer markets. Our software business has experienced steady growth
during the past few years.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Distribution
Network</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
sell our products and services to end customers through our sales ecosystem, which consists of multiple regional sales teams and maintain
strong relationships with suppliers. Our products cover large and medium-sized contact centers, financial institutions, communication
operators, government services, industrial manufacturing, medical care and other customer groups. Since 2015, we have launched the partner
development plan, with more than 600 customers at present. Partners include finance, government, healthcare, energy, education, and manufacturing
customers from Beijing, Shanghai, Guangzhou and Shenzhen. Partners are divided into three levels: strategic level, commercial level and
ecological level. Cooperation above the commercial level has the application scenarios of integrating the solutions of both parties and
customers. We provide partners with a series of end-to-end support and services from sales support, event promotion, media publicity,
training and certification and follow-up guarantee.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intellectual
Property</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
establish and protect our intellectual property rights through patent, copyright, trademark and trade secret laws, as well as non-competition,
confidentiality and other contractual clauses, to establish and protect our intellectual property rights.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of March 31, 2023, we have applied for 557 patents, 282 of which have been granted and have obtained 228 registered trademarks and 131
computer software copyrights. We have led and participated in the formulation of 1 international standard, 5 national standards and 2
association standards, led the world&#8217;s first international standard for AI emotional computing, and published more than 20 class
A papers (Class A papers refer to papers in authoritative core journals, indexed by the internationally accepted SCIE, EI, ISTP, SSCI
and A&amp;HCI retrieval system) every year. In June 2020, the company passed the national intellectual property management system certification
and obtained the certificate. This certificate represents that the company&#8217;s intellectual property management system conforms to
the GB/T 29490-2013 standard. We applied in 2004, and in 2009 were authorized a patented technology numbered ZL200410053749.9 (a chatbot
system), which represented the world&#8217;s leading level of intelligent voice at that time.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition to the foregoing protections, we generally control access to and use of our proprietary and other confidential information through
the use of internal and external controls. For example, for external controls, we enter into confidentiality agreements or agree to confidentiality
clauses with our advertising customers and mobile device manufacturers and, for internal controls, we adopt and maintain relevant policies
governing the operation and maintenance of our IT systems and the management of user-generated data.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
Research and Development</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
believe a strong research and development capability is crucial to our continued success and ability to develop innovative solution offerings
to keep up with rapid development and advances in AI technologies. We closely attend to the needs of our customers and respond to their
feedback and requests through developing new solutions or adding advanced or optimized features in existing solutions.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of March 31, 2023, we have 214 R&amp;D personnel, accounting for about 60.8% of our personnel, including 143 with bachelor&#8217;s degrees,
17 with master&#8217;s degrees and 7 with doctorates. A large number of our senior engineers have more than 10 years&#8217; experience
in the computer, Internet and AI industries, and we also use part-time experts from several universities and research institutes. We
have established joint laboratories with the Institute of Software of the Chinese Academy of Sciences, East China Normal University,
Hong Kong University of Science and Technology, and have established in-depth cooperative relations with Tsinghua University, Fudan University,
Shanghai Jiaotong University, Beijing University of Posts and Telecommunications and Peking University.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Competition</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
competition in the AI services industry is intense. We compete with various integrated AI services providers in chatbots and personal
assistants as conversational intermediates. We also compete with new companies entering into the AI service industry. The rapid nature
of new technologies emerging also enhances the competitive nature of our industry. Among the many other Chinese competitors, our products&#8217;
global competitors include Apple Siri, Microsoft Cortana and Amazon Echo. To gain market share, we have built good customer relationships
with major banks and government departments in China. In addition, we also seek customers from different industries to maintain a long-term
collaboration relationship.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_015"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">C.
<b><i>Organizational Structure.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following diagram illustrates the corporate legal structure of Xiao-I as of the date of this annual report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img alt="" src="image_008.jpg" style="height: 339px; width: 650px"/>&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following diagram illustrates the ownership of the VIE, Shanghai Xiao-i as of the date of this annual report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><img alt="" src="image_009.jpg" style="height: 367px; width: 850px"/></span>&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Compliance
with Foreign Investment</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All
limited liability companies formed and operating in the PRC are governed by the Company Law, which was amended and promulgated by the
SCNPC on October 26, 2018 and came into effect on the same day. Foreign invested enterprises must also comply with the Company Law, with
exceptions as specified in the relevant foreign investment laws. Under our corporate structure as of the date of this annual report,
100% of the equity interests of Zhizhen Technology are entirely and directly held by our company through Xiao-i Technology Limited. Therefore,
Zhizhen Technology, the WFOE of Xiao-i Technology Limited, should be regarded as a foreign-invested enterprise and comply with both the
Company Law and other applicable foreign investment laws.</span></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_016"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">D.
<b><i>Property, Plants and Equipment.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
current principal executive offices are located in 7<sup>th</sup> floor, Building 398, No. 1555 West, Jinshajiang Rd, Shanghai, China.
We lease offices in other cities where we operate with an aggregate area of approximately 4,022.4 square meters as of December 1, 2022.
These following facilities currently accommodate our management headquarters, as well as most of our sales and marketing, research and
development, and general and administrative activities:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: left">Location</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Area<br/> (Square<br/> Meter)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Term</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Use</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-indent: -0.125in; padding-left: 0.125in; width: 54%; text-align: left">Floor 2/3/5/6/7/8 and basement 06, No. 398, floor 3 and basement 09/10, No. 399, Lane 1555, Jinsha Jiangxi Road, Jiading District, Shanghai</td><td style="width: 1%">&#160;</td>
    <td style="width: 11%; text-align: center">2171.2</td><td style="width: 1%">&#160;</td>
    <td style="width: 23%; text-align: center">2020.7.13-2024.7.12<br/> July 13, 2020 to<br/> July 12, 2024</td><td style="width: 1%">&#160;</td>
    <td style="width: 9%; text-align: center">Office</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; text-indent: -0.125in; padding-left: 0.125in; text-align: left">B1/1/2/3, No. 383, Lane 1555, Jinsha Jiangxi Road, Jiangqiao Town, Jiading District, Shanghai</td><td>&#160;</td>
    <td style="text-align: center">1148.76</td><td>&#160;</td>
    <td style="text-align: center">April 18, 2019 to<br/> April 17, 2023</td><td>&#160;</td>
    <td style="text-align: center">Office</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-indent: -0.125in; padding-left: 0.125in; text-align: left">Room 905, building 1, No. 46, dongzhimenwai street, Dongcheng District, Beijing</td><td>&#160;</td>
    <td style="text-align: center">163.45</td><td>&#160;</td>
    <td style="text-align: center">January 1, 2022 to<br/> December 31, 2023</td><td>&#160;</td>
    <td style="text-align: center">Office</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="vertical-align: top; text-indent: -0.125in; padding-left: 0.125in; text-align: left">Unit 1845, No. 167, Linhe West Road, Tianhe District, Guangzhou</td><td>&#160;</td>
    <td style="text-align: center">162.15</td><td>&#160;</td>
    <td style="text-align: center">July 5, 2022 to<br/> July 31, 2025</td><td>&#160;</td>
    <td style="text-align: center">Office</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-indent: -0.125in; padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">Zhongtian, Changling North Road, guanshanhu District, Guiyang city No. 1, floor 8, unit 3, building 5, East Fifth tower, East District, financial and business district, zone B, convention and Exhibition City</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center; padding-bottom: 1.5pt">378</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="vertical-align: top; text-align: center; padding-bottom: 1.5pt">March&#160;15, 2022 to<br/>
March 14, 2024</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: bold 10pt Times New Roman, Times, Serif; width: 93px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
    4A.</span></td>
    <td style="font: bold 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unresolved
    Staff Comments</span>.</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_017"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
5.  Operating and Financial Review and Prospects.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>In
the following management&#8217;s discussion and analysis of financial condition and operating results, &#8220;we,&#8221; &#8220;us,&#8221;
or &#8220;our&#8221; refer to the PRC operating entities except when financial information is presented on a consolidated basis in which
case &#8220;we&#8221;, &#8220;us,&#8221; or &#8220;our&#8221; refer to Xiao-I Corporation and its subsidiaries and the PRC operating
entities on a consolidated basis.</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>The
following discussion and analysis of our financial condition and results of operations is based upon and should be read in conjunction
with our financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking
statements. In evaluating our business, you should carefully consider the information provided under the caption &#8220;Item 3. Key Information&#8212;D.
Risk Factors&#8221; and elsewhere in this annual report. We caution you that our businesses and financial performance are subject to
substantial risks and uncertainties.</i></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_019"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
<b><i>Operating Results.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Overview</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are a leading cognitive intelligence company with strong brand recognition and profound industrial knowledge in China. We primarily provide
cloud platform products, software business and architectural design AI services to our customers. Our software products mainly include
intelligent interactive platform, intelligent voice platform, knowledge fusion platform, computer vision series platform and other core
intelligent products.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The AI basic data service industry has plenty of opportunities
for growth in the future. Participating in artificial intelligence technology since the inception, we have rich experience in independent
research and development and industrial application of cognitive intelligence, multilingual natural language processing, deep semantic
interaction, speech recognition and machine learning. We have provided services to nearly 1,000 enterprises and governments. Our business
covers communications, finance, government affairs, legal, medical, manufacturing and other industries, and we expanded steady growth
in those industries for the next few&#160;years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We generate the majority of our revenue from fees
charged to our customers based on (i) sale of cloud platform products, (ii)&#160;technology development service, (iii) sale of software
products, (iv) M&amp;S service, and (v)&#160;sale of hardware products. We gradually decreased the business focus on the sales of software
products and in turn increased our revenue from sale of cloud platform products, which is based on Software as a Service (&#8220;SaaS&#8221;)
and private cloud services. The sale of software products accounted 36.8%, 45.8% and 7.4% of total revenue for the years ended December
31, 2020, 2021 and 2022, respectively. For sale of cloud platform products, revenue accounted 0.0%, 17.1% and 53.4% of total revenue for
the years ended December 31, 2020, 2021 and 2022, respectively. In addition, revenue generated from technology development services accounted
for 46.2%, 28.4% and 34.1% for the years ended December 31, 2020, 2021 and 2022, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have achieved significant growth in recent periods.
Our revenues were US$13.86&#160;million, US$32.52&#160;million and US$48.18&#160;million for the&#160;years ended December&#160;31, 2020,
2021 and 2022, respectively. The increase in revenue was mainly due to the significant growth of technology development services and sale
of cloud platform products. We made significant investment in research and development, especially focusing on integrating AI and industrial
internet, which ultimately contributed to the development of intelligent industrial platform in the manufacturing industry. The project
to develop an intelligent industrial platform in the manufacturing industry was initiated in 2022 and was expected to be completed in
early 2024. In addition, we are continuously devoted to the research and development in the field including contact center, architectural
design AI services and smart city to discover potential demand in the market. Our research and development expenses were US$4.24 million,
US$5.36 million and US$24.00 million for the years ended December 31, 2020, 2021 and 2022, respectively.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Major
Factors Affecting Our Results of Operations</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
business and operating results are affected by the general factors affecting the global robotics industry, and in particular the global
software robotics industry, including technology development and breakthroughs in areas such as AI and cloud computing, increases in
per capita disposable income, as well as shortage of labor supply. Changes in any of these general factors could affect the demand for
our products and services and our results of operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
our business is influenced by factors affecting our industry generally, we believe our results of operations are more directly affected
by the following specific factors:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Continued
Monetization of Robot Products and Services</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
long-term growth will depend on our continued ability to expand our customer base and increase revenue from existing and new robot application
scenarios. We have formed products in different industries. Our CIAI platform products and services are marketed and sold primarily to
customers in the following industries: (1)&#160;Contact Center, (2)&#160;Finance, (3)&#160;Urban Public Service, (4)&#160;Construction,
(5)&#160;Metaverse, (6)&#160;Manufacturing and (7)&#160;Smart Healthcare. According to Frost&#160;&amp; Sullivan, Shanghai Xiao-i has
been focusing on developing cognitive intelligence technologies based on its cutting-edge natural language processing and AI implementation
in businesses, enjoying a privileged reputation in AI industry. As a leading AI technology and industrialization service platform in
the world, through&#160;years of operation, Shanghai Xiao-I has established extensive cooperation with many leading companies amongst
various industry verticals. As a result, we are well positioned to capture significant monetization opportunities. Going forward, we
plan to expand our product and service offerings, including our Metaverse-related offering and intelligent drawing review software products,
which is expected to have a positive impact on our results of operations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sales
and Marketing</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have built our Xiao-i (Chinese: &#23567;i&#26426;&#22120;&#20154;) brand through a multitude of avenues, including:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">industry
                                            trade shows;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">academic
                                            seminars;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">publicity
                                            of major milestones and achievements; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">collaboration
                                            with relevant partners.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">With
these approaches, we have successfully built our brand and expanded customer markets. Our software business has experienced steady growth
during the past few&#160;years.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Competition</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
competition in the AI services industry is intense. We compete with various integrated AI services providers in chatbots and personal
assistants as conversational intermediates. Our products&#8217; main competitors include Apple Siri, Microsoft Cortana and Amazon Echo.
To gain market share, we have built good customer relationships with several major banks and government departments in China. In addition,
we also seek customers from different industries to maintain a long-term collaboration relationship.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Technology</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Xiao-i robot has a strong human-computer cognitive
interaction ability, which is known as &#8220;representative of conversational AI enterprises&#8221; by Gartner. Our technical strength
and academic status have also been recognized on the international platform. We are a technology-driven company and our research and development
staffs are an important asset for us. To further strengthen our technological ability, we have set training courses and talent development
plans to nurture the staffs. With aligned interests, we promote our research and development ability to respond to the rapidly changing
market.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intellectual
Property</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
intellectual property includes trademarks related to our brands and services, copyrights in software, patents and other intellectual
property rights and licenses. We seek to protect our intellectual property assets and brand through a combination of monitoring and enforcement
of trademark, patent, copyright and trade secret protection laws in the PRC and other jurisdictions, as well as through confidentiality
agreements and procedures. For further details, see &#8220;Risk Factors&#160;&#8212;&#160;Risks Relating to Our Business and Industry&#160;&#8212;<b><i>&#160;</i></b><i>We
may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs
of business</i>&#8221; of this annual report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regulations
on Intellectual Property Rights</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China
has adopted legislation governing intellectual property rights, including trademarks, patents and copyrights. China is a signatory to
the major international conventions on intellectual property rights and became a member of the Agreement on Trade Related Aspects of
Intellectual Property Rights upon its accession to the World Trade Organization in December&#160;2001.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
China, holders of computer software copyrights enjoy protection under the Copyright Law. Various regulations relating to the protection
of software copyrights in China have been promulgated, including the Copyright Law, which was originally promulgated in 1990, the Regulation
for the Implementation of the Copyright Law, which originally came into effect in September&#160;2002, and the Measures for the Registration
of Computer Software Copyright, which were issued by the National Copyright Administration in 2002. Under these regulations, computer
software that is independently developed and exists in a physical form is protected, and software copyright owners may license or transfer
their software copyrights to others. Registration of software copyrights, exclusive licensing and transfer contracts with the Copyright
Protection Center of China or its local branches is encouraged. Such registration is not mandatory under Chinese law, but can enhance
the protections available to the registered copyrights holders. The Computer Software Copyright Registration Procedures, issued by the
National Copyright Administration in 2002, apply to software copyright registration, license contract registration and transfer contract
registration. We have registered software copyrights in compliance with the above rules and to take advantage of the protections under
them.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Impact
of COVID-19 on Our Operations and Financial Performance</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beginning
in 2020, normal economic activity received a severe shock when many company offices, retail stores and production facilities across China
were forced to temporarily close as a result of the COVID-19 outbreak. The population in most of the major cities was locked down to
a greater or lesser extent at various times and opportunities for discretionary consumption were extremely limited. People are forced
to stay at home, and travel and social activities are restricted.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
took a series of measures to protect our employees, closing our offices, facilitating remote working arrangements for our employees,
and canceling business meetings and travels. The operations of some of our business partners and service providers were also constrained
and impacted. This has led to delays in the purchase decisions and sales and implementation cycles of our products and solutions for
existing or potential customers. Meanwhile it reduces our efficiency in product development, sales, marketing, and customer service work.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China
began to modify its zero-COVID policy at the end of 2022, which seems to have prompted a considerable degree of uncertainties about the
economic and market outlook. Thus, we have to be prepared for the possibility for a wide range of possible outcomes, some of which could
be highly unfavorable to our business. There is still uncertainty as to the future impact of the virus. The extent to which the pandemic
impacts our results of operations going forward will depend on future developments which are highly uncertain and unpredictable, including
the frequency, duration and extent of outbreaks of COVID-19, the appearance of new variants with different characteristics, the success
or failure of efforts to contain or treat cases, and future actions we or the authorities may take in response to these developments.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Impact
of Foreign Exchange Fluctuation</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
we derive our revenue in RMB, foreign exchange rate fluctuations may adversely affect our business and performance. The exchange rates
between US$ and RMB are subject to continuous movements affected by international political and economic conditions and changes in the
PRC government&#8217;s economic and monetary policies. Any appreciation of RMB, which is our reporting currency, against US$ will decrease
our profit margin. On the other hand, any depreciation of RMB against US$ will adversely affect our ability to pay for foreign currency
obligations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">RESULTS
OF OPERATIONS</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth a summary of our consolidated results of operations for the&#160;periods indicated, both in absolute amount
and as a percentage of our revenues for the periods presented. This information should be read together with our consolidated financial
statements and related notes included elsewhere in this annual report. The operating results in any&#160;period are not necessarily indicative
of the results that may be expected for any future period.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(4,620,113</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(14.2</td><td style="text-align: left">)%</td><td></td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(3,911,818</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(5,694,785</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(6,657,251</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(20.5</td><td style="text-align: left">)%</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 80; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->72<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">KEY
COMPONENTS OF RESULTS OF OPERATIONS</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
revenues</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
generate revenue primarily from the (i) sale of cloud platform products, (ii)&#160;technology development service, (iii) sale of software
products, (iv) M&amp;S service, and (v)&#160;sale of hardware products. For the&#160;years ended December&#160;31, 2020, 2021 and, 2022,
our total revenue was US$13.86&#160;million, US$32.52&#160;million and US$48.18&#160;million, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth the components of our net revenues by amounts and percentages of our total net revenues for the periods presented:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cost
of revenues</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
cost of revenues primarily consists of the following components: (i)&#160;staff costs (salaries and employee benefits), (ii)&#160;cost
of materials, which primarily includes software and hardware purchased, (iii)&#160;cloud hosting service fees, and (iv)&#160;overhead
costs relating to consumables and office expenses used for production.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth the components of our cost of revenues by amounts and percentages of net revenues for the periods presented:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; ">
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    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">17,379,144</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">36.1</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">%</td></tr>
  </table><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Selling
expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Selling
expenses primarily consist of: (i)&#160;salaries and benefits for our sales and marketing personnel; (ii)&#160;advertising costs and
market promotion expenses; (iii)&#160;traveling expenses incurred by our sales and marketing personnel for business purposes; and (iv)&#160;others,
which primarily include entertainment expenses related to selling and marketing functions, office expenses and consulting expenses.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">General
and administrative expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">General
and administrative expenses primarily consist of: (i)&#160;salaries and benefits for our administrative personnel; (ii)&#160;rental expenses
relating to our leased properties used for administrative purposes and utilities which is primarily represented by water, electricity
charges for administrative purposes; (iii)&#160;professional fees, which primarily represented fees we paid for legal services, audit
services and consultation in the ordinary course of our business; (v)&#160;bad debt expenses, which primarily represented the bad debt
loss of accounts receivable and prepaid expenses and other current assets, and (vi)&#160;others, which primarily include depreciation
and amortization expenses, office expenses for office supplies and consumables, and other miscellaneous expenses for administrative purposes.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Research
and development expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Research
and development expenses primarily include: (i)&#160;salaries and benefits for research and development personnel; (ii)&#160;professional
services fees, which primarily represent fees paid for professional services in research and development activities; (iii)&#160;patent
registration related expenses and patent litigation expenses; (iv)&#160;amortization, which represents amortization expenses for our
intangible assets; and (v)&#160;others, which primarily include rental expenses, consumables, traveling expenses, utilities and miscellaneous
expenses.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
Tax Expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cayman
Islands</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Act and accordingly
is not subject to income tax from business carried in Cayman Islands.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hong&#160;Kong</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
accordance with the relevant tax laws and regulations of Hong&#160;Kong, a company registered in Hong&#160;Kong is subject to income
taxes within Hong&#160;Kong at the applicable tax rate on taxable income. In March&#160;2018, the Hong&#160;Kong Government introduced
a two-tiered profit tax rate regime by enacting the Inland Revenue (Amendment) (No.3) Ordinance 2018 (the &#8220;Ordinance&#8221;). Under
the two-tiered profits tax rate regime, the first HK dollar 2&#160;million of assessable profits of qualifying corporations is taxed
at 8.25% and the remaining assessable profits at 16.5%. The Ordinance is effective from the year of assessment&#160;2018-2019. According
to the policy, if no election has been made, the whole of the taxpaying entity&#8217;s assessable profits will be chargeable to Profits
Tax at the rate of 16.5% or 15%, as applicable. Because the preferential tax treatment is not elected by us, our subsidiaries registered
in Hong&#160;Kong are subject to income tax at a rate of 16.5%. Payments of dividends by the subsidiary to us are not subject to withholding
tax in Hong&#160;Kong.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRC</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Generally,
our PRC subsidiaries are subject to enterprise income tax on their taxable income in China at a statutory rate of 25%, except for our
certain PRC subsidiaries that are qualified as high and new technology enterprises under the PRC Enterprise Income Tax Law and are eligible
for a preferential enterprise income tax rate of 15%. The enterprise income tax is calculated based on the entity&#8217;s global income
as determined under PRC tax laws and accounting standards.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
accordance with the implementation rules of EIT Laws, a qualified &#8220;High and New Technology Enterprise&#8221; (&#8220;HNTE&#8221;)
is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three&#160;years. An entity could re-apply
for the HNTE certificate when the prior certificate expires. Our subsidiary, Shanghai Xiao-i, is eligible to enjoy a preferential tax
rate of 15% from 2020 to 2022 to the extent it has taxable income under the EIT Law.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
subsidiary, Guizhou Xiao-i was qualified as an eligible software enterprise before the income tax year-end final settlement in 2017.
As a result of this qualification, it is entitled to a tax holiday of a full exemption for the&#160;years ended December&#160;31, 2017
and 2018, in which its taxable income is greater than zero, followed by a three-year 50% exemption. In 2022, the tax holiday has expired
and Guizhou Xiao-i applied qualification of HNTE, which allows Guizhou Xiao-i to enjoy a preferential tax rate of 15% from 2022 to 2024.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Comparison
of&#160;Years Ended December&#160;31, 2021 and 2022</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
revenues</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sale
of cloud platform products</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
cloud platform products consist of standardized software products uploaded to our cloud platform. The revenue from sales of cloud platform
products increased by 363.7% from US$5.55&#160;million for the year ended December&#160;31, 2021 to US$25.74&#160;million for the year
ended December&#160;31, 2022 primarily due to the promotion of our AI super automation platform in 2022. The intelligent Robotic Process
Automation (&#8220;RPA&#8221;) platform primarily includes intelligent process editor which supports customers in creating automation
processes according to different business scenario, and intelligent unmanned robots which supports the configuration and execution of
various task automatically. We entered into sales contracts at significant amounts with three customers in 2022, resulting in a significant
increase in revenue of sale of cloud platform products.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Technology
development service</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
technology development service provided to customers comprises customized technology development services for specific needs. The revenue
from technology development service increased by 77.6% from US$9.25&#160;million for the year ended December&#160;31, 2021 to US$16.42&#160;million
for the year ended December&#160;31, 2022. Our revenue generated from technology development services was primarily due from three major
contracts, including:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Operation
and Technical Service Agreement of Intelligent Plan Review Platform Agreement (the &#8220;Support Agreement&#8221;), pursuant to which
we agreed to provide technical support and co-operation of the drawing review platform (&#8220;Drawing Platform&#8221;) for a term of
three years. As the technical services for Drawing Platform were for specific software upgrades and customer can only receive the benefits
when they accept upgrade specifications, the revenue was recognized at point-in-time. The revenue recognized of technical services for
the Drawing Platform was US$3.24&#160;million for the year ended December 31, 2022.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intelligent
Platform Technical Service Agreement related to intelligent education products, pursuant to which we provided customized technology development
services to develop and deliver the education products under the customer&#8217;s specifications, including but not limited to intelligent
teaching platform, course learning platform and classroom management platform. The revenue recognized was US$3.60&#160;million for the
year ended December 31, 2022.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Intelligent
Virtual Simulation Platform Technical Service Agreement, also related to intelligent education products, pursuant to which we provided
customized technology development services to develop and deliver the video, 3D and VR experimental teaching platforms for primarily,
middle and high school. The revenue recognized was US$2.06&#160;million for the year ended December 31, 2022.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sale
of software products</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
software products sold to customers comprising customized software products for specific needs. The revenue from sales of software products
decreased by 76.2% from US$14.88&#160;million for the year ended December&#160;31, 2021 to US$3.55&#160;million for the year ended December
31, 2022. The significant amount in 2021 was primarily due to the major contract of smart graphic review software products sales signed
in 2021 amounted to US$11.88&#160;million and the revenue was fully recognized in 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->75<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">M&amp;S
service</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
provide M&amp;S services for software products contracts which consist of future software updates, upgrades, and enhancements as well
as technical product support services, and the provision of updates and upgrades on a when-and-if-available basis. The revenue from sales
of M&amp;S service decreased by 12.4% from US$2.77&#160;million for the year ended December&#160;31, 2021 to US$2.43&#160;million for
the year ended December&#160;31, 2022, primarily due to the decrease of sale of software products, and the accompanying M&amp;S services
also decreased.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sale
of hardware products</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
hardware products sold to customers comprising the hardware designed for specific needs. The revenue from sales of hardware products
decreased by 38.3% from US$0.08&#160;million for the year ended December&#160;31, 2021 to US$0.05&#160;million for the year ended December
31, 2022.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cost
of revenues</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
cost of revenues increased by 59.7% from US$10.89&#160;million for the year ended December&#160;31, 2021 to US$17.38&#160;million for
the year ended December&#160;31, 2022, which was primarily attributed to increase cost of materials, and partially offset by the decreased
cloud hosting services fees:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            cost of materials increased by 509.4% from US$1.35 million for the year ended December 31,
                                            2021 to the US$8.25 million for the year ended December 31,2022. The increase of cost of
                                            materials in 2022 was primarily for the completion of technology development for Intelligent
                                            Platform Technical Service Agreement and Intelligent Virtual Simulation Platform Technical
                                            Service Agreement, and software products upgrade demand from customers.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Staff
                                            costs increased by 33.1% from US$5.64&#160;million for the year ended December&#160;31, 2021
                                            to US$7.50&#160;million for the year ended December&#160;31, 2022, primarily due to the fact
                                            that we provided more labor investment to support increased sale of cloud platform products
                                            and the continuing services provided to maintain the operation of Drawing Platform.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cloud
                                            hosting services fees decreased by 64.2% from US$3.67 million for the year ended December
                                            31, 2021 to the US$1.31 million for the year ended December 31,2022, primarily due to our
                                            improved utilization of the cloud hosting services to reduce idle cost.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gross
Profit and Gross Profit Margin</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have different types of products and services that have different profit margins. For the&#160;years ended December&#160;31, 2021 and
2022, our gross profit was US$21.64&#160;million and US$30.81&#160;million, respectively, and our gross profit margins were 66.5% and
63.9%, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gross
profit for sales increased by 42.4%, but the gross margins decreased slightly, primarily impacted by the technology development services
to develop Intelligent Platform related to education products, and Intelligent Virtual Simulation Platform, both with high cost of materials
and lower margins.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Selling
expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
selling expenses decreased by 15.3% from US$4.62&#160;million for the year ended December&#160;31, 2021 to US$3.91&#160;million for the
year ended December&#160;31, 2022, which was primarily attributable to (i) a decreased travel expenses and entertainment expenses of
US$0.26 million due to the lock-down of Shanghai from March to May in 2022, and (ii) decreased staff salary of US$0.30 million in 2022.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">General
and administrative expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
general and administrative expenses decreased by 9.4% from US$6.66&#160;million for the year ended December&#160;31, 2021 to US$6.03&#160;million
for the year ended December&#160;31, 2022, which was primarily attributable to (i)&#160;a decrease in professional service expenses of
US$0.62 million as we recorded Initial Public Offering related professional service fees into deferred offering costs, and (ii)&#160;decreased
rental and utilities expenses of US$0.42&#160;million, primarily due to one of Hong Kong offices termination of the lease, partially offset
by (i)&#160;increased bad debt expenses related to receivables of US$0.52&#160;million.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Research
and development expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
research and development expenses increased by US$18.64 million from US$5.36&#160;million for the year ended December&#160;31, 2021 to
US$24.00&#160;million for the year ended December&#160;31, 2022, which was primarily attributable to the increase of professional service
fee of US$18.8&#160;million for industrial internet platform research and other cloud platform products.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
income/(loss), net</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
income primarily consists of: (i)&#160;government grants, which primarily include government support for project development; (ii)&#160;interest
expense of borrowings from banks and third parties; (iii)&#160;investment gain/(loss), which represent gain or losses from long-term
equity investment; and (iv)&#160;non-operating expenses, which primarily includes the loss of disposal of non-current assets.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
other loss was US$2.21 million for the year ended December&#160;31, 2022, compared with the other loss amounted to US$1.08&#160;million
for the year ended December&#160;31, 2021. The fluctuation was mainly due to the decrease of the government grants and the increase of
interest expenses. We recognized government subsidies for scientific research in the amount of US$0.85&#160;million and US$0.22&#160;million
for the&#160;years ended December&#160;31, 2021 and 2022, respectively. In addition, we recognized interest expenses of US$1.87&#160;million
and US$2.44 million for the&#160;years ended December&#160;31, 2021 and 2022, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
tax benefits/(expenses)</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
tax expenses were US$0.66&#160;million in 2022, compared with income tax expenses of US$0.55&#160;million in 2021. The fluctuation was
primarily due to the increase valuation allowance of deferred tax assets we recognized in 2022, We will invest significantly in the research
and development to improve our products and service, and as we are entitled to an additional deduction of 100% of research and development
expenses from January 1, 2023, we expect it more likely than not that all of the deferred tax assets will not be realized as the VIE
is not expect to generate enough taxable income to utilize all of the deferred tax assets in the future, and thus, we recognized an additional
$1.72 million of valuation allowance of the deferred tax assets of the VIE.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
income</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of the foregoing, we had net loss of US$6.01&#160;million in 2022, compared with a net income of US$3.37&#160;million in 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Comparison
of&#160;Years Ended December&#160;31, 2020 and 2021</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
revenues</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sale
of software products</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
software products sold to customers comprising customized software products for specific needs. The revenue from sales of software products
increased by 191.8% from US$5.10&#160;million for the year ended December&#160;31, 2020 to US$14.88&#160;million for the year ended December&#160;31,
2021, primarily due to two major contracts signed in 2021, providing smart graphic review software products amounted to US$11.88&#160;million
and technical services amounted to US$1.51&#160;million, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
entered into an Intelligent Drawing Review Platform License Agreement (the &#8220;License Agreement&#8221;). Pursuant to the terms of
the License Agreement, we agreed to provide China Construction with the Drawing Platform. The Drawing Platform was delivered, installed
and commissioned in accordance with the License Agreement in 2021. The revenue recognized for license of the Drawing Platform was US$11.88&#160;million
in 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Technology
development service</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
technology development service provided to customers comprises customized technology development services for specific needs. The revenue
from technology development service increased by 44.4% from US$6.40 &#160;million for the year ended December&#160;31, 2020 to US$9.25&#160;million
for the year ended December&#160;31, 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
connection with the License Agreement, we also entered into the Support Agreement with the customer, which was described under &#8220;Net
revenues of Comparison of Years Ended December 31, 2021 and 2022&#8221; immediately above. Pursuant to the terms of the Support Agreement,
we have agreed to provide technical support and co-operation of the Drawing Platform for a term of three&#160;years. During the term
of the Support Agreement, the customer, with the consent of us, may license the use of the Drawing Platform to third parties. In such
event, we shall be entitled to receive 30% of the license fee paid to the customer by any third party. The revenue recognized of technical
services for the Drawing Platform was US$1.51&#160;million in 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sale
of cloud platform products</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
cloud platform products, which is a newly established revenue stream in 2021, consist of standardized software products uploaded to our
cloud platform. The revenue from sales of cloud platform products increased from nil for the year ended December&#160;31, 2020 to US$5.55&#160;million
for the year ended December&#160;31, 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">M&amp;S
service</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
provide M&amp;S services for software products contracts which consist of future software updates, upgrades, and enhancements as well
as technical product support services, and the provision of updates and upgrades on a when-and-if-available basis. The revenue from sales
of M&amp;S service increased by 43.1% from US$1.94&#160;million for the year ended December&#160;31, 2020 to US$2.78&#160;million for
the year ended December&#160;31, 2021, primarily due to more residence service provided to customers in 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cost
of revenues</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
cost of revenues increased by 50.6% from US$7.23&#160;million for the year ended December&#160;31, 2020 to US$10.89&#160;million for
the year ended December&#160;31, 2021, which was primarily attributable to the increased cost of US$3.67&#160;million in cloud hosting
services fees for the new revenue stream. Staff costs increased by 4.3% from US$5.41&#160;million for the year ended December&#160;31,
2020 to US$5.64&#160;million for the year ended December&#160;31, 2021, primarily due to increased salaries of technical personnel. Cost
of materials decreased by 9.7% from US$1.50&#160;million for the year ended December&#160;31, 2020 to US$1.35&#160;million for the year
ended December&#160;31, 2021, primarily due to decreased demand of hardware products.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gross
Profit and Gross Profit Margin</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gross
profit represents our revenue less cost of sales. Our gross profit margin represents our gross profit as a percentage of our revenue.
We have different types of products and services that have different profit margins. For the&#160;years ended December&#160;31, 2020
and 2021, our gross profit was US$6.63&#160;million and US$21.64&#160;million, respectively, and our gross profit margins were 47.8%
and 66.5%, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gross
profit for sales increased by 226.4%, primarily due to the major contract of smart graphic review software products sales incurred less
cost of revenues. For this major contract, our technology accumulation has reached a milestone and the software products required minimal
cost to update or customize, resulting in high profit margin.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Selling
expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
selling expenses increased by 1.2% from US$4.57&#160;million for the year ended December&#160;31, 2020 to US$4.62&#160;million for the
year ended December&#160;31, 2021, which remained relatively stable. We have accumulated customer resources for&#160;years and signed
several major contracts in 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">General
and administrative expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
general and administrative expenses increased by 16.9% from US$5.69&#160;million for the year ended December&#160;31, 2020 to US$6.66&#160;million
for the year ended December&#160;31, 2021, which was primarily attributable to (i)&#160;an increase in bad debt expenses related to receivables
from third parties of US$1.38&#160;million, which lent to former business partners of us prior to fiscal year of 2019, and (ii)&#160;increased
professional services fees of US$0.53&#160;million, partially offset by (i)&#160;decreased bad debt expenses related to customer receivables
of US$0.49&#160;million due to amount received from customers, (ii)&#160;decreased rental expenses of US$0.36&#160;million, and (iii)&#160;decreased
staff salaries and benefits of US$0.16&#160;million in 2021.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Research
and development expenses</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
research and development expenses increased by 26.6% from US$4.24&#160;million for the year ended December&#160;31, 2020 to US$5.36&#160;million
for the year ended December&#160;31, 2021, which was primarily attributable to the increase of salaries for research staff of US$0.69&#160;million
and professional service fee of US$0.31&#160;million.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
income/(loss), net</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
income primarily consists of: (i)&#160;government grants, which primarily include government support for project development; (ii)&#160;interest
expense of borrowings from banks and third parties; (iii)&#160;investment gain/(loss), which represent gain or losses from long-term
equity investment; and (iv)&#160;non-operating expenses, which primarily includes the loss of disposal of non-current assets.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
other income was US$0.58&#160;million for the year ended December&#160;31, 2020, compared with the other loss was US$1.08&#160;million
for the year ended December&#160;31, 2021. The fluctuation was mainly due to the decrease of the government grants and the increase of
interest expenses. We recognized government subsidies for scientific research in the amount of US$1.70&#160;million and US$0.85&#160;million
for the&#160;years ended December&#160;31, 2020 and 2021, respectively. In addition, we recognized interest expenses of US$1.03&#160;million
and US$1.87&#160;million for the&#160;years ended December&#160;31, 2020 and 2021, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
tax benefits/(expenses)</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income
tax expense was US$0.55&#160;million in 2021, compared with income tax benefit was US$0.24&#160;million in 2020. The fluctuation was
primarily due to the increase in income.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net
income</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a result of the foregoing, we earned net income of US$3.37&#160;million in 2021, compared with a net loss of US$7.06&#160;million in
2020.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_020"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.
<b><i>Liquidity and Capital Resources.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December&#160;31, 2021 and 2022, we had US$1.31&#160;million and US$1.03&#160;million in cash and cash equivalents, respectively.
Our cash and cash equivalents primarily consist of cash on hand. As of December 31, 2022, the VIE had total expected cash payment of
US$4.34 million of convertible loans, including principal and interests. The VIE intends to settle the remaining balance of the convertible
loans by cash through cash flow from operations, bank borrowings and other financing sources including financial support from related
parties. From January to April, 2023, Fumei Shi, Sunny Concord International Ltd., Senbiao Hu, Guoqiang Chen and Jun Xu entered into
a series of extension agreements with the VIE. In the latest extension agreement in April 2023, Guoqiang Chen, Sunny Concord International
Ltd. and Jun Xu extended the maturity date of convertible loans to May 31, 2023 with annual interest rate of 12%, 15% and 15%, respectively.
Pursuant to the extension agreements, the loans would be settled in cash without conversion options.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March and April, 2023, the VIE has repaid principal and interest of the convertible loans to Senbiao Hu and Fumei Shi, in amount of US$0.46
million and US$1.77 million, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
March, 2023, we completed our initial public offering and was listed on the Nasdaq Global Market under the symbol
&#8220;AIXI&#8221;. 5,700,000 American depositary shares (each, an &#8220;ADS&#8221;, collectively, &#8220;ADSs&#8221;), each
represents one-third of an ordinary shares, were issued at a price of $6.8 per share for net proceeds of approximately $35.44
million, after deducting underwriting discounts, commissions and other offering expenses of $3.32 million. We intend to use the net
proceeds from the offering for research and development, investment in technology infrastructure, marketing and branding, and other
capital expenditure, and other general corporate purpose.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiao-I
is a holding company with no operations of its own. Xiao-I conducts its operations in China primarily through the PRC operating entities
in China. As a result, although other means are available for us to obtain financing at the holding company level, Xiao-I&#8217;s ability
to pay dividends and other distributions to its shareholders and to service any debt it may incur may depend upon dividends and other
distributions paid by Xiao-I&#8217;s PRC subsidiaries, which relies on dividends and other distributions paid by the PRC operating entities
pursuant to the VIE Agreements. If any of these entities incurs debt on its own in the future, the instruments governing such debt may
restrict its ability to pay dividends and other distributions to Xiao-I.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, dividends and distributions from WFOE and the VIE are subject to regulations and restrictions on dividends and payment to parties
outside of China. Applicable PRC law permits payment of dividends to Xiao-I by WFOE only out of net income, if any, determined in accordance
with PRC accounting standards and regulations. A PRC company is not permitted to distribute any profits until any losses from prior fiscal&#160;years
have been offset by general reserve fund and profits (if general reserve fund is not enough). Profits retained from prior fiscal&#160;years
may be distributed together with distributable profits from the current fiscal year. In addition, registered share capital and capital
reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. In
contrast, there is presently no foreign exchange control or restrictions on capital flows into and out of Hong&#160;Kong. Hence, Xiao-I&#8217;s
Hong&#160;Kong subsidiary is able to transfer cash without any limitation to the Cayman Islands under normal circumstances.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Further,
the PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the
PRC.&#160;Xiao-I&#8217;s WFOE generates primarily all of its revenue in Renminbi, which is not freely convertible into other currencies.
As a result, any restriction on currency exchange may limit the ability of Xiao-I&#8217;s WFOE to use its Renminbi revenues to pay dividends
to Xiao-I. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process
may be put forward by State Administration of Foreign Exchange (the &#8220;SAFE&#8221;) for cross-border transactions falling under both
the current account and the capital account. Any limitation on the ability of Xiao-I&#8217;s WFOE to pay dividends or make other kinds
of payments to Xiao-I could materially and adversely limit its ability to grow, make investments or acquisitions that could be beneficial
to our business, pay dividends, or otherwise fund and conduct our business.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additionally,
the transfer of funds among the PRC operating entities are subject to the Provisions on Private Lending Cases, which was implemented
on January&#160;1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations.
The Provisions on Private Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated
PRC operating entity&#8217;s operations. Xiao-I or the PRC operating entities have not been notified of any other restriction which could
limit the PRC operating entities&#8217; ability to transfer cash among each other. In the future, cash proceeds from overseas financing
activities, including the IPO proceeds, may be transferred by Xiao-I to AI Plus, and then transferred to Xiao-i Technology, and then
transferred to WFOE via capital contribution or shareholder loans, as the case may be. Cash proceeds may flow to Shanghai Xiao-i from
WFOE pursuant to certain contractual arrangements between WFOE and Shanghai Xiao-i as permitted by the applicable PRC regulations. As
a result of these PRC laws and regulations, the PRC operating entities are restricted in their ability to transfer a portion of their
net assets to the Company.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of December&#160;31, 2021 and 2022, US$1,254,528 and US$908,614 of cash and cash equivalents were denominated in RMB, US$15,170 and US$11,224
of cash and cash equivalents were denominated in US dollars, US$42,148 and US$106,407 of cash and cash equivalents were denominated in
Hong&#160;Kong dollars, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cash
Flows</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth a summary of our cash flows for the periods indicated:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the Years Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: justify; text-indent: -9pt; padding-left: 9pt">Net cash used in operating activities</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(3,463,094</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(11,887,122</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(10,923,346</td><td style="width: 1%; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net cash (used in)/provided by investing activities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(25,825</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(2,494,191</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Operating
Activities</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our net cash used in operating activities was
US$10.92&#160;million in 2022, compared to net loss of US$6.01&#160;million. The principal changes accounting for the difference between
our net income and our net cash used in operating activities in 2022 were an adjustment of $3.71&#160;million non-cash items, an increase
in accounts receivable of US$15.01&#160;million, and an increase in inventories of US$2.13&#160;million, offset by the increase in accounts
payable of US$4.12&#160;million, and an increase in accrued expenses and other current liabilities of US$5.16&#160;million. The increase
in accounts receivable was mainly due to the growth of net revenues. The increase in accrued expenses and other current liabilities was
primarily due to the increase of payroll payable and interest payable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
net cash used in operating activities was US$11.89&#160;million in 2021, compared to net income of US$3.37&#160;million. The principal
changes accounting for the difference between our net income and our net cash used in operating activities in 2021 were an adjustment
of $3.55&#160;million non-cash items, an increase in accounts receivable of US$23.39&#160;million, a decrease in lease payment liabilities
of US$1.07&#160;million, and partially offset by the increase in accounts payable of US$3.39&#160;million, an increase in accrued expenses
and other current liabilities of US$2.69&#160;million and an increase in deferred revenue of US$1.04&#160;million. The increase in accounts
receivable and deferred revenue was mainly due to the growth of our software products sales. The decrease in lease payment liabilities
was due to the termination of several rental properties. The increase in accrued expenses and other current liabilities was primarily
due to the increase of loans from third parties and the related interest payable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
net cash used in operating activities was US$3.46&#160;million in 2020, compared to net loss of US$7.06&#160;million. The principal changes
accounting for the difference between our net income and our net cash used in operating activities in 2020 were an adjustment of $2.25&#160;million
non-cash items, an increase in non-current accrued liabilities of US$5.04&#160;million, an increase in accrued expenses and other current
liabilities of US$1.02&#160;million, and a decrease of prepaid expenses and other current assets of US$0.96&#160;million, partially offset
by an increase in prepaid expenses and other non-current assets of US$3.79&#160;million and a decrease in lease payment liabilities of
US$1.31&#160;million. The net changes of prepaid expenses and other assets were primarily due to the increase of prepaid lawsuit case
acceptance fee. The net changes of accrued expenses and other liabilities were primarily due to the increase of litigation related payable,
which mainly consisted of the litigation fee of the lawsuit with Apple paid by the third parties on behalf of us.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Investing
Activities</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
net cash used in investing activities amounted to US$2.86&#160;million in 2022, primarily due to purchase of equity method investment
of US$2.75&#160;million.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
net cash provided by investing activities amounted to US$0.08&#160;million in 2021, mainly due to proceeds of US$0.10 from disposal of
property and equipment, partially offset by purchase of property and equipment of US$0.02&#160;million.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
net cash used in investing activities amounted to US$0.03&#160;million in 2020, due mainly to purchase of property and equipment of US$0.02&#160;million
and purchase of intangible assets of US$0.02&#160;million, partially offset by proceeds of US$0.01&#160;million from disposal of property
and equipment.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 89; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->81<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financing
Activities</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our net cash provided by financing activities
amounted to US$13.51&#160;million in 2022, mainly due to proceeds of US$21.25&#160;million from short-term borrowings from banks, proceeds
of US$2.32&#160;million from related parties and proceeds of US$7.95&#160;million from third-parties borrowings, partially offset by
repayments of short-term borrowings from banks of US$10.63&#160;million, repayments of borrowings from related parties of US$2.31&#160;million,
repayments of borrowings from third-parties of US$2.07&#160;million, repayments of convertible loans of US$1.63 million and deferred
offering costs of US$1.36&#160;million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
net cash provided by financing activities amounted to US$12.19&#160;million in 2021, mainly due to proceeds of US$11.39&#160;million
from short-term borrowings, proceeds of US$16.76&#160;million from related parties and proceeds of US$15.12&#160;million from third-parties
borrowings, partially offset by repayments of short-term borrowings of US$16.47&#160;million, repayments of borrowings from related parties
of US$6.89&#160;million and repayments of borrowings from third-parties of US$7.72&#160;million.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
net cash provided by financing activities amounted to US$1.79&#160;million in 2020, mainly due to proceeds of US$10.39&#160;million from
short-term borrowings and US$2.91&#160;million and borrowings from third-parties, partially offset by repayments of short-term borrowings
of US$11.01&#160;million and repayments of borrowings from third-parties of US$0.51&#160;million.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Disclosure
of Contractual Obligations </span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth our contractual obligations as of December 31, 2022:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Payment Due by Period</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Within&#160;one&#160;year</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">1&#160;&#8211;&#160;3&#160;years</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Total</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left">Operating lease payment</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">526,810</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">261,661</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">788,471</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Short-term bank borrowings</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">18,784,459</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">18,784,459</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Convertible loans</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">3,754,269</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">3,754,269</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Loans from related parties and third parties</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">7,049,601</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">11,885,729</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">18,935,330</td><td style="text-align: left">&#160;</td></tr>
  </table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Operating
lease obligations consist of leases in relation to certain offices and buildings, plants and other property for our sales and after-sales
network. Borrowings are short-term bank borrowings due in one year, and loans from related parties and third parties are for the purpose
of ordinary business operation.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Convertible
loans could be extended with both parties&#8217; consensus. In March and April, 2023, the VIE has repaid principal and interest of the
convertible loans to Senbiao Hu and Fumei Shi, in amount of US$0.46 and US$1.77 million, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
than those shown above, we did not have any other significant capital commitments and long-term obligations as of December&#160;31, 2022.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Off-Balance
Sheet Arrangements</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From February to October 2022, we pledged eleven
patents to obtain US$ 28.6 million credit limits from banks, with one to five years term. In October and November 2022, we pledged five
patents to a third party to obtain principal accounted for US$2,899,728 (RMB20 million) loans, and the interests were calculated under
effective interest method. These patents were not recorded in our consolidated balance sheets as they do not meet all the capitalization
criteria.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
than those shown above, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholder&#8217;s
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 product development services with us.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 90; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->82<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_020a"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>C.
<span><i>Research and Development, Patents and Licenses, etc.</i></span></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">See &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8221;
and &#8220;Item 5. Operating and Financial Review and Prospects&#8212;A. Operating Results.&#8221;&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_021"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt">D<span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">.
<b><i>Trend Information</i></b></span><b><i>.</i></b></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
than as disclosed elsewhere in this report, we are not aware of any trends, uncertainties, demands, commitments or events for the year
ended December&#160;31, 2020, 2021 and 2022 that are reasonably likely to have a material and adverse effect on our net revenues, income,
profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative
of future results of operations or financial conditions.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_022"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">E.
<b><i>Critical Accounting Estimates.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
prepare our consolidated financial statements in accordance with U.S.&#160;GAAP, which requires our management to make estimates that
affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as
well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences
between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates
on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations
for the future based on available information. We evaluate these estimates on an ongoing basis.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
expectations regarding the future are based on available information and assumptions that we believe to be reasonable, which together
form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an
integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies
require a higher degree of judgment than others in their application.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
consider an accounting estimate to be critical if: (i)&#160;the accounting estimate requires us to make assumptions about matters that
were highly uncertain at the time the accounting estimate was made, and (ii)&#160;changes in the estimate that are reasonably likely
to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material
impact on our financial condition or results of operations. When reading our consolidated financial statements, you should consider our
selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity
of reported results to changes in conditions and assumptions.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Out
of our significant accounting policies, which are described in Note&#160;2 &#8212;&#160;Summary of Significant Accounting Policies of
our consolidated financial statements included elsewhere in this Form&#160;20-F, certain accounting policies are deemed &#8220;critical,&#8221;
as they require management&#8217;s highest degree of judgment, estimates and assumptions.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">While
management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual
results may differ significantly from those estimates under different assumptions and conditions. We believe that the following critical
accounting estimates involve the most significant judgments used in the preparation of our financial statements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)
Allowance for doubtful accounts</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accounts
receivable, net are stated at the original amount less an allowance for doubtful accounts. Accounts receivable are recognized in the
period when we have provided services to its customers and when its right to consideration is unconditional. We review the accounts receivable
on a periodic basis and make specific allowances when there is doubt as to the collectability of individual balances. We consider many
factors in assessing the collectability of its receivables, such as the age of the amounts due, the customer&#8217;s payment history,
credit-worthiness and other specific circumstances related to the accounts. An allowance for doubtful accounts is recorded in the period
in which a loss is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted.
We made a provision of bad debt allowance amounted to US$758,019, US$270,649 and US$2,149,176 as of December&#160;31, 2020, 2021 and
2022, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)
Valuation of deferred tax assets</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the&#160;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. Current income taxes are provided for in accordance with the laws of the relevant taxing
authorities.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December&#160;31 2021 and 2022, we had net operating loss carryforwards
of approximately $36,288,770 and $28,198,108, respectively. As of December&#160;31, 2021 and 2022, deferred tax assets from the net operating
loss carryforwards amounted to $6,239,757 and $4,475,379, respectively. Due to our history of recurrent losses, we did not expect to generate
enough profit to utilize the deferred tax assets in the future. We have recognized an increase to the valuation allowance of $570,253,
$810,159 and $1,723,347 for the&#160;years ended December&#160;31, 2020, 2021 and 2022, respectively. While we consider the facts above,
our projections of future income qualified tax-planning strategies may be changed due to the macroeconomic conditions and our business
development. The deferred tax assets (&#8220;DTAs&#8221;) could be utilized in the future&#160;years if we make profits in the future,
the valuation allowance shall be reversed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
provisions of ASC&#160;740-10-25, &#8220;Accounting for Uncertainty in Income Taxes,&#8221; prescribe a more-likely-than-not threshold
for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This
interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred
income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The
PRC operating entities in PRC are subject to examination by the relevant tax authorities. According to the PRC Tax Administration and
Collection Law, the statute of limitations is three&#160;years if the underpayment of taxes is due to computational errors made by the
taxpayer or the withholding agent. The statute of limitations is extended to five&#160;years under special circumstances, where the underpayment
of taxes is more than RMB 100,000 ($14,930). In the case of transfer pricing issues, the statute of limitation is ten&#160;years. There
is no statute of limitation in the case of tax evasion. Penalties and interest incurred related to underpayment of income tax are classified
as income tax expense in the period incurred.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
did not accrue any liability, interest or penalties related to uncertain tax positions in its provision for income taxes line of its
consolidated statements of operations for the&#160;years ended December&#160;31, 2020, 2021 and 2022, respectively. We do not expect
that its assessment regarding unrecognized tax positions will materially change over the next 12&#160;months.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(c)   &#160;
transaction price allocation between software income and maintenance service income</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
provide M&amp;S service along with the sale of software products and service for some contracts. As M&amp;S service constitute a single
performance obligation, we use 10% of total transaction price to allocate to the M&amp;S service for contracts with no specified price
term for M&amp;S service renewal, due to the fact that contracts with specified renewal price were generally set to be approximately
10% of the total contract amount. We recognized $1,937,887, $2,772,795 and $2,429,526 revenue of the 10% allocation to M&amp;S service
for the&#160;years ended December&#160;31, 2020, 2021 and 2022, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Recent
Accounting Pronouncements</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
description of recent relevant accounting pronouncements is included in Note&#160;2 &#8220;Summary of Principal Accounting Policies&#8221;
of our Consolidated Financial Statements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_023"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
6.  Directors, Senior Management and Employees.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_024"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
<b><i>Directors and Senior Management.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth information regarding our directors and executive officers as of the date of this annual report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="width: 34%; border-bottom: black 1.5pt solid"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Directors and Executive Officers</b></span></td>
    <td style="white-space: nowrap; width: 2%">&#160;</td>
    <td style="width: 7%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Age</b></span></td>
    <td style="white-space: nowrap; width: 2%">&#160;</td>
    <td style="width: 55%; border-bottom: black 1.5pt solid"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Position/Title</b></span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hui Yuan(2)(3)(4)</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">49</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Executive Officer, Director, Chairman of the Board of Directors</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Wei Weng</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">37</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Financial Officer</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiaomei Wu(5)</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">53</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jun Xu (1)(2)(3)(5)</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">48</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Independent Director</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhong Lin (1)(2)(3)(5)</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">53</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Independent Director</span></td></tr>
  <tr style="vertical-align: bottom; ">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">H. David Sherman (1)(3)(5)</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">74</span></td>
    <td style="white-space: nowrap">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Independent Director</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(1)</td><td style="text-align: justify">Audit committee member</td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(2)</td><td style="text-align: justify">Compensation committee member</td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(3)</td><td style="text-align: justify">Nominating and Corporate Governance committee member</td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(4)</td><td style="text-align: justify">Executive Director</td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(5)</td><td style="text-align: justify">Non-Executive Director</td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The current business address for our executive officers and board of
directors is c/o Xiao-I Corporation, 1F, Building 383, No. 1555 of West Jinshajiang Road, Shanghai, China, 201803.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Director
and Executive Officer Biographies</span></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Mr.
Hui Yuan</i> Mr. Hui Yuan serves as the CEO and Chairman of the board of directors of Xiao-I Corporation since March&#160;2018. Mr. Yuan
has been the CEO and Chairman of the board of directors of Shanghai Xiao-i since 2009. Prior to that, Mr. Yuan served as the executive
director of Incesoft from 2001 to 2012. Recognized as a pioneer and expert in the field of artificial intelligence, Mr. Yuan&#8217;s
has been invited to share his thought leadership on numerous world stages, including the World Economic Forum/Davos Forum, Boao Forum
for Asia, and many others. Mr. Yuan continues to drive the success of Shanghai Xiao-i through research and development of natural language
processing cognitive intelligence-related technologies and the commercialization of the resulting technologies. In addition to his leadership
at Shanghai Xiao-i, Mr. Yuan serves as the vice chairman of the Artificial Intelligence Industry Innovation Alliance, the Executive Director
of CCCS, the vice chairman of the Shanghai Artificial Intelligence Development Alliance, the vice chairman of the Shanghai Robot Industry
Association, a member of the All-China Youth Federation and the Shanghai IT Youth Talent Association, and a director and member of the
executive committee of Shanghai Jiading District Federation of Industry and Commerce, among others. Mr. Yuan graduated from Jianghan
University with a major in Computer Application in July 1995 and received his EMBA degree from Guanghua School of Management, Peking
University in July 2021.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Ms.
Wei Weng</i> Ms. Weng has served as the Chief Financial Officer of Xiao-I Corporation since July 2019. As the CFO, Ms. Weng makes financial
plans for the company, manages and controls operating costs, and supervises the company&#8217;s financial activities. She has extensive
experience in corporate finance, taxation and auditing. Ms. Weng has been the Chief Financial Officer of Shanghai Xiao-i since 2015.
Prior to joining Shanghai Xiao-i in 2015, she worked in a leading international accounting firm for seven years, and is proficient in
financial accounting, financial regulations and other professional knowledge. She received her bachelor&#8217;s degree in accounting
and management from Lixin Accounting College in Shanghai in 2008.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ms.
Xiaomei Wu Ms. Xiaomei Wu is director of Xiao-I Corporation. Ms. Wu serves as a member of Shanghai Xiao-i&#8217;s supervisory board since
2013, and she has extensive experience in corporate management and corporate fund raising. From March&#160;2017 to September 2020, Ms.
Wu served as the General Manager of Light Control Haiyin Fund in Everbright Holdings Management Service Co., LTD., responsible for the
establishment of the fund, the whole investment process, post-investment management and the establishment and management of the fund
team. From April 2010 to February 2017, Ms. Wu served as the founding partner of Haiyin (Tianjin) Equity Investment Management Co., LTD.,
where she was in charge of capital raising, limited partner management, project investment and post-investment management. From January
2005 to March&#160;2009, Ms. Wu served as the General manager of Beijing Junping Technology Co., LTD., responsible for the overall operation
management of the company. Ms. Wu received her EMBA from Peking University School of Private Economics in May 28, 2009 and her MBA from
Concordia University &#8212; Wisconsin in December 2012.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Mr.
Jun Xu</i> Mr. Jun Xu is an independent director of Xiao-I Corporation. Mr. Xu founded and continues to run Shanghai Liancheng Real Estate
Appraisal and Consulting Co., Ltd., Shanghai Zhonggulian Information Technology Co., Ltd., Shanghai Puruo Information Technology Limited
Partnership, Shanghai Gravel Bank Business Information Consulting Limited Partnership, entities primarily engaged in asset appraisal,
consulting and other related businesses. Mr. Xu has earned titles as a senior member of China&#8217;s Registered Real Estate Appraiser,
China Registered Land Appraiser, China Registered Real Estate Broker, member of American Institute of Appraisers, member of Royal Institute
of Chartered Surveyors, member of Hong Kong Institute of Surveyors, and executive vice president of Shanghai Real Estate Brokerage Association.
Mr. Xu earned his MBA degree from China Europe International Business School in 2017.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Dr.
Zhong Lin</i> Dr. Zhong Lin is an independent director of Xiao-I Corporation. Dr. Lin possesses more than 25 years&#8217; experience
in the areas of international commercial law and is the founder and Managing Partner of Leadvisor Law, a leading China-based business
law firm. Dr. Lin advises clients on a vast array of complex matters spanning private equity, venture capital, foreign direct investment,
cross-border mergers and acquisitions, corporate governance, and antitrust. Prior to founding Leadvisor Law, Dr. Lin was a partner of
the law firm Shanghai Chen &amp; Co. from 2006 to 2021, a partner of the law firm Shanghai Haoliwen from 2003 to 2006, a manager of the
international headquarters of a Big 4 firm&#8217;s legal practice in Paris, and a lecturer of law at Xiamen University. Dr. Lin&#8217;s
experience covers various industrial sectors including, inter alia, life sciences, healthcare, automotive and technology, media and telecom.
Dr. Lin is especially active in the antitrust law field. He served as vice director of the Antimonopoly Law Committee of the All China
Lawyers Association, vice chairman of the Competition Law Research Institution of Shanghai Law Society, director of the International
Investment &amp; Antimonopoly Research Committee of Shanghai Lawyers Association, and has served as independent director on two listed
companies in China. Dr. Lin was admitted to the Chinese bar in 1992. He received an LL.B. from Peking University in 1990, and an LL.M
and PhD from Xiamen University in 1993 and 1996 respectively.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Mr.
H. David Sherman</i> H. David Sherman is an independent director of Xiao-I Corporation. Professor Sherman is a professor at Northeastern
University, specializing in financial and management accounting, and contemporary accounting issues. Professor Sherman&#8217;s research
areas include shareholder reporting and corporate governance; management and financial accounting, financing and managing new ventures;
service business productivity and data envelopment analysis; and mergers and acquisition performance measurement. Professor Sherman teaches
Northeastern University MBA courses in accounting, control, and global financial statement analysis with a focus on international shareholder
reporting. Professor Sherman currently serves as a board member and chair of the audit committee for Nuvve (NYSE: NVVE), Universe Pharmaceutical
Corp (NYSE: UPC), Lakeshore Acquisition I Corp (NYSE: LAAA), Lakeshore Acquisition II Corp (NYSE: LBBB), and Prime Number Acquisition
I Corp. (NYSE: PNACU). He has served on the board and as audit chair of several U.S. and Chinese businesses, including Kingold Corporation
(NYSE: KGJI), China HGS Real Estate Inc. (NASDAQ: HGSH), Agfeed Corporation, Dunxin (DXF &#8212; NYSE/Amer) and China Growth Alliance,
Ltd. He also serves on two nonprofit boards: American Academy of Dramatic Arts, and D-Tree International. Professor Sherman was on the
faculty of the Sloan School of Management at Massachusetts Institute of Technology from 1981 to 1984.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Board
Diversity</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.</span></p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td colspan="9" style="padding-left: 3pt; border: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Board
    Diversity Matrix</b></span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Country
    of Principal Executive Offices</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td colspan="7" style="border-left: Black 1.5pt solid; padding-left: 3pt; border-right: Black 1.5pt solid; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">China</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Foreign
    Private Issuer</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td colspan="7" style="border-left: Black 1.5pt solid; padding-left: 3pt; border-right: Black 1.5pt solid; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yes</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Disclosure
    Prohibited Under Home Country Law</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td colspan="7" style="border-left: Black 1.5pt solid; padding-left: 3pt; border-right: Black 1.5pt solid; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total
    Number of Directors</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td colspan="7" style="border-left: Black 1.5pt solid; padding-left: 3pt; border-right: Black 1.5pt solid; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Part
    I: Gender Identity</b></span></td>
    <td style="padding-left: 3pt; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-left: Black 1.5pt solid; padding-left: 3pt; border-right: Black 1.5pt solid; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Female</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Male</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-Binary</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Did
                                            Not</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Disclose
    Gender</span></p></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Directors</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td style="border-left: Black 1.5pt solid; padding-left: 3pt; border-right: Black 1.5pt solid; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td colspan="9" style="padding-left: 3pt; border-right: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td colspan="9" style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Part
    II: Demographic Background</b></span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Underrepresented
    Individual in Home Country Jurisdiction</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td colspan="7" style="border-left: Black 1.5pt solid; padding-left: 3pt; border-right: Black 1.5pt solid; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">LGBTQ+</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td colspan="7" style="border-left: Black 1.5pt solid; padding-left: 3pt; border-right: Black 1.5pt solid; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td>
    </tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="padding-left: 3pt; border-right: black 1.5pt solid; border-bottom: black 1.5pt solid; border-left: black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Did
    Not Disclose Demographic Background</span></td>
    <td style="padding-left: 3pt; border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></td>
    <td colspan="7" style="border-left: Black 1.5pt solid; padding-left: 3pt; border-right: Black 1.5pt solid; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0</span></td>
    </tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->86<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Family
Relationships</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There
are no family relationships among the directors and executive officers of the Company.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_025"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.
<b><i>Compensation.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Compensation
of Directors and Executive Officers</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the fiscal year ended December 31, 2021, we
paid an aggregate of US$113,376 in cash to our executive officers, and we paid US$42,987 to our non-executive director. For the fiscal
year ended December 31, 2022, we paid an aggregate of US$95,014 in cash to our executive officers, and we paid US$40,190 to our non-executive
director. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive
officers. WFOE and the PRC operating entities are required by law to make contributions equal to certain percentages of each employee&#8217;s
salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident
fund.</p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2023
Share Incentive Plan</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
November 30, 2022, the Company adopted our 2023 share incentive plan (the &#8220;2023 Plan&#8221;), to promote the success and enhance
the value of the Company by linking the personal interests of the Directors, Employees, and Consultants to those of the Company&#8217;s
shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company&#8217;s
shareholders. Under the 2023 Plan, the maximum aggregate number of Ordinary Shares which may be issued pursuant to all awards under such
plan shall initially be 2,600,000, provided, that if the aggregate number of Ordinary Shares reserved and available for future grants
of awards under the 2023 Plan falls below 3.0% of the total Ordinary Shares in issue and outstanding on the last day of the immediately
preceding calendar year (the &#8220;Limit&#8221;), such number shall automatically be increased so that the aggregate number of Ordinary
Shares reserved and available for future grants of awards under the 2023 Plan shall be equal to the Limit on January 1 thereafter, assuming,
for purposes of determining the number of Ordinary Shares outstanding on such date, that all preferred shares, options, warrants, convertible
notes and other equity securities that are convertible into or exercisable or exchangeable for Shares (whether or not by their terms
then currently convertible, exercisable or exchangeable) that were outstanding on such date, are deemed to have been so converted, exercised
or exchanged. As of the date of this annual report, we have not granted any awards under the 2023 Plan.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following paragraphs summarize the principal terms of the 2023 Plan.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Types
of awards</i>. The 2023 Plan permits the awards of options, restricted shares, restricted share units or any other type of awards approved
by our board of directors or compensation committee of the board.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Plan
administration</i>. Our board of directors or the compensation committee shall administer the 2023 Plan. The board or the committee shall
determine, among other things, the participants to receive awards, the type and number of awards to be granted to each participant, and
the terms and conditions of each award grant.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Award
agreement</i>. Awards granted under the 2023 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations
for each award, which may include the term of the award, the provisions applicable in the event of the grantee&#8217;s employment or
service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Eligibility</i>.
We may grant awards to our employees, directors and consultants.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Vesting
schedule</i>. In general, the plan administrator or, in its absence, the compensation committee determines the vesting schedule, which
is specified in the relevant award agreement.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Exercise
of awards</i>. The exercise price per share subject to an option is determined by the plan administrator or, the compensation committee
and set forth in the award agreement, which may be a fixed price or a variable price related to the fair market value of the shares.
The vested portion of option will expire if not exercised prior to the time as the plan administrator or, the compensation committee
determines at the time of its grant.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Transfer
restrictions</i>. Awards may not be transferred in any manner by the eligible participant other than in accordance with the limited exceptions,
such as transfers to our company or a subsidiary of ours, transfers to the immediate family members of the participant by gift, the designation
of a beneficiary to receive benefits if the participant dies, permitted transfers or exercises on behalf of the participant by the participant&#8217;s
duly authorized legal representative if the participant has suffered a disability, or, subject to the prior approval of the plan administrator
or our executive officer or director authorized by the plan administrator, transfers to one or more natural persons who are the participant&#8217;s
family members or entities owned and controlled by the participant and/or the participant&#8217;s family members, including but not limited
to trusts or other entities whose beneficiaries or beneficial owners are the participant and/or the participant&#8217;s family members,
or to such other persons or entities as may be expressly approved by the plan administrator, pursuant to such conditions and procedures
as the plan administrator may establish.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Termination
and amendmen</i>t. Unless terminated earlier, the 2023 Plan has a term of ten years. Our board of directors may terminate, amend or modify
the plan, subject to the limitations of applicable laws. However, no such action may adversely affect in any material way any award previously
granted without prior written consent of the participant.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Limitation
on Liability and Other Indemnification Matters</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cayman Islands law does not limit the extent to which a company&#8217;s
memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision
may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the
consequences of committing a crime. Our amended and restated memorandum and articles of association provide that that we shall indemnify
our directors and officers, and their personal representatives, against all actions, proceedings, costs, charges, expenses, losses, damages
or liabilities incurred or sustained by such persons, other than by reason of such person&#8217;s dishonesty, willful default or fraud,
in or about the conduct of our company&#8217;s business or affairs (including as a result of any mistake of judgment) or in the execution
or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs,
expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings
concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, we entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree
to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with
claims made by reason of their being a director or officer of our company.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in
the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_026"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">C.
<b><i>Board Practices.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our board of directors consists of five directors.
A director is not required to hold any shares in our company to qualify to serve as a director. A director who is in any way, whether
directly or indirectly, interested in a contract or transaction or proposed contract or transaction with our company is required to declare
the nature of his interest at a meeting of our directors. A director may vote with respect to any contract or transaction or proposed
contract or transaction notwithstanding that he may be interested therein, and if she/he does so his vote shall be counted and he may
be counted in the quorum at any meeting of our directors at which any such contract or transaction is considered. Our directors may exercise
all the powers of our company to borrow money, mortgage or charge its undertaking, property and uncalled capital and to issue debentures
or other securities whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third party.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Director
Independence</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board has reviewed the independence of our directors, applying Nasdaq independence standards. Based on this review, the board determined
that each H. David Sherman, Jun Xu and Zhong Lin is &#8220;independent&#8221; within the meaning of the Nasdaq Global Market rules. In
making this determination, our board considered the relationships that each of these non-employee director candidates has with us and
all other facts and circumstances our board deemed relevant in determining their independence. As required under applicable Nasdaq Global
Market rules, our independent directors will meet on a regular basis as often as necessary to fulfill their responsibilities, including
at least annually in executive session without the presence of non-independent directors and management.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Committees
of the Board of Directors</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have three committees under the board of directors with a charter for each of the three committees. Each committee&#8217;s members and
functions are described below.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Audit
Committee</i></b>. Our audit committee consists of H. David Sherman, Jun Xu and Zhong Lin, and is chaired by H. David Sherman. Each committee
member satisfies the &#8220;independence&#8221; requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Global Market and
meets the independence standards under Rule 10A-3 under the Exchange Act. We have determined that H. David Sherman qualifies as an &#8220;audit
committee financial expert.&#8221; The audit committee oversees our accounting and financial reporting processes and the audits of the
financial statements of our company. The audit committee is responsible for, among other things:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">selecting
                                            the independent registered public accounting firm and pre-approving all auditing and non-auditing
                                            services permitted to be performed by the independent registered public accounting firm;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            with the independent registered public accounting firm any audit problems or difficulties
                                            and management&#8217;s response;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            and approving all proposed related party transactions, as defined in Item 404 of Regulation
                                            S-K under the Securities Act;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">discussing
                                            the annual audited financial statements with management and the independent registered public
                                            accounting firm;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            major issues as to the adequacy of our internal controls and any special audit steps adopted
                                            in light of material control deficiencies;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">annually
                                            reviewing and reassessing the adequacy of our audit committee charter;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">meeting
                                            separately and periodically with management and the independent registered public accounting
                                            firm; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: normal 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reporting
                                            regularly to the board.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Compensation
Committee</i></b>. Our compensation committee consists of Hui Yuan, Jun Xu and Zhong Lin,
and is chaired by Hui Yuan. Except for Hui Yuan, Jun Xu and Zhong Lin each satisfies the &#8220;independence&#8221; requirements of Rule
5605(c)(2) of the Listing Rules of the Nasdaq Global Market. The compensation committee assists the board in reviewing and approving the
compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer
may not be present at any committee meeting during which his compensation is deliberated upon. The compensation committee is responsible
for, among other things:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            the total compensation package for our executive officers and making recommendations to the
                                            board with respect to it;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            the compensation of our non-employee directors and making recommendations to the board with
                                            respect to it; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">periodically
                                            reviewing and approving any long-term incentive compensation or equity plans, programs or
                                            similar arrangements, annual bonuses, and employee pension and welfare benefit plans.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->89<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Nominating
and Corporate Governance Committee</i></b>. Our nominating and corporate governance committee consists of Hui Yuan,
Jun Xu, Zhong Lin and H. David Sherman, and is chaired by Hui Yuan. Except for Hui Yuan, Jun Xu, Zhong Lin and H. David Sherman each satisfies
the &#8220;independence&#8221; requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Global Market. The nominating committee
assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.
The nominating committee is responsible for, among other things:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">recommending
                                            nominees to the board for election or re-election to the board, or for appointment to fill
                                            any vacancy on the board;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">reviewing
                                            annually with the board the current composition of the board with regards to characteristics
                                            such as independence, age, skills, experience and availability of service to us;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">selecting
                                            and recommending to the board the names of directors to serve as members of the audit committee
                                            and the compensation committee, as well as of the nominating committee itself; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">monitoring
                                            compliance with our code of business conduct and ethics, including reviewing the adequacy
                                            and effectiveness of our procedures to ensure proper compliance.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Duties
of Directors</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
Cayman Islands law, our directors owe fiduciary duties to our company, including (i) duty to act in good faith in what the director or
officer believes to be in the best interests of the company as a whole; (ii) duty to exercise powers for the purposes for which those
powers were conferred and not for a collateral purpose; (iii) directors should not improperly fetter the exercise of future discretion;
(iv) duty to exercise powers fairly as between different sections of shareholders; (v) duty to exercise independent judgment; and (vi)
duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests.
Our directors also owe to our company a duty to act with skill and care. It was previously considered that a director need not exhibit
in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.
However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these
authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance
with our memorandum and articles of association, as amended and restated from time to time. We have the right to seek damages if a duty
owed by our directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name
if a duty owed by our directors is breached.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Terms
of Directors</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders. Our directors are
not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders.
A director will cease to be a director if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition
with his creditors; (ii) dies or is found by our company to be or becomes of unsound mind, (iii) resigns his office by notice in writing
to the company, or (iv) without special leave of absence from our board, is absent from three consecutive board meetings and our directors
resolve that his office be vacated.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_027"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">D.
<b><i>Employees.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of March&#160;31, 2023, we had 352 full-time employees. The following table sets forth the number of our full-time employees by function
as of March&#160;31, 2023:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Function/Department</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%">Management</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">58</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Sales and Marketing</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">51</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Research and Development</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">214</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 1.5pt">Production</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">29</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">352</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->90<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
success depends on our ability to attract, retain and motivate qualified employees. As part of our human resource strategy, we offer
employees a dynamic work environment, competitive salaries, performance-based cash bonuses and other incentives. As a result, we have
generally been able to attract and retain qualified personnel and maintain a stable core management team.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
primarily recruit our employees through on-campus job fairs, recruitment agencies and online channels, including our corporate website
and third-party employment websites. We provide regular training and reviews to our employees to enhance their performance.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Substantially
all of our employees as of March&#160;31, 2023 are stationed in China. We enter into standard employment, confidentiality and non-compete
agreements with our employees. As required by PRC laws and regulations, we participate in housing fund and various employee social security
plans that are organized by applicable local municipal and provincial governments, including housing, pension, medical, work-related
injury and unemployment benefit plans.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None
of our employees are currently represented by labor unions. We believe that we maintain good working relationship with our employees
and we have not experienced any material labor disputes.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_028"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">E.
<b><i>Share Ownership.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
information regarding the share ownership of directors and officers, see &#8220;Item 7.A. Major Shareholders and Related Party Transactions&#8212;Major
Shareholders.&#8221; For information as to our equity incentive plan, see &#8220;Item 6.B. Director, Senior Management and Employees&#8212;Compensation&#8212;2023
Share Incentive Plan.&#8221;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_029"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F.
<b><i>Disclosure of a Registrant&#8217;s Action to Recover Erroneously Awarded Compensation.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_030"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
7.  Major Shareholders and Related Party Transactions.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_031"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
<b><i>Major Shareholders.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange
Act, of our ordinary shares as of the date of this annual report:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each
                                            of our directors and executive officers who beneficially own our ordinary shares;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
                                            directors and executive officers as a group; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each
                                            person known to us to own beneficially more than 5% of our ordinary shares.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beneficial
ownership includes voting or investment power with respect to the securities. Except as indicated below, and subject to applicable community
property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares shown as beneficially
owned by them. Percentage of beneficial ownership of each listed person is based on 24,015,592 ordinary shares on an as-converted basis
outstanding as of the date of this annual report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 99; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->91<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Information
with respect to beneficial ownership has been furnished by each director, officer, or beneficial owner of 5% or more of our ordinary
shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting
or investment power with respect to securities. In computing the number of shares beneficially owned by a person listed below and the
percentage ownership of such person, shares underlying options, warrants, or convertible securities held by each such person that are
exercisable or convertible within 60 days of the date of this annual report are deemed outstanding, but are not deemed outstanding for
computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to this table, or as required
by applicable community property laws, all persons listed have sole voting and investment power for all shares shown as beneficially
owned by them. As of the date of this annual report, none of the Company&#8217;s major shareholders have different voting rights. Except
as otherwise indicated below, the business address of our director and executive officer is 7<sup>th</sup> floor, Building 398, No. 1555
West Jinshajiang Rd, Shanghai, People&#8217;s Republic of China.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Ordinary<br/> Shares<br/> Beneficially<br/> Owned</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Percent</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: left">Directors and Executive Officers:</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hui Yuan<sup>(3)</sup></span></td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">All directors and executive officers as a group (1 individual):</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,255,966</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">13.34</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Other &#8805; 5% Beneficial Owners</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">AI Smart Holding Limited<sup>(4)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,119,738</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8.68</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ZunTian Holding Limited<sup>(5)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,969,546</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8.07</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PP Smart Holding Limited<sup>(6)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,668,542</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">6.83</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">River Hill China Fund L.P<sup>(7)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,458,532</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5.97</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Grand Glory (Hong Kong) Corporation Limited<sup>(8)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,444,752</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5.92</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">iTeam Holding Limited<sup>(9)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,286,420</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5.27</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shanghai Maocheng Enterprise Management Center (Limited Partnership)<sup>(10)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,203,972</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4.93</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shanghai Tongjun Enterprise Management Consulting Partnership (Limited Partnership)<sup>(11)</sup></span></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,146,350</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">4.7</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
  </table><div>




</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Beneficial
                                            ownership is determined in accordance with the rules of the SEC and includes voting or investment
                                            power with respect to the Ordinary Shares. All shares represent only common shares held by
                                            shareholders as no options are issued or outstanding.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Assuming
                                            the underwriters do not exercise their over-allotment option.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Includes
                                            shares held by ZunTian Holding Limited and iTeam Holding Limited.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">AI
                                            Smart Holding Limited is incorporated in British Version Islands and is wholly owned and
                                            controlled by Li Aini. The registered address of AI Smart Holding Limited is Sea Meadow House,
                                            P.O. Box 116, Road Town, Tortola, British Virgin Islands.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ZunTian
                                            Holding Limited is incorporated in British Virgin Islands and is wholly owned and controlled
                                            by our Chairman and CEO, Mr. Yuan. The registered address of ZunTian Holding Limited is Sea
                                            Meadow House, P.O. Box 116, Road Town, Tortola, British Virgin Islands.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PP
                                            Smart Holding Limited is incorporated in British Virgin Islands and is wholly owned and controlled
                                            by Zhu Pinpin. The registered address of PP Smart Holding Limited is Sertus Chambers, P.O.
                                            Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">River
                                            Hill China Fund L.P. is formed in Cayman Islands and is wholly owned and controlled by Hangzhou
                                            Ali Venture Capital Co., Ltd. (a Chinese company), which in return is wholly owned and controlled
                                            by Hangzhou Zhenxi Investment Co., Ltd. (a Chinese company), which in return is owned by
                                            Hangzhou Zhengqiang Investment Management Partnership (Limited Partnership) (a Chinese company)
                                            (&#8220;Hangzhou Zhengqiang&#8221;) and Hangzhou Zhensheng Investment Management Partnership
                                            (Limited Partnership) (a Chinese company) (&#8220;Hangzhou Zhensheng&#8221;) 50/50. Hangzhou
                                            Zhengqiang is owned by five individuals (Yong Zhang, Ying Zhao, Junfang Zheng, Xiaofeng Shao,
                                            Zeming Wu) with each owning 19.999% and Hangzhou Zhengyue Enterprise Management Co., Ltd.
                                            owning 0.0001%. Hangzhou Zhensheng is owned by five individuals (Yong Zhang, Ying Zhao, Junfang
                                            Zheng, Xiaofeng Shao, Zeming Wu) owning 19.999% each and Hangzhou Zhengyue Enterprise Management
                                            Co., Ltd. owning 0.0001%. The registered address of River Hill China Fund L.P. is Maples
                                            Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->92<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(8)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Grand
                                            Glory (Hong Kong) Corporation Limited is incorporated in Hong Kong and is wholly owned and
                                            controlled by Zhejiang Geely Holding Group Co., Ltd. (a Chinese company), which in return
                                            is wholly owned and controlled by Zhejiang Geely Holding (Group) Co., Ltd. (a Chinese company),
                                            of which Shufu Li, Xingxing Li and Zhejiang Geely Holding (Group) Co., Ltd. own 82.23%, 8.058%
                                            and 9.709% respectively. The registered address of Grand Glory (Hong Kong) Corporation Limited
                                            is Unit 2204, 22/F Lippo Ctr Tower 2, 89 Queensway, Hong Kong.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(9)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">iTeam
                                            Holding Limited is incorporated in British Virgin Islands and is owned by our Chairman and
                                            CEO, Mr. Yuan who controls 100% of the voting power of iTeam Holding Limited. The registered
                                            address of iTeam Holding Limited is Sertus Chambers, P.O. Box 905, Quastisky Building, Road
                                            Town, Tortola, British Virgin Islands.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(10)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shanghai
                                            Maocheng Enterprise Management Center (Limited Partnership) is formed in Shanghai, China
                                            and is owned by Jiaxing Well Known Investment Partnership (limited Partnership) (a Chinese
                                            company), with 99% ownership and Zhiwei Zheng with 1%, which in return is owned by Zhiwei
                                            Zheng and Lijun Zhong 50/50. The registered address of Shanghai Maocheng Enterprise Management
                                            Center (Limited Partnership) is Floor 5, Building 7, No. 3601, Dongfang Road, Pudong New
                                            Area, Shanghai, China.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(11)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shanghai
                                            Tongjun Enterprise Management Consulting Partnership (Limited Partnership) is formed in Shanghai,
                                            China and is owned by Tianjin Haiyin Equity Investment Fund Partnership (Limited Partnership)
                                            (a People&#8217;s Republic of China company), with 99.8% ownership and Tianjin Haifeng Yinhua
                                            Investment Management Partnership (limited partnership) (a Chinese company) with 0.2%, of
                                            which Tianjin Haifeng Yinhua Investment Management Partnership (limited partnership) (a Chinese
                                            company), Hengtong Jiuding (Beijing) Investment, Holding Co., Ltd. (a Chinese company), Zhi
                                            Xu, Ying Jin, and others (here, others mean other individuals all together) own 8.721%, 5.988%,
                                            3.779%, 3.488% and 78.023%, respectively. The registered address of Shanghai Tongjun Enterprise
                                            Management Consulting Partnership (Limited Partnership) is Floor 5, Building 7, No. 3601,
                                            Dongfang Road, Pudong New Area, Shanghai, China.</span></td></tr></table><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this annual report, none of our outstanding ordinary shares were held by record holders in the United States.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this annual report we have a total of 58 shareholders, with 8 of them owning more than 5% each, and 50 of them owning
less than 5% each. The names of the entities and their corresponding ownership percentages are listed on the principal shareholders table
above. Other than these shareholders, to the extent known to the company (1) no other corporations, individuals or foreign governments
directly or indirectly controls the company, (2) no other corporations, individuals or foreign governments directly owns the company,
(3) some entities or individuals, other than foreign governments, indirectly own certain small percentage of the company which are listed
on our corporate legal structure diagram in detail. See our corporate legal structure diagram for detailed information.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.</span></p><div>

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</div><div><a id="a_032"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.
<b><i>Related Party Transactions.</i></b></span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Contractual
Arrangements</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiao-I&#8217;s
indirect wholly owned subsidiary, Zhizhen Artificial Intelligent Technology (Shanghai) Co. Ltd. (&#8220;Zhizhen Technology&#8221; or
&#8220;WFOE&#8221;) entered into a series of contractual arrangements that establish the VIE structure (the &#8220;VIE Agreements&#8221;).
The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where Chinese law prohibits
direct foreign investment in the operating companies. Xiao-I has evaluated the guidance in FASB ASC 810 and determined that Xiao-I is
the primary beneficiary of the VIE, for accounting purposes, based upon such contractual arrangements. ASC 810 requires a VIE to be consolidated
if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE&#8217;s residual
returns. A VIE is an entity in which a company or its WFOE, through contractual arrangements, is fully and exclusively responsible for
the management of the entity, absorbs all risk of losses of the entity (excluding non-controlling interests), receives the benefits of
the entity that could be significant to the entity (excluding non-controlling interests), and has the exclusive right to exercise all
voting rights of the entity, and therefore the company or its WFOE is the primary beneficiary of the entity for accounting purposes.
Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity
has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE&#8217;s
economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant
to the VIE. Through the VIE Agreements, the Company is deemed the primary beneficiary of the VIE for accounting purposes. The VIE has
no assets that are collateral for or restricted solely to settle its obligations. The creditors of the VIE do not have recourse to the
Company&#8217;s general credit. Accordingly, under U.S. GAAP, the results of the PRC operating entities are consolidated in Xiao-I&#8217;s
financial statements. However, investors will not and may never hold equity interests in the PRC operating entities. The VIE Agreements
may not be effective in providing control over Shanghai Xiao-i. Uncertainties exist as to Xiao-I&#8217;s ability to enforce the VIE Agreements,
and the VIE Agreements have not been tested in a court of law. The Chinese regulatory authorities could disallow this VIE structure,
which would likely result in a material change in the PRC operating entities&#8217; operations and the value of Xiao-I&#8217;s ADSs,
including that it could cause the value of such securities to significantly decline or become worthless.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
VIE Agreements</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
PRC government regulates the telecommunications and internet industry, including software industry, through strict business licensing
requirements and other government regulations. These laws and regulations also include limitations on foreign ownership of PRC companies
that engage in software business. Xiao-I, AI Plus and Zhizhen Technology, are considered as foreign invested enterprises. To comply with
these regulations, the Company conducts the majority of its activities in PRC through the PRC operating entities. Uncertainties exist
as to the Company&#8217;s ability to enforce the VIE Agreements, and the VIE Agreements have not been tested in a court of law.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhizhen
Technology has entered into the following contractual arrangements with Shanghai Xiao-i and 61 of its shareholders, whom together hold
100% equity interest in Shanghai Xiao-i, that enable the Company to (i) have power to direct the activities that most significantly affect
the performance of Shanghai Xiao-i and its subsidiaries, and (ii) receive the benefits of Shanghai Xiao-i and its subsidiaries that could
be significant to Shanghai Xiao-i and its subsidiaries. The Company, through its indirect wholly owned subsidiary, Zhizhen Technology,
is fully and exclusively responsible for the management of Shanghai Xiao-i, absorbs all risk of losses of Shanghai Xiao-i (excluding
non-controlling interests) and has the exclusive right to exercise all voting rights of Shanghai Xiao-i&#8217;s shareholders. In exchange,
Shanghai Xiao-i pays service fees to Zhizhen Technology. The service fees shall consist of 100% of the profit before tax of Shanghai
Xiao-i, after the deduction of all costs, expenses, taxes and other fee required under PRC laws and regulations. Shanghai Xiao-i agrees
not to accept the same or any similar services provided by any third party and shall not establish cooperation relationships similar
to that formed by the Exclusive Business Cooperation Agreement with any third party, except with the prior written consent of Zhizhen
Technology. Therefore, the Company, through its wholly owned subsidiaries AI Plus and Zhizhen Technology, has been determined to be the
primary beneficiary of Shanghai Xiao-i and the VIE&#8217;s subsidiaries for accounting purposes and has consolidated Shanghai Xiao-i&#8217;s
and its subsidiaries&#8217; assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Exclusive
Call Option Agreement</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Exclusive Call Option Agreement signed on March&#160;29, 2019 by and among Zhizhen Technology, Shanghai Xiao-i and its shareholders,
the shareholders irrevocably granted Zhizhen Technology or any third party designated by Zhizhen Technology an option to purchase all
or part of their equity interests in Shanghai Xiao-i at any time at a price determined at Zhizhen Technology&#8217;s discretion. According
to the Exclusive Call Option Agreement, the purchase price to be paid by the Company to each shareholder of Shanghai Xiao-i will be the
minimum price permitted by applicable PRC Law at the time when such share transfer occurs. Without Zhizhen Technology&#8217;s prior written
consent, the shareholders and Shanghai Xiao-i agreed not to, among other things: set encumbrance on, transfer all or part of, or dispose
of the equity interests; amend the articles of association of Shanghai Xiao-i; change the registered capital of Shanghai Xiao-i or holding
structure; change Shanghai Xiao-i&#8217;s business activities; sell, assign, mortgage or dispose of any legal or beneficial rights to
or in any of Shanghai Xiao-i&#8217;s assets, business, or revenue; incur, assume or guarantee any debts; enter into any material contract;
extend any loan or credit to any party, or provide any guarantee or assume any obligation of any party; merge or consolidate with any
third party or acquire or invest in any third party; or distribute dividends. The shareholders and Shanghai Xiao-i agreed to manage business
and handle financial and commercial affairs prudently and in accordance with relevant laws and codes of practice. This agreement will
continue with full force and effect until the earlier of the date on which Zhizhen Technology has acquired all of the Equity Interests
in Shanghai Xiao-i, or this Agreement is terminated by the mutual written consent.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Exclusive
Business Cooperation Agreement</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March&#160;29, 2019, Zhizhen Technology entered into an Exclusive Business Cooperation Agreement with Shanghai Xiao-i to enable Zhizhen
Technology to engage in the development and operation of the Internet technology development in accordance with applicable laws. Under
this agreement, Shanghai Xiao-i appointed Zhizhen Technology to provide exclusive comprehensive business support, technical services,
consulting services and other services to Shanghai Xiao-i, and Shanghai Xiao-i agreed to accept such services. The term of the Services
provided by Zhizhen Technology shall be 10 years from the effective date of March&#160;29, 2019, and will be automatically extended after
the expiration until when terminated in writing by Zhizhen Technology. Additionally, Zhizhen Technology has the full and exclusive right
to manage and direct all cash flow and assets of Shanghai Xiao-i and to direct and administrate the financial affairs and daily operation
of Shanghai Xiao-i. In exchange, Shanghai Xiao-i pays service fees to Zhizhen Technology. The service fees shall consist of 100% of the
profit before tax of Shanghai Xiao-i, after the deduction of all costs, expenses, taxes and other fee required under PRC laws and regulations.
If Shanghai Xiao-i is unable to pay the service fees due to the actual managing situation, with the written consent of Zhizhen Technology,
the unpaid part of the service fees in the previous fiscal year can be deferred to the end of the next year and settled together. Shanghai
Xiao-i agrees not to accept the same or any similar services provided by any third party and shall not establish cooperation relationships
similar to that formed by the Exclusive Business Cooperation Agreement with any third party, except with the prior written consent of
Zhizhen Technology. During the validity term of this agreement, Zhizhen Technology will bear all the economic benefits and risks arising
from the business of Shanghai Xiao-i and its subsidiaries. Zhizhen Technology will provide financial support to Shanghai Xiao-i or its
subsidiaries in the event of a loss or serious operational difficulties.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Power
of Attorney Agreement</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March&#160;29, 2019, each shareholder of Shanghai Xiao-i, signed the Power of Attorney Agreement to irrevocably entrust Zhizhen Technology
or any person(s) designated by Zhizhen Technology to act as its attorney-in-fact to exercise any and all of its rights as a shareholder
of Shanghai Xiao-i, including, but not limited to, the right to convene, attend and present the shareholders&#8217; meetings, vote, sign
and perform as a shareholder; transfer, pledge or dispose of all the equity interest of Shanghai Xiao-i held by the shareholder; collect
the dividend, and participate in litigation procedures. This agreement is effective and irrevocable until all of each shareholder&#8217;s
equity interest in Shanghai Xiao-i has been transferred to Shanghai Xiao-i or the person(s) designated by Zhizhen Technology.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Share
Interest Pledge Agreement</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the Share Interest Pledge Agreement signed on March&#160;29, 2019 by and among Zhizhen Technology and each shareholder of Shanghai Xiao-i,
the shareholders of Shanghai Xiao-i have agreed to pledge 100% equity interest in Shanghai Xiao-i to Zhizhen Technology to guarantee
the performance obligations of Shanghai Xiao-i under the Exclusive Business Cooperation Agreement, and the performance obligations of
each shareholder under the Exclusive Call Option Agreement. If Shanghai Xiao-i or its shareholders breach their contractual obligations
under these agreements, Zhizhen Technology, as pledgee, will have the right to exercise the pledge.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
shareholders also agreed that, without prior written consent of Zhizhen Technology, they will not dispose of the pledged equity interests
or create or allow any encumbrance on the pledged equity interests. The pledge of equity interests in Shanghai Xiao-i has been registered
with the relevant office of the State Administration for Market Regulation in accordance with the Civil Code of the People&#8217;s Republic
of China.</span></p><div>

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</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Spousal
Commitment Letter</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
spouses of each individual shareholder of Shanghai Xiao-i have each signed a Commitment Letter. Under the Commitment Letter, the signing
spouse unconditionally and irrevocably has agreed to the execution by his or her spouse of the above-mentioned Exclusive Business Cooperation
Agreement, Exclusive Call Option Agreement, Power of Attorney Agreement and Share Interest Pledge Agreement, and that his or her spouse
may perform, amend or terminate such agreements without his or her consent. In addition, in the event that the spouse obtains any equity
interest in Shanghai Xiao-i held by his or her spouse for any reason, he or she agrees to be bound by and sign any legal documents substantially
similar to the contractual arrangements entered into by his or her spouse, as may be amended from time to time.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
VIE structure is used to provide investors with exposure to foreign investment in China-based companies where Chinese law prohibits direct
foreign investment in the operating companies. Xiao-I has evaluated the guidance in FASB ASC 810 and determined that Xiao-I is the primary
beneficiary of the VIE, for accounting purposes, based upon such contractual arrangements. ASC 810 requires a VIE to be consolidated
if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE&#8217;s residual
returns. A VIE is an entity in which a company, through contractual arrangements, is fully and exclusively responsible for the management
of the entity, absorbs all risk of losses of the entity (excluding non-controlling interests), receives the benefits of the entity that
could be significant to the entity (excluding non-controlling interests), and has the exclusive right to exercise all voting rights of
the entity, and therefore the company is the primary beneficiary of the entity for accounting purposes. Under ASC 810, a reporting entity
has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics:
(a) the power to direct the activities of the VIE that most significantly affect the VIE&#8217;s economic performance; and (b) the obligation
to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. Through the VIE agreements, the
Company is deemed the primary beneficiary of the VIE for accounting purposes. The VIE has no assets that are collateral for or restricted
solely to settle its obligations. The creditors of VIE do not have recourse to the Company&#8217;s general credit. Accordingly, under
U.S. GAAP, the results of the PRC operating entities are consolidated in Xiao-I&#8217;s financial statements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
investors will not and may never hold equity interests in the PRC operating entities. The VIE Agreements may not be effective in providing
control over Shanghai Xiao-i. Uncertainties exist as to Xiao-I&#8217;s ability to enforce the VIE Agreements, and the VIE Agreements
have not been tested in a court of law. If the VIE or its shareholders fail to perform their respective obligations under the contractual
arrangements, Xiao-I may have to incur substantial costs and expend additional resources to enforce such arrangements. The Chinese regulatory
authorities could disallow this VIE structure, which would likely result in a material change in the PRC operating entities&#8217; operations
and the value of Xiao-I&#8217;s ADSs, including that it could cause the value of such securities to significantly decline or become worthless.
See &#8220;Risk Factors &#8212; Risks Relating to Our Corporate Structure.&#8221;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Consolidation</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiao-I
conducts substantially all of its business in China through Shanghai Xiao-i, the VIE, due to PRC legal restrictions of foreign ownership
in certain sectors. Substantially all of Xiao-I&#8217;s revenues, costs and net income in China are directly or indirectly generated
through the VIE.&#160;Xiao-I, through its indirect wholly owned subsidiary, Zhizhen Technology, has signed various agreements with the
VIE and shareholders of the VIE to allow the transfer of economic benefits from the VIE to Zhizhen Technology and to direct the activities
of the VIE. Total assets and liabilities presented on Xiao-I&#8217;s consolidated balance sheets and revenue, expense, net income presented
on consolidated statement of operations and comprehensive income as well as the cash flow from operating, investing and financing activities
presented on the consolidated statement of cash flows are the financial position, operation and cash flow of the PRC operating entities
(excluding non-controlling interests). The Company has not provided any financial support to the PRC operating entities for the fiscal&#160;years
ended at December&#160;31, 2020, 2021 and 2022, and the variable interest entities accounted for an aggregate of 100%, 95%, and 96% of
the Company&#8217;s total assets and total liabilities, respectively. As of December&#160;31, 2021 and 2022, $1,254,528 and US$908,614
of cash and cash equivalents were denominated in RMB, respectively.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiao-I
and its directly and indirectly wholly owned subsidiaries, AI Plus, Xiao-i Technology and Zhizhen Technology do not have any substantial
assets or liabilities or result of operations. The following table sets forth the assets, liabilities, results of operations and changes
in cash, cash equivalents of the PRC operating entities, which were included in the Company&#8217;s consolidated balance sheets and statements
of comprehensive income/(loss) and statements of cash flows with intercompany transactions eliminated:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(14,498,268</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(14,498,268</td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(6,808,365</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">6,808,365</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(14,498,268</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">577,684</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(2,494,191</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(2,494,191</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,105</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,320,111</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">4</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">3,321,220</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,105</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,669,519</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">90,350</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">90,350</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">207,989</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">207,989</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">798,459</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">798,459</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">335,448</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">335,448</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,194,859</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,194,859</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">4,906,287</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4,906,287</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">3,941,346</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">3,941,346</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total non-current assets</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">11,384,388</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 4pt">TOTAL ASSETS</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9,117,158</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,581,879</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,581,879</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,558,642</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,558,642</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,953,238</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,953,238</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,717,737</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,717,737</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10,316,428</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10,316,432</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">800,658</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">800,658</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Income tax payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,904</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,904</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">190,267</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(190,267</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">190,267</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(190,267</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total current liabilities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">190,267</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">36,063,644</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">190,267</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">4</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">36,063,648</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,905,313</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,905,313</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Accrued liabilities, non-current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,157,971</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,157,971</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">446,140</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">446,140</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">14,509,424</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">14,509,424</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,106</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,106</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">75,621,294</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(75,621,294</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">75,621,294</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">237,486</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">237,486</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(237,486</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">237,486</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(72,584,621</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(72,584,621</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(190,267</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">72,774,888</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(72,584,621</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Accumulated other comprehensive loss</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,464,426</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">3,464,426</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,464,423</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">XIAO-I CORPORATION shareholders&#8217; deficit</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(189,158</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(190,267</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(190,267</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">380,534</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(189,158</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Non-controlling interests</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(3,193,503</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(3,193,503</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total shareholders&#8217; deficit</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(189,158</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(3,383,770</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(190,267</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">380,534</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(3,382,661</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 4pt">TOTAL LIABILITIES AND SHAREHOLDERS&#8217; DEFICIT</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  </table><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(16,641,273</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,079,652</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,079,652</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">484,817</td><td style="text-align: left">&#160;</td></tr>
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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,330,902</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,330,902</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,115,672</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,115,672</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">1</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">1</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">1,106</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">219,470</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">637,114</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">204,899</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,647,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,852,492</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">865,399</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">865,399</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">3,888,574</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,888,574</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">3,697,675</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">3,697,675</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Total non-current assets</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">2,647,593</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">12,160,724</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">60,584,144</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">18,784,459</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">18,784,459</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9,180,532</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9,180,532</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">896,431</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">896,431</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,553,808</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,553,808</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,754,269</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,754,269</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,006,680</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">30</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,006,713</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">435,462</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">435,462</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,887,042</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(5,887,042</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,887,042</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(5,887,042</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Total current liabilities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">5,887,042</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">52,611,641</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">5,887,072</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">3</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(11,774,084</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">52,611,674</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Non-current liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Amount due to related parties-non current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,581,743</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,581,743</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Accrued liabilities, non-current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5,391,664</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,682,248</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,073,912</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Lease liabilities, non-current</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">300,974</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">300,974</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Total non-current liabilities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">-</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">14,274,381</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">2,682,248</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-left: 0.125in; text-indent: -0.125in; padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(237,486</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(78,447,606</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(5,922,592</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">3,262,664</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(5,852,356</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(2</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">11,774,084</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(5,885,936</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(3,098,223</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(3,098,223</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Total shareholders&#8217; deficit</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(5,885,936</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(8,950,579</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">11,774,084</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(8,984,159</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 4pt">TOTAL LIABILITIES AND SHAREHOLDERS&#8217; DEFICIT</td><td style="font-weight: bold; padding-bottom: 4pt"><p style="margin-top: 0; margin-bottom: 0">&#160;</p>
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,106</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">57,935,443</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">60,584,144</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; padding-left: 0pt; text-indent: 0pt"><b>Condensed Consolidating Schedule of
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  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(33,941,593</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(5,898,535</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5,898,535</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Other loss</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(2,173,328</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(35,550</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(106,779</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(5,898,535</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5,898,535</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="22" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the year ended December 31, 2022</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">4</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of the date of this annual report, cash was transferred among the Company, WFOE, other subsidiaries of the Company, the VIE and its consolidated
subsidiaries, in the following manners: (i) the Company provided a total of US$10,000,550 in cash to its other subsidiaries while other
subsidiaries transferred US$4,500 to the Company; (ii) Other subsidiaries of the Company provided a total of US$10,000,000 in cash to
WFOE; (iii) WFOE provided a total of US$9,859,073 (RMB68,000,000) to VIE and its subsidiaries while VIE and its subsidiaries transferred
US$36,247 (RMB250,000) to WFOE; (iv) VIE and its subsidiaries transferred US$8,000 to other subsidiaries of the Company. The aforementioned
cash transfers were generally for working capital purpose among the Company, WFOE, VIE and its consolidated subsidiaries, and other subsidiaries.
Xiao-I intends to keep any future earnings to finance the expansion of its business, and it does not anticipate that any cash dividends
will be paid in the foreseeable future.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company, WFOE, the VIE and its consolidated subsidiaries maintain cash management policies that dictate the purpose, amount, appropriate
internal control procedures on the handling, depositing, receiving, transferring, safeguarding, and documentation and recording of cash
transfers. Subject to the amounts of cash transfer and the nature of the use of funds, requisite internal approval shall be obtained
prior to each cash transfer. Specifically, all transactions require the approval of the financial manager. As for the large quantity
transactions, the Chief Financial Officer and Chief Executive Officer are required to conduct regular review and approve.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiao-I
is a holding company with no operations of its own. It conducts its operations in China primarily through the PRC operating entities
in China. As a result, although other means are available for Xiao-I to obtain financing at the holding company level, Xiao-I&#8217;s
ability to pay dividends and other distributions to its shareholders and to service any debt it may incur may depend upon dividends and
other distributions paid by Xiao-I&#8217;s PRC subsidiaries, which relies on dividends and other distributions paid by the PRC operating
entities pursuant to the VIE Agreements. If any of these entities incurs debt on its own in the future, the instruments governing such
debt may restrict its ability to pay dividends and other distributions to Xiao-I.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, dividends and distributions from Xiao-I&#8217;s PRC subsidiaries and the VIE are subject to regulations and restrictions on
dividends and payment to parties outside of China. Applicable PRC law permits payment of dividends to Xiao-I by WFOE only out of net
income, if any, determined in accordance with PRC accounting standards and regulations. A PRC company is not permitted to distribute
any profits until any losses from prior fiscal years have been offset by general reserve fund and profits (if general reserve fund is
not enough). Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal
year. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount
of net assets held in each operating subsidiary. In contrast, there is presently no foreign exchange control or restrictions on capital
flows into and out of Hong Kong. Hence, Xiao-I&#8217;s Hong Kong subsidiary is able to transfer cash without any limitation to the Cayman
Islands under normal circumstances. As a result of these PRC laws and regulations, the PRC operating entities are restricted in their
ability to transfer a portion of their net assets to the Company.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Moreover,
the transfer of funds among the PRC operating entities are subject to the Provisions on Private Lending Cases, which was implemented
on January 1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The
Provisions on Private Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated PRC
operating entity&#8217;s operations. Xiao-I, its subsidiaries or the PRC operating entities have not been notified of any other restriction
which could limit the PRC operating entities&#8217; ability to transfer cash among each other. In the future, cash proceeds from overseas
financing activities, including the IPO proceeds, may be transferred by Xiao-I to AI Plus, and then transferred to Xiao-i Technology, and
then transferred to WFOE via capital contribution or shareholder loans, as the case may be. Cash proceeds may flow to Shanghai Xiao-i
from WFOE pursuant to certain contractual arrangements between WFOE and Shanghai Xiao-i as permitted by the applicable PRC regulations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided
that in no circumstances may a dividend be paid out of share premium if this would result in the company being unable to pay its debts
due in the ordinary course of business. Xiao-I does not expect to pay dividends in the foreseeable future. If, however, it declares dividends
on its Ordinary Shares, the depositary will pay you the cash dividends and other distributions it receives on Xiao-I&#8217;s Ordinary
Shares after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement. If it determines to pay
dividends on any of its Ordinary Shares in the future, as a holding company, it will rely on payments made from Shanghai Xiao-i to WFOE,
pursuant to the VIE Agreements between them, and the distribution of such payments to Xiao-i Technology from WFOE, and then to AI Plus
from Xiao-i Technology, and then to Xiao-I from AI Plus as dividends, unless it receives proceeds from future offerings. See &#8220;Risk
Factors &#8212; Risks Relating to Doing Business in China &#8212; <i>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</i>.&#8221;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
Related Party Transactions</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following provides descriptions of related party transactions based on (1) names of related parties and their relationships with the
Company through its wholly-owned subsidiaries, variable interest entity (&#8220;VIE&#8221;) and VIE&#8217;s subsidiaries (collectively,
the &#8220;Group&#8221;), (2) amounts due from related parties, (3) amounts due to related parties and (4) nature of loans/transactions
and interest rates of the loans.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->102<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Related
parties</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following is a list of related parties which the Group has transactions with:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 5%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>No.</b></span></td>
    <td style="padding-bottom: 1.5pt; font: 10pt Times New Roman, Times, Serif; white-space: nowrap; width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 45%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name
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    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 48%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Relationship</b></span></td></tr>
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    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Zhejiang
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
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    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shanghai
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    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: #CCEEFF">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: #CCEEFF">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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    <td style="font: 10pt Times New Roman, Times, Serif; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: #CCEEFF">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: #CCEEFF">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amounts
due from related parties</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amounts
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Accounts receivable</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Shanghai Aoshu (c)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">22,055</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(20,377</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">391,919</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a).</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b).</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
                                            receivable from Zhejiang Baiqianyin consists of the interest-free borrowings for ordinary
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 111; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->103<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amounts
due to related parties</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amount
due to related parties consisted of the following for the periods indicated:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Interest-free loans (c)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">Jiaxing Chiyu Investment Partnership (limited Partnership)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">784,610</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">434,959</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Haiyin Capital Investment (International) Limited</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">128,299</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="font-weight: bold; text-align: left">Subtotal-due to related parties-current</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">1,558,642</td><td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">896,431</td><td style="font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: right">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="font-weight: bold; text-align: left">Due to related parties-non current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Interest-free loans (c)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Hui Yuan</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">8,905,313</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">8,581,743</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Subtotal-due to related parties-non current</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">8,905,313</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">8,581,743</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">10,463,955</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">9,478,174</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(c)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
                                            balance represents the advance funds from related parties for daily operational purposes.
                                            The funds are interest-free, unsecured and repayable on demand. Loans from Hui Yuan are not
                                            required to be settled within one year.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Significant
transactions with related parties</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt; font-weight: bold"></td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
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    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center; font-weight: bold">2021</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold">Software and service income</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
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    <td style="padding-left: 0.125in; text-indent: -0.125in; width: 64%; text-align: left">Zhejiang Baiqianyin</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">2,449,560</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">286,875</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Shanghai Shenghan</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">130,356</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">465,058</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">100,315</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">Interest-free loans from related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Zhejiang Baiqianyin</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,448</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">5,782,216</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,783,326</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Hui Yuan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9,696,450</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">532,026</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Haiyin Capital Investment (International) Limited</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">126,744</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Jiaxing Chiyu Investment Partnership (limited Partnership)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">775,097</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Tianjin Haiyin</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">310,038</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
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    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Weng Wei</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">74,409</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">Interest-free loans repayment to related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Zhejiang Baiqianyin</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">5,470,627</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,788,230</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">297,221</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Hui Yuan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">899,111</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">169,416</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Jiaxing Sound Core Intelligent Technology Co., LTD</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">59,444</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">139,517</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Weng Wei</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">74,409</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Tianjin Haiyin</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">310,038</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">Return of inventories to a related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Shanghai Shenghan</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">239,330</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">Debt relief</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Shanghai Machinemind Intelligent Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">72,819</td><td style="text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 112; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->104<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; "><b>Arrangements with Our Executive Officers
and Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; "><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; "><b><i>Agreements with Our Non-Executive Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">We have entered into
an independent director agreement with one of our non-executive directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; "><b><i>Indemnification Agreements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">We have entered into
indemnification agreements with each of our directors and executive officers. See &#8220;Item 6.B. Directors and Senior Management&#8212;Compensation&#8212;Limitations
on Liability and Indemnification Matters.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; "><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; "><b>2023 Share Incentive Plan</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; ">See &#8220;Item 6.B. Director, Senior Management
and Employees&#8212;Compensation&#8212;2023 Share Incentive Plan.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; "><b>Related Person Transaction Policy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">Our board of directors
has adopted a written related party transactions policy setting forth the policies and procedures for the review and approval or ratification
of related person transactions. This policy covers any transaction or proposed transactions between us and a related person that are material
to us or the related person, including without limitation, purchases of goods or services by or from the related person or entities in
which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In
reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including,
but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm&#8217;s length transaction
and the extent of the related person&#8217;s interest in the transaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><div><a id="a_032a"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; "><b>C. <i>Interests of Experts and Counsel.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; ">&#160;</p><div>

</div><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Not applicable.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_033"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
8.  Financial Information.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_034"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
<b><i>Consolidated Statements and Other Financial Information.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Please
see Item 18. &#8220;Financial Statements&#8221; for our audited consolidated financial statements filed as part of this annual report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Litigation</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the ordinary course of business, the Group may be subject to legal proceedings regarding contractual and employment relationships and
a variety of other matters. The Group records contingent liabilities resulting from such claims, when a loss is assessed to be probable
and the amount of the loss is reasonably estimable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
August 3, 2020, Shanghai Xiao-i filed a lawsuit with the High People&#8217;s Court of Shanghai in China, against Apple Computer Trading
(Shanghai) Co., Ltd., Apple, Inc., and Apple Computer Trading (Shanghai) Co., Ltd. (together, &#8220;Apple&#8221;), demanding that Apple
cease its infringement of Shanghai Xiao-i&#8217;s intelligent assistant patent (ZL200410053749.9 invention patent) by its Siri (intelligent
assistant) (the &#8220;Patent Infringement Case&#8221;). The lawsuit seeks various remedies, including but not limited to, requiring
Apple to stop manufacturing, using, offering to sell, selling or importing products that infringe Shanghai Xiao-i&#8217;s patent, and
a temporary claim amount of 10 billion yuan (RMB). On August 10, 2020, the High People&#8217;s Court of Shanghai formally accepted the
Patent Infringement Case filed by Shanghai Xiao-i against Apple. On September 4, 2021, Shanghai Xiao-i filed a behavior preservation
application (injunction) with the Shanghai High People&#8217;s Court, demanding Apple to immediately stop the patent infringement involving
Siri, including but not limited to stopping the production, selling, offering to sell, importing or using of iPhone products that infringe
Shanghai Xiao-i&#8217;s patent. As of the date of this annual report, the Patent Infringement Case is pending in the High People&#8217;s
Court of Shanghai.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the opinion of management, there were no other
pending or threatened claims and litigation as of December 31, 2022 and through the date of this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dividend
Policy</span></p><div>

</div><p style="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the following discussion of dividend policy, &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221; refer to Xiao-I.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have not previously declared or paid cash dividends and we have no plan to declare or pay any dividends in the near future on our shares.
We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. Any
future determination related to a dividend policy will be made at the discretion of our board of directors, and subject to Cayman Islands
law. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or its share premium account, provided
that in no circumstances may a dividend be paid out of share premium if this would result in the company being unable to pay its debts
as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing,
amount and form of future dividends, if any, will be based upon conditions then existing, including our results of operations, financial
condition, current and anticipated capital requirements, business prospects, contractual restrictions and other factors our board of
directors deems relevant, and subject to the restrictions contained in any future financing instruments.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_035"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.
<b><i>Significant Changes.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
significant change has occurred since the date of the financial statements included in this Annual Report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 113; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->105<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_036"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
9.  The Offer and Listing.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_037"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
<b><i>Offer and Listing Details.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
ADSs are traded on the Nasdaq Global Market.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_038"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.
<b><i>Plan of Distribution</i></b></span><b><i>.</i></b></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_039"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">C.
<b><i>Markets.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
ADSs are listed on the Nasdaq Global Market under the symbol &#8220;AIXI.&#8221;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_040"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">D.
<b><i>Selling Shareholders.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_041"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">E.
<b><i>Dilution.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_042"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F.
&#160; <b><i>Expenses of the Issuer.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_043"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
10. Additional Information.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_044"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
<b><i>Share Capital.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_045"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.
<b><i>Memorandum and Articles of Association.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following are summaries of material provisions of our amended and restated memorandum and articles of association and of the Companies
Act, insofar as they relate to the material terms of our Ordinary Shares.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Objects
of Our Company</i>. Under our amended and restated memorandum and articles of association, the objects of our company are unrestricted,
and we are capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit,
as provided by section 27(2) of the Companies Act.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Ordinary
Shares</i>. s Our Ordinary Shares are issued in registered form and are issued when registered in our register of members. We may not
issue shares to bearer. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Dividends</i>.
The holders of our Ordinary Shares are entitled to such dividends as may be declared by our board of directors. Our amended and restated
memorandum and articles of association provide that dividends may be declared and paid out of the funds of our company lawfully available
therefor. Under the laws of the Cayman Islands, our company may pay a dividend out of either profit or share premium account; provided
that in no circumstances may a dividend be paid out of above premium if this would result in our company being unable to pay its debts
as they fall due in the ordinary course of business.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Voting
Right</i>s. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            chairperson of such meeting;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">by
                                            at least three shareholders present in person or by proxy for the time being entitled to
                                            vote at the meeting;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">by
                                            shareholder(s) present in person or by proxy representing not less than one-tenth of the
                                            total voting rights of all shareholders having the right to vote at the meeting; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">by
                                            shareholder(s) present in person or by proxy and holding shares in us conferring a right
                                            to vote at the meeting being shares on which an aggregate sum has been paid up equal to not
                                            less than one-tenth of the total sum paid up on all shares conferring that right.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An
ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching
to the Ordinary Shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the
votes cast attaching to the issued and outstanding Ordinary Shares at a meeting. A special resolution will be required for important
matters such as a change of name or making changes to our amended and restated memorandum and articles of association, a reduction of
our share capital and the winding up of our company. Our shareholders may, among other things, divide or combine their shares by ordinary
resolution.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>General
Meetings of Shareholders</i>. As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders&#8217;
annual general meetings. Our amended and restated memorandum and articles of association provide that we shall, if required by the Companies
Act, in each year hold a general meeting as its annual general meeting, and shall specify the meeting as such in the notices calling
it, and the annual general meeting shall be held at such time and place as may be determined by our directors. General meetings, including
annual general meetings, may be held at such times and in any location in the world as may be determined by the Board. A general meeting
or any class meeting may also be held by means of such telephone, electronic or other communication facilities as to permit all persons
participating in the meeting to communicate with each other, and participation in such a meeting constitutes presence at such meeting.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shareholders&#8217;
general meetings may be convened by the chairperson of our board of directors or by a majority of our board of directors. Advance notice
of at least ten clear days is required for the convening of our annual general shareholders&#8217; meeting (if any) and any other general
meeting of our shareholders. A quorum required for any general meeting of shareholders consists of, at the time when the meeting proceeds
to business, two shareholders holding shares which carry in aggregate (or representing by proxy) not less than one-third of all votes
attaching to issued and outstanding shares in our company entitled to vote at such general meeting.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Transfer
of Ordinary Shares</i>. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her Ordinary
Shares by an instrument of transfer in the usual or common form or in a form prescribed by Nasdaq Global Market or any other form approved
by our board of directors. Notwithstanding the foregoing, Ordinary Shares may also be transferred in accordance with the applicable rules
and regulations of Nasdaq Global Market.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up
or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            instrument of transfer is lodged with us, accompanied by the certificate for the Ordinary
                                            Shares to which it relates and such other evidence as our board of directors may reasonably
                                            require to show the right of the transferor to make the transfer;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            instrument of transfer is in respect of only one class of Ordinary Shares;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            instrument of transfer is properly stamped, if required; in the case of a transfer to joint
                                            holders, the number of joint holders to whom the ordinary share is to be transferred does
                                            not exceed four; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
                                            fee of such maximum sum as the Nasdaq Global Market may determine to be payable or such lesser
                                            sum as our directors may from time to time require is paid to us in respect thereof.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged,
send to each of the transferor and the transferee notice of such refusal.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
registration of transfers may, after compliance with any notice required in accordance with the rules of the Nasdaq Global Market, be
suspended and the register closed at such times and for such periods as our board of directors may from time to time determine; provided,
however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our board
may determine. The period of 30 days may be extended for a further period or periods not exceeding 30 days in respect of any year if
approved by the shareholders by ordinary resolution.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Liquidation</i>.
On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to
repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders
in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares
in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available
for distribution are insufficient to repay all of the paid-up capital, such the assets will be distributed so that, as nearly as may
be, the losses are borne by our shareholders in proportion to the par value of the shares held by them.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Calls
on Shares and Forfeiture of Shares</i>. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid
on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares
that have been called upon and remain unpaid are subject to forfeiture.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Redemption,
Repurchase and Surrender of Shares</i>. We may issue shares on terms that such shares are subject to redemption, at our option or at
the option of the holders of these shares, on such terms and in such manner, including out of capital, as may be determined by our board
of directors. Our company may also repurchase any of our shares on such terms and in such manner as have been approved by our board of
directors. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company&#8217;s profits, share premium
or out of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital if our company
can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies
Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in
there being no shares outstanding or (c) if the company has commenced liquidation. In addition, our company may accept the surrender
of any fully paid share for no consideration.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Variations
of Rights of Shares</i>. Whenever the capital of our company is divided into different classes the rights attached to any such class
may, subject to any rights or restrictions for the time being attached to any class, only be varied with the sanction of a resolution
passed by a majority of two-thirds of the votes cast at a separate meeting of the holders of the shares of that class. The rights conferred
upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the
terms of issue of the shares of that class, be deemed to be varied by the creation, allotment or issue of further shares ranking pari
passu with such existing class of shares.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Issuance
of Additional Shares</i>. Our amended and restated memorandum and articles of association authorizes our board of directors to issue
additional Ordinary Shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued
shares.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
amended and restated memorandum and articles of association also authorizes our board of directors to establish from time to time one
or more series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series,
including, among other things:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            designation of the series;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            number of shares of the series;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            dividend rights, dividend rates, conversion rights, voting rights; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            rights and terms of redemption and liquidation preferences.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued. Issuance of
these shares may dilute the voting power of holders of Ordinary Shares.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Inspection
of Books and Records</i>. Holders of our Ordinary Shares will have no general right under Cayman Islands law to inspect or obtain copies
of our list of shareholders or our corporate records. However, amended and restated memorandum and articles of association have provisions
that give our shareholders the right to inspect our register of shareholders without charge, and to receive our annual audited financial
statements. See &#8220;Where You Can Find Additional Information.&#8221;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Anti-Takeover
Provisions</i>. Some provisions of our amended and restated memorandum and articles of association may discourage, delay or prevent a
change of control of our company or management that shareholders may consider favorable, including provisions that authorize our board
of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions
of such preference shares without any further vote or action by our shareholders. Further shareholders have no right under the amended
and restated memorandum and articles of association to requisition and convene general meetings of shareholders.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">However,
under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our amended and restated memorandum
and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Exempted
Company</i>. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary
resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside
of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the
same as for an ordinary company except that an exempted company:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">does
                                            not have to file an annual return of its shareholders with the Registrar of Companies;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">is
                                            not required to open its register of members for inspection;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">does
                                            not have to hold an annual general meeting;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            issue negotiable or bearer shares or shares with no par value;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            obtain an undertaking against the imposition of any future taxation (such undertakings are
                                            usually given for 20 years in the first instance);</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            register by way of continuation in another jurisdiction and be deregistered in the Cayman
                                            Islands;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            register as a limited duration company; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">may
                                            register as a segregated portfolio company.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Limited
liability&#8221; means that the liability of each shareholder is limited to the amount unpaid by the shareholder on that shareholder&#8217;s
shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an
illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Differences
in Corporate Law</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Companies Act is derived, to a large extent, from the older Companies Acts of England but does not follow recent English statutory enactments
and accordingly there are significant differences between the Companies Act and the current Companies Act of England. In addition, the
Companies Act differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant
differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the United
States and their shareholders.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Mergers
and Similar Arrangements</i>. The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman
Islands companies and non-Cayman Islands companies. For these purposes, (a) &#8220;merger&#8221; means the merging of two or more constituent
companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (b) a
&#8220;consolidation&#8221; means the combination of two or more constituent companies into a consolidated company and the vesting of
the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation,
the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a)
a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in
such constituent company&#8217;s articles of association. The plan must be filed with the Registrar of Companies of the Cayman Islands
together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each
constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors
of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Court
approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders
of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that
member agrees otherwise. For this purpose, a company is a &#8220;parent&#8221; of a subsidiary if it holds issued shares that together
represent at least ninety percent (90%) of the votes at a general meeting of the subsidiary. The consent of each holder of a fixed or
floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Save
in certain limited circumstances, a shareholder of a Cayman constituent company who dissents from the merger or consolidation is entitled
to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court)
upon dissenting to the merger or consolidation, provided the dissenting shareholder complies strictly with the procedures set out in
the Companies Act. The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which
he or she might otherwise be entitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or
consolidation is void or unlawful.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Separate
from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory provisions that facilitate
the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by seventy-five
per cent in value of the members or class of members, as the case may be, with whom the arrangement is to be made and a majority in number
of each class of creditors with whom the arrangement is to be made, and who must in addition represent seventy-five per cent in value
of each such class of creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings,
convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the
Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved,
the court can be expected to approve the arrangement if it determines that:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            statutory provisions as to the required majority vote have been met;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            shareholders have been fairly represented at the meeting in question and the statutory majority
                                            are acting bona fide without coercion of the minority to promote interests adverse to those
                                            of the class;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            arrangement is such that may be reasonably approved by an intelligent and honest man of that
                                            class acting in respect of his interest; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            arrangement is not one that would more properly be sanctioned under some other provision
                                            of the Companies Act.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Companies Act also contains a statutory power of compulsory acquisition which may facilitate the &#8220;squeeze out&#8221; of a dissentient
minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected within four
months, the offeror may, within a two-month period commencing on the expiration of such four-month period, require the holders of the
remaining shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the
Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud,
bad faith or collusion.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
an arrangement and reconstruction by way of scheme of arrangement is thus approved and sanctioned, or if a tender offer is made and accepted,
in accordance with the foregoing statutory procedures, a dissenting shareholder would have no rights comparable to appraisal rights,
save that objectors to a takeover offer may apply to the Grand Court of the Cayman Islands for various orders that the Grand Court of
the Cayman Islands has a broad discretion to make, which would otherwise ordinarily be available to dissenting shareholders of Delaware
corporations, providing rights to receive payment in cash for the judicially determined value of the shares.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Companies Act also contains statutory provisions which provide that a company may present a petition to the Grand Court of the Cayman
Islands for the appointment of a restructuring officer on the grounds that the company (a) is or is likely to become unable to pay its
debts within the meaning of section 93 of the Companies Act; and (b) intends to present a compromise or arrangement to its creditors
(or classes thereof) either, pursuant to the Companies Act, the law of a foreign country or by way of a consensual restructuring. The
petition may be presented by a company acting by its directors, without a resolution of its members or an express power in its articles
of association. On hearing such a petition, the Cayman Islands court may, among other things, make an order appointing a restructuring
officer or make any other order as the court thinks fit.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shareholders&#8217;
Suits. Conyers, Dill &amp; Pearman, our Cayman Islands legal counsel, is not aware of any reported class action having been brought in
a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed
the availability for such actions. In most cases, we will be the proper plaintiff in any claim based on a breach of duty owed to us,
and a claim against (for example) our officers or directors usually may not be brought by a shareholder. However, based both on Cayman
Islands authorities and on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in
the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
                                            company is acting, or proposing to act, illegally or beyond the scope of its authority;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            act complained of, although not beyond the scope of the authority, could be effected if duly
                                            authorized by more than the number of votes which have actually been obtained; or</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">those
                                            who control the company are perpetrating a &#8220;fraud on the minority.&#8221;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
shareholder may have a direct right of action against us where the individual rights of that shareholder have been infringed or are about
to be infringed.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indemnification
of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which a company&#8217;s
memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision
may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the
consequences of committing a crime. Our amended and restated memorandum and articles of association provide that that we shall indemnify
our directors and officers, and their personal representatives, against all actions, proceedings, costs, charges, expenses, losses, damages
or liabilities incurred or sustained by such persons, other than by reason of such person&#8217;s dishonesty, wilful default or fraud,
in or about the conduct of our company&#8217;s business or affairs (including as a result of any mistake of judgment) or in the execution
or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs,
expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings
concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere. This standard of conduct is generally
the same as permitted under the Delaware General Corporation Law for a Delaware corporation.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional
indemnification beyond that provided in our amended and restated memorandum and articles of association.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling
us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Directors&#8217;
Fiduciary Duties</i>. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and
its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act
in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director
must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction.
The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation.
He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that
the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling
shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed
basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption
may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by
a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company
and therefore it is considered that he owes the following duties to the company &#8212; a duty to act in good faith in the best interests
of the company, a duty not to make a personal profit based on his position as director (unless the company permits him to do so), a duty
not to put himself in a position where the interests of the company conflict with his personal interest or his duty to a third party
and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the
company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties
a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth
courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed
in the Cayman Islands.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Shareholder
Action by Written Consent</i>. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act
by written consent by amendment to its certificate of incorporation. Cayman Islands law permits us to eliminate the right of shareholders
to act by written consent and our amended and restated amended and restated articles of association provide that any action required
or permitted to be taken at any general meetings may be taken upon the vote of shareholders at a general meeting duly noticed and convened
in accordance with our amended and restated amended and restated articles of association and may not be taken by written consent of the
shareholders without a meeting.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Shareholder
Proposals</i>. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting
of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board
of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special
meetings.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Companies Act does not provide shareholders with any right to requisition a general meeting or to put any proposal before a general meeting.
As an exempted Cayman Islands company, we are not obliged by law to call shareholders&#8217; annual general meetings.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Cumulative
Voting</i>. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation&#8217;s
certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders
on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single
director, which increases the shareholder&#8217;s voting power with respect to electing such director. There are no prohibitions in relation
to cumulative voting under the laws of the Cayman Islands but our amended and restated memorandum and articles of association do not
provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders
of a Delaware corporation.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Removal
of Directors</i>. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only
for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides
otherwise. Under our amended and restated memorandum and articles of association, subject to certain restrictions as contained therein,
directors may be removed with or without cause, by an ordinary resolution of our shareholders. An appointment of a director may be on
terms that the director shall automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual
general meeting or upon any specified event or after any specified period in a written agreement between the company and the director,
if any; but no such term shall be implied in the absence of express provision. Under our amended and restated memorandum and articles
of association, a director&#8217;s office shall be vacated if the director (i) becomes bankrupt or has a receiving order made against
him or suspends payment or compounds with his creditors; (ii) is found to be or becomes of unsound mind or dies; (iii) resigns his office
by notice in writing to the company; (iv) without special leave of absence from our board of directors, is absent from three consecutive
meetings of the board and the board resolves that his office be vacated; (v) is prohibited by law from being a director or; (vi) is removed
from office pursuant to the laws of the Cayman Islands or any other provisions of our amended and restated memorandum and articles of
association.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Transactions
with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations
whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation,
it is prohibited from engaging in certain business combinations with an &#8220;interested shareholder&#8221; for three years following
the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which
owns or owned 15% or more of the target&#8217;s outstanding voting share within the past three years. This has the effect of limiting
the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The
statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board
of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder.
This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target&#8217;s
board of directors.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cayman
Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business
combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders,
it does provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect of
constituting a fraud on the minority shareholders.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Dissolution;
Winding up</i>. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution
must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the
board of directors may it be approved by a simple majority of the corporation&#8217;s outstanding shares. Delaware law allows a Delaware
corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated
by the board.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its
members or, if the company is unable to pay its debts, by an ordinary resolution of its members. The court has authority to order winding
up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Variation
of Rights of Shares</i>. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the
approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our
amended and restated memorandum and articles of association, if our share capital is divided into more than one class of shares, the
rights attached to any such class may only be materially adversely varied with the sanction of a resolution passed by a majority of two-thirds
of the votes cast at a separate meeting of the holders of the shares of that class.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendment
of Governing Documents. Under the Delaware General Corporation Law, a corporation&#8217;s governing documents may be amended with the
approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under
Cayman Islands law, our amended and restated memorandum and articles of association may only be amended with a special resolution of
our shareholders.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Rights
of Non-resident or Foreign Shareholders</i>. There are no limitations imposed by our amended and restated memorandum and articles of
association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there
are no provisions in our amended and restated memorandum and articles of association governing the ownership threshold above which shareholder
ownership must be disclosed.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Anti-Money
Laundering &#8212; Cayman Islands</i>. In order to comply with legislation or regulations aimed at the prevention of money laundering,
the Company may be required to adopt and maintain anti-money laundering procedures, and may require subscribers to provide evidence to
verify their identity. Where permitted, and subject to certain conditions, the Company may also delegate the maintenance of our anti-money
laundering procedures (including the acquisition of due diligence information) to a suitable person.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company reserves the right to request such information as is necessary to verify the identity of a subscriber. In the event of delay
or failure on the part of the subscriber in producing any information required for verification purposes, we may refuse to accept the
application, in which case any funds received will be returned without interest to the account from which they were originally debited.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company also reserves the right to refuse to make any redemption payment to a shareholder if directors or officers suspect or are advised
that the payment of redemption proceeds to such shareholder might result in a breach of applicable anti-money laundering or other laws
or regulations by any person in any relevant jurisdiction, or if such refusal is considered necessary or appropriate to ensure compliance
with any such laws or regulations in any applicable jurisdiction.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_046"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">C.
<b><i>Material Contracts.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Except
as otherwise disclosed in this Annual Report (including the exhibits thereto), we are not currently, and have not been in the last two
years, party to any material contract, other than contracts entered into in the ordinary course of business.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_047"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">D.
<b><i>Exchange Controls.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; "><i>Regulations on Foreign
Currency Exchange</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">Under the PRC Foreign
Currency Administration Rules promulgated on January 29, 1996 and last amended on August 5, 2008 and various regulations issued by SAFE
and other relevant PRC government authorities, payment of current account items in foreign currencies, such as trade and service payments,
payment of interest and dividends can be made without prior approval from SAFE by following the appropriate procedural requirements. By
contrast, the conversion of RMB into foreign currencies and remittance of the converted foreign currency outside the PRC for the purpose
of capital account items, such as direct equity investments, loans and repatriation of investment, requires prior approval from SAFE or
its local office.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">On February 13, 2015,
SAFE promulgated the Circular on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment, effective from
June 1, 2015, which cancels the requirement for obtaining approvals of foreign exchange registration of foreign direct investment and
overseas direct investment from SAFE. The application for the registration of foreign exchange for the purpose of foreign direct investment
and overseas direct investment may be filed with qualified banks, which, under the supervision of SAFE, may review the application and
process the registration.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">SAFE promulgated the
Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested
Enterprises, or SAFE Circular 19, effective in June 2015. According to SAFE Circular 19, the flow and use of the RMB capital converted
from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used
for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of banks loans that have been transferred
to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested
enterprise to be used for equity investments within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated
capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. SAFE promulgated
the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy
of Capital Account, or SAFE Circular 16, effective in June 2016, which reiterates some of the rules set forth in SAFE Circular 19, but
changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested
company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises. SAFE Circular
19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from
our initial public offering, to our PRC subsidiary, which may adversely affect our liquidity and our ability to fund and expand our business
in the PRC. On October 23, 2019, SAFE issued Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation
of Cross-border Trade and Investment, or the Circular 28. Circular 28 allows non-investment foreign-invested enterprises to use their
capital funds to make equity investments in China, provided that such investments do not violate the Negative List and the target investment
projects are genuine and in compliance with PRC laws. Since Circular 28 was issued only recently, its interpretation and implementation
in practice are still subject to substantial uncertainties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">On January 26, 2017,
SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance
Verification, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profits
from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing board resolutions
regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic entities must
retain income to account for previous years&#8217; losses before remitting any profits. Moreover, pursuant to SAFE Circular 3, domestic
entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts and
other proof as a part of the registration procedure for outbound investment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">In light of the various
requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, and the fact
that the PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future, we
cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals
on a timely basis, if at all, with respect to future loans to PRC subsidiaries or future capital contributions by us to our PRC subsidiary.
As a result, uncertainties exist as to our ability to provide prompt financial support to our subsidiaries when needed. If we fail to
complete such registrations or obtain such approvals, our ability to use our available funds to capitalize or otherwise fund our PRC operations
may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business
of our PRC subsidiary and consolidated affiliated entities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; "><i>Regulations on Foreign
Exchange Registration of Overseas Investment by PRC Residents</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">SAFE issued the Circular
on Relevant Issues Relating to Domestic Resident&#8217;s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles,
or SAFE Circular 37, which became effective in July 2014, to replace the Circular of the State Administration of Foreign Exchange on Issues
Concerning the Regulation of Foreign Exchange in Equity Finance and Roundtrip Investments by Domestic Residents through Offshore Special
Purpose Vehicles, to regulate foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or
entities to seek offshore investment and financing or conduct round trip investment in China. SAFE Circular 37 defines a SPV as an offshore
entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or
making offshore investment, using legitimate onshore or offshore assets or interests, while &#8220;round trip investment&#8221; is defined
as direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the
ownership, control rights and management rights. SAFE Circular 37 stipulates that, prior to making contributions into an SPV, PRC residents
or entities be required to complete foreign exchange registration with SAFE or its local branch. In addition, SAFE promulgated the Notice
on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015 (which amended
SAFE Circular 37), as amended in 2019, local banks will examine and handle foreign exchange registration for overseas direct investment,
including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 from June 1, 2015.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">PRC residents or entities
who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration as required before the
implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified banks. An amendment
to the registration is required if there is a material change with respect to the SPV registered, such as any change of basic information
(including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges
of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent
notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through
round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise,
including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation,
to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities
to penalties under PRC foreign exchange administration regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">If our shareholders who
are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiary may be prohibited from
distributing its profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in
our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above
could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">Currently, most of our
shareholders have completed Circular 37 Registration and are in compliance. Some of our beneficial owners, who are PRC residents, have
not completed the Circular 37 Registration. All our significant shareholders, directors and officers have completed Circular 37 Registration.
We have asked our shareholders who are Chinese residents to make the necessary applications and filings as required by Circular 37. We
attempt to comply and attempt to ensure that our shareholders who are subject to these rules comply, with the relevant requirements. We
cannot, however, provide any assurances that all of our and future shareholders who are Chinese residents will comply with our request
to make or obtain any applicable registration or comply with other requirements required by Circular 37 or other related rules. In addition,
seven of our shareholders did not register according to the registration procedures stipulated in Circular 37 Registration of the SAFE
when they conducted their other external investment activities unrelated to us. As a result, WFOE is unable to open a new capital account
with banks within China, and may be restricted from remitting funds or handling other foreign exchange businesses within China. Currently,
we are unable to use most of the IPO proceeds (for product development and company operations because we are unable to transfer the funds
from Xiao-I Corporation to WFOE and then to the VIE due to WFOE&#8217;s inability to open a new capital account as discussed above. We
are trying to assist these shareholders with remedying their non-compliance with Circular 37, but we are not sure when we will be able
to accomplish it. See &#8220;Item 3. Key Information&#8212;D. Risk Factors &#8212;Risks Related to Our Corporate Structure&#8212; Some
of our shareholders are not in compliance with the PRC&#8217;s regulations relating to offshore investment activities by PRC residents,
and as a result, currently WFOE is unable to open a new capital account with banks within China, and may be restricted from remitting
funds or handling other foreign exchange businesses within China unless and until we remediate the non-compliance,&#8221; and &#8220;Item
3. Key Information&#8212;D. Risk Factors &#8212;Risks Related to Doing Business in China&#8212;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 our
available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional capital contributions
to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand the business of our
PRC subsidiary and consolidated affiliated entities.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; "><i>Regulations on Dividend
Distribution</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">Distribution of dividends
of foreign investment enterprises are mainly governed by the Foreign Investment Enterprise Law, issued in 1986 and amended in 2000 and
2016 respectively, and the Implementation Rules under the Foreign Investment Enterprise Law, issued in 1990 and amended in 2001 and 2014
respectively. Thus, dividends and distributions from WFOE and the VIE are subject to regulations and restrictions on dividends and payment
to parties outside of China. These regulations permit payment of dividends to Xiao-I by WFOE only out of net income, if any, determined
in accordance with PRC accounting standards and regulations. A PRC company is not permitted to distribute any profits until any losses
from prior fiscal&#160;years have been offset by general reserve fund and profits (if general reserve fund is not enough). Profits retained
from prior fiscal&#160;years may be distributed together with distributable profits from the current fiscal year. In addition, a wholly
foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain
statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. As of December 31, 2022, our PRC
operating entities had restricted amount of US$237,486 (RMB1,569,546) the reserve fund. Moreover, registered share capital and capital
reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. We
have not previously declared or paid cash dividends and we have no plan to declare or pay any dividends in the near future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_048"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">E.
<b><i>Taxation.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following summary of material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in ADSs or Ordinary Shares
is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change.
This summary does not deal with all possible tax consequences relating to an investment in ADSs or Ordinary Shares, such as the tax consequences
under state, local and other tax laws.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cayman
Islands Taxation</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is
no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to investors levied by the
government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought
within the jurisdiction of the Cayman Islands. The Cayman Islands is a party to a double tax treaty entered with the United Kingdom in
2010 but is otherwise is not party to any double tax treaties which are applicable to any payments made to or by our company. There are
no exchange control regulations or currency restrictions in the Cayman Islands.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Payments
of dividends and capital in respect of Ordinary Shares (including Ordinary Shares represented by the ADSs) will not be subject to taxation
in the Cayman Islands and no withholding will be required under Cayman Islands laws on the payment of a dividend or capital to any holder
of Ordinary Shares (including Ordinary Shares represented by the ADSs), nor will gains derived from the disposal of ADSs or Ordinary
Shares be subject to Cayman Islands income or corporation tax.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
stamp duty is payable in the Cayman Islands in respect of the issue of our ADSs or Ordinary Shares or on an instrument of transfer in
respect of our ADSs or Ordinary Shares except those which hold interests in land in the Cayman Islands.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">People&#8217;s
Republic of China Taxation</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Under
the PRC EIT Law and its implementation rules, an enterprise established outside the PRC with a &#8220;<i>de facto</i> management body&#8221;
within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global
income. The implementation rules define the term &#8220;<i>de facto</i> management body&#8221; as the body that exercises full and substantial
control over and overall management of the business, production, personnel, accounts and properties of an enterprise. In April 2009,
the SAT issued the Circular of the SAT on Issues Relating to Identification of PRC-Controlled Overseas Registered Enterprises as Resident
Enterprises in Accordance with the De Facto Standards of Organizational Management (the &#8220;SAT Circular 82&#8221;), which provides
certain specific criteria for determining whether the &#8220;<i>de facto</i> management body&#8221; 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 the
SAT&#8217;s general position on how the &#8220;<i>de facto</i> management body&#8221; test 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 &#8220;<i>de facto</i> management body&#8221;
in the PRC only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the
PRC; (ii) decisions relating to the enterprise&#8217;s financial and human resource matters are made or are subject to approval by organizations
or personnel in the PRC; (iii) the enterprise&#8217;s primary assets, accounting books and records, company seals, and board and shareholder
resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside
in the PRC.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Further
to SAT Circular 82, the SAT issued Announcement of the State Administration of Taxation on Printing and Distributing the Administrative
Measures for Income Tax on Chinese-controlled Resident Enterprises Incorporated Overseas (Trial Implementation) (the &#8220;SAT Bulletin
45&#8221;), which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides
for procedures and administration details of determination on resident status and administration on post-determination matters. Our company
is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and
its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders)
are maintained, outside the PRC. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises
either. As such, we do not believe that our company meets all of the conditions above or is 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 &#8220;<i>de facto</i> management body.&#8221; There can be no assurance that the PRC government
will ultimately take a view that is consistent with us. If the PRC tax authorities determine that our Cayman Islands holding company
is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. For example,
Xiao-I Corporation may be subject to enterprise income tax at a rate of 25% with respect to its worldwide taxable income. Also, a 10%
withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders (including our ADS holders) and with respect
to gains derived by our non-PRC enterprise shareholders (including our ADS holders) from transferring our Ordinary Shares or ADSs and
potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders (including our ADS holders)
and with respect to gains derived by our non-PRC individual shareholders (including our ADS holders) from transferring our Ordinary Shares
or ADSs. See &#8220;Risk Factors &#8212; Risks Relating to Doing Business in China &#8212; Under the PRC Enterprise Income Tax Law, we
may be classified as a PRC &#8220;resident enterprise,&#8221; which could result in unfavorable tax consequences to us and our shareholders
or ADS holders and have a material adverse effect on our results of operations and the value of your investment.&#8221;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
SAT and the Ministry of Finance issued the Notice of Ministry of Finance and State Administration of Taxation on Several Issues relating
to Treatment of Corporate Income Tax Pertaining to Restructured Business Operations of Enterprises (the &#8220;SAT Circular 59&#8221;)
in April 2009, which took effect on January 1, 2008. On October 17, 2017, the SAT issued the Announcement of the State Administration
of Taxation on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, which took effect on December 1, 2017
and was amended on June 15, 2018 (the &#8220;SAT Circular 37&#8221;). By promulgating and implementing the SAT Circular 59 and the SAT
Circular 37, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident
enterprise by a non-PRC resident enterprise.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and
Tax Evasion on Income, or the Tax Arrangement, where a Hong Kong resident enterprise which is considered a non-PRC tax resident enterprise
directly holds at least 25% of a PRC enterprise, the withholding tax rate in respect of the payment of dividends by such PRC enterprise
to such Hong Kong resident enterprise is reduced to 5% from a standard rate of 10%, subject to approval of the PRC local tax authority.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pursuant
to the Circular of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements
(&#8220;Circular 81&#8221;), a resident enterprise of the counter-party to such Tax Arrangement should meet all of the following conditions,
among others, in order to enjoy the reduced withholding tax under the Tax Arrangement: (i) it must take the form of a company; (ii) it
must directly own the required percentage of equity interests and voting rights in such PRC resident enterprise; and (iii) it should
directly own such percentage of capital in the PRC resident enterprise anytime in the 12 consecutive months prior to receiving the dividends.
Furthermore, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties, or the Administrative Measures,
which took effect in November 2015, requires that the non-resident taxpayer shall determine whether it may enjoy the treatments under
relevant tax treaties and file the tax return or withholding declaration subject to further monitoring and oversight by the tax authorities.
Accordingly, Xiao-I Corporation may be able to enjoy the 5% withholding tax rate for the dividends it receives from WFOE, if it satisfies
the conditions prescribed under Circular 81 and other relevant tax rules and regulations. However, according to Circular 81, if the relevant
tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment,
the relevant tax authorities may adjust the favorable withholding tax in the future.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notwithstanding
the foregoing, Shanghai Xiao-I and Guizhou Xiao-I enjoy preferential income tax rate of 15% until 2022 and 2024, respectively, due to
their treatment as &#8220;National High-Tech Enterprises&#8221; in China.</span></p><div>

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</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">United
States Federal Income Taxation Considerations</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following is a summary of certain United States federal income tax considerations generally applicable to the ownership and disposition
of our ADSs or Ordinary Shares by a U.S. holder (as defined below) that acquired our ADSs in our initial public offering or otherwise
and holds our ADSs or Ordinary Shares as &#8220;capital assets&#8221; (generally, property held for investment).</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
summary does not address all aspects of United States federal income taxation that may be important to particular investors in light
of their individual circumstances, including investors subject to special tax rules, for example, certain financial institutions, insurance
companies, broker-dealers, traders in securities that have elected the mark-to-market method of accounting for their securities, partnerships
and their partners, regulated investment companies, real estate investment trusts, and tax-exempt organizations (including private foundations),
investors who are not U.S. holders, investors who own directly, indirectly, or constructively 10% or more of our stock (by vote or value),
investors that will hold their ADSs or Ordinary Shares as part of a straddle, hedge, conversion, constructive sale, or other integrated
transaction for United States federal income tax purposes, investors required to accelerate the recognition of any item of gross income
with respect to our ADSs or Ordinary Shares as a result of such income being recognized on an applicable financial statement, or investors
that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly
from those summarized below.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the &#8220;Code&#8221;), and regulations, rulings
and judicial decisions in effect as of the date hereof. Those authorities may be changed, possibly with retroactive effect, which could
result in United States federal income tax consequences different from those summarized below. This summary does not address all aspects
of United States federal income taxes, such as consequences under the Medicare contribution tax or the alternative minimum tax, and does
not deal with all tax considerations that may be relevant to beneficial owners in light of their personal circumstances. Further, this
summary does not address the consequences under any United States federal tax laws other than United States federal income tax laws (such
as U.S. federal gift or estate tax laws), and does not address the consequences under the tax laws of any state, local or non-U.S. jurisdiction.
We will not seek a ruling from the Internal Revenue Service (&#8220;IRS&#8221;) with respect to any of the United States federal income
tax consequences discussed below and there can be no assurance that the IRS would not assert, or that a court would not sustain, positions
contrary to those described in this summary.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INVESTORS
SHOULD CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE UNITED STATES FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL
AS THE STATE AND LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF OUR ADSs OR ORDINARY SHARES AND
THE POSSIBLE EFFECTS OF ANY CHANGES IN APPLICABLLE TAX LAWS.</b></span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">General</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">For
purposes of this discussion, a &#8220;U.S. holder&#8221; is a beneficial owner of our ADSs or Ordinary Shares that is, for United States
federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity
treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United States
or any state thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust if (A) it is subject to the primary supervision of a United States court and one or more United
States persons (as defined in the Code) are authorized to control all substantial decisions of the trust or (B) it has in effect a valid
election under applicable Treasury regulations to be treated as a United States person for U.S. federal income tax purposes.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
a partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes) is a beneficial
owner of our ADSs or Ordinary Shares, the tax treatment of a partner in the partnership generally will depend upon the status of the
partner and the activities of the partnership. Partnerships holding our ADSs or Ordinary Shares and partners in such partnerships are
urged to consult their tax advisors as to the particular United States federal income tax consequences of an investment in our ADSs or
Ordinary Shares.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit
agreement and any related agreement will be complied with in accordance with their terms. Based on such assumptions, if you hold ADSs,
you should generally be treated as the holder of the underlying Ordinary Shares represented by those ADSs for United States federal income
tax purposes.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
United States Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer
of the underlying Ordinary Shares may be taking actions that are inconsistent with the beneficial ownership of the underlying Ordinary
Shares. Accordingly, the creditability of foreign tax credits by U.S. Holders of ADSs or the availability of the reduced tax rate for
dividends received by certain non-corporate U.S. Holders could be affected by actions taken by intermediaries in the chain of ownership
between the holder of an ADS and the Company.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Passive
Foreign Investment Company Considerations</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A
non-U.S. corporation, such as our company, will be classified as a passive foreign investment company, or PFIC, for any taxable year
if either (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average value of its assets (generally
determined on a quarterly basis) consists of assets that produce passive income or are held for the production of passive income. For
purposes of these calculations, we will be treated as earning our proportionate share of the income and owning our proportionate share
of the assets of any other corporation in which we own, directly or indirectly, 25% (by value) of the stock. Although the law in this
regard is not entirely clear, we treat the VIE and its subsidiaries as being owned by us for U.S. federal income tax purposes because
we control their management decisions and are entitled to all of the economic benefits associated with them (excluding non-controlling
interests). As a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined,
however, that we are not the owner of the VIE and its subsidiaries for U.S. federal income tax purposes, we may be treated as a PFIC
for the current taxable year and any subsequent taxable year.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Assuming
that we are the owner of the VIE and its subsidiaries for U.S. federal income tax purposes, and based upon the manner in which we currently
operate our business through the VIE, the expected composition of our income and assets and the value of our assets, we do not presently
expect to be a PFIC for the current taxable year or the foreseeable future. However, this is a factual determination that must be made
annually after the close of each taxable year, and the application of the PFIC rules is subject to uncertainty in several respects. The
value of our assets for purposes of the PFIC determination generally will be determined by reference to the market price of our ADSs
or Ordinary Shares, which could fluctuate significantly. In addition, our PFIC status will depend on the manner we operate our business.
Furthermore, it is not entirely clear how the contractual arrangements between us, the VIE and its nominal shareholders will be treated
for purposes of the PFIC rules, and we may be or become a PFIC if the VIE is not treated as owned by us. Because of these uncertainties,
there can be no assurance that we will not be a PFIC for the current taxable year in future taxable years.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
discussion below under &#8220;&#8212; Dividends&#8221; and &#8220;&#8212; Sale or Other Disposition of ADSs or Ordinary Shares&#8221;
is written on the basis that we will not be or become a PFIC for U.S. federal income tax purposes. If we are a PFIC for any taxable year
during which a U.S. holder holds our ADSs or Ordinary Shares, the PFIC rules discussed below under &#8220;&#8212; Passive Foreign Investment
Company Rules&#8221; generally will apply to such U.S. holder for such taxable year, and unless the U.S. holder makes certain elections,
will apply in future years even if we cease to be a PFIC.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dividends</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Any
cash distributions (including the amount of any PRC tax withheld) paid on our Ordinary Shares or ADSs out of our current or accumulated
earnings and profits, as determined under U.S. federal income tax principles, generally will be includible in the gross income of a U.S.
holder as dividend income on the day actually or constructively received by the U.S. holder. Because we do not intend to determine our
earnings and profits on the basis of U.S. federal income tax principles, the full amount of any distribution we pay generally will be
treated as a &#8220;dividend&#8221; for U.S. federal income tax purposes. Dividends received on our Ordinary Shares or ADSs will not
be eligible for the dividends received deduction generally allowed to corporations. Dividends received by individuals and certain other
non-corporate U.S. holders may be subject to tax at the lower capital gain tax rates applicable to &#8220;qualified dividend income,&#8221;
provided that certain conditions are satisfied, including that (1) our ADSs or Ordinary Shares, as applicable, on which the dividends
are paid are readily tradable on an established securities market in the United States, or, in the event that we are deemed to be a PRC
resident enterprise under the PRC Enterprise Income Tax Law, we are eligible for the benefits of the United States-PRC income tax treaty
(the &#8220;Treaty&#8221;), (2) we are neither a PFIC nor treated as such with respect to such a U.S. holder for the taxable year in
which the dividend was paid and the preceding taxable year, and (3) certain holding period requirements are met. Ordinary shares or ADSs
will generally be considered for the purpose of clause (1) above to be readily tradable on an established securities market in the United
States if they are listed on Nasdaq, as our ADSs are expected to be, although there can be no assurance in this regard.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see &#8220;&#8212; People&#8217;s
Republic of China Taxation&#8221;), we may be eligible for the benefits of the Treaty. If we are eligible for such benefits, dividends
we pay on our Ordinary Shares or ADSs would be eligible for the reduced rates of taxation described in the preceding paragraph.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dividends
paid on our Ordinary Shares or ADSs, if any, generally will be treated as income from foreign sources and generally will constitute passive
category income for U.S. foreign tax credit purposes. Depending on the U.S. holder&#8217;s individual facts and circumstances, a U.S.
holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any non-refundable foreign
withholding taxes imposed on dividends received on our Ordinary Shares or ADSs. A U.S. holder who does not elect to claim a foreign tax
credit for foreign taxes withheld may instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholding,
but only for a year in which such holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax
credit are complex and their outcome depends in large part on the U.S. holder&#8217;s individual facts and circumstances. Accordingly,
U.S. holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.</span></p><div>

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</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sale
or Other Disposition of Our ADSs or Ordinary Shares</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Subject
to the PFIC rules discussed below, a U.S. holder generally will recognize capital gain or loss upon the sale or other disposition of
our ADSs or Ordinary Shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. holder&#8217;s
adjusted tax basis in such ADSs or Ordinary Shares. Any capital gain or loss will be long-term if the ADSs or Ordinary Shares have been
held for more than one year and generally will be United States source gain or loss for United States foreign tax credit purposes. Long-term
capital gain of individuals and certain other non-corporate U.S. holders generally is eligible for a reduced rate of taxation. The deductibility
of a capital loss may be subject to limitations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the event that we are treated as a PRC &#8220;resident enterprise&#8221; under the Enterprise Income Tax Law and gain from the disposition
of the ADSs or Ordinary Shares is subject to tax in the PRC, a U.S. holder that is eligible for the benefits of the income tax treaty
between the United States and the PRC may elect to treat the gain as PRC-source gain under the Treaty. If a U.S. holder is not eligible
for the benefits of the income tax treaty or fails to make the election to treat any such gain as PRC-source, then such U.S. holder may
not be able to use the foreign tax credit arising from any PRC tax imposed on the disposition of the ADSs or Ordinary Shares unless such
credit can be applied (subject to applicable limitations) against U.S. federal income tax due on other income derived from foreign sources
in the same income category (generally, the passive category). U.S. holders are advised to consult their tax advisors regarding the tax
consequences if a foreign tax is imposed on a disposition of our ADSs or Ordinary Shares, including the availability of the foreign tax
credit under their particular circumstances and the election to treat any gain as PRC-source. The deductibility of a capital loss may
be subject to limitations.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Passive
Foreign Investment Company Rules</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we are a PFIC for any taxable year during which a U.S. holder holds our ADSs or Ordinary Shares, and unless the U.S. holder makes a mark-to-market
election (as described below), the U.S. holder generally will be subject to special tax rules that have a penalizing effect, regardless
of whether we remain a PFIC for subsequent taxable years, on (i) any excess distribution that we make to the U.S. holder (which generally
means any distribution paid during a taxable year to a U.S. holder that is greater than 125% of the average annual distributions paid
in the three preceding taxable years or, if shorter, the U.S. holder&#8217;s holding period for the ADSs or Ordinary Shares), and (ii)
any gain realized on the sale or other disposition, including, under certain circumstances, a pledge, of ADSs or Ordinary Shares. Under
the PFIC rules:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">such
                                            excess distribution and/or gain will be allocated ratably over the U.S. holder&#8217;s holding
                                            period for the ADSs or Ordinary Shares;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            amount allocated to the current taxable year and any taxable years in the U.S. holder&#8217;s
                                            holding period prior to the first taxable year in which we are a PFIC, or pre-PFIC year,
                                            will be taxable as ordinary income;</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
                                            amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject
                                            to tax at the highest tax rate in effect for that year; and</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">an
                                            interest charge generally applicable to underpayments of tax will be imposed on the tax attributable
                                            to each prior taxable year, other than a pre-PFIC year.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
we are a PFIC for any taxable year during which a U.S. holder holds our ADSs or Ordinary Shares and any of our non-United States subsidiaries,
our consolidated VIE or any subsidiary of our consolidated VIE is also a PFIC, such U.S. holder would be treated as owning a proportionate
amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. holders are advised to consult
their tax advisors regarding the application of the PFIC rules to any of our subsidiaries, our consolidated VIE or any subsidiary of
our consolidated VIE.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
an alternative to the foregoing rules, a U.S. holder of &#8220;marketable stock&#8221; in a PFIC may make a mark-to-market election with
respect to such stock, provided that such stock is regularly traded on a qualified exchange or other market, as defined in applicable
United States Treasury Regulations. We expect that our ADSs to be listed on Nasdaq and to be treated as marketable stock for this purposes.
We anticipate that our ADSs should qualify as being regularly traded, but no assurances may be given in this regard. If a U.S. holder
makes this election, the holder generally will (i) include as ordinary income for each taxable year that we are a PFIC the excess, if
any, of the fair market value of ADSs or Ordinary Shares held at the end of the taxable year over the adjusted tax basis of such ADSs
or Ordinary Shares and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ADSs or Ordinary Shares over
the fair market value of such ADSs or Ordinary Shares held at the end of the taxable year, but such deduction will only be allowed to
the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. holder&#8217;s adjusted
tax basis in the ADSs or Ordinary Shares would be adjusted to reflect any income or loss resulting from the mark-to-market election.
If a U.S. holder makes a mark-to-market election in a year when we are classified as a PFIC and we subsequently cease to be classified
as a PFIC, the holder will not be required to take into account the gain or loss described above during any period that we are not classified
as a PFIC. If a U.S. holder makes a mark-to-market election, any gain such U.S. holder recognizes upon the sale or other disposition
of our ADSs or Ordinary Shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary
loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of
the mark-to-market election. If a U.S. holder makes a mark-to-market election it will be effective for the taxable year for which the
election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a qualified exchange or the IRS consents
to the revocation of the election.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Because
a mark-to-market election cannot be made for any lower-tier PFICs that a PFIC may own, a U.S. holder who makes a mark-to-market election
with respect to our ADSs or Ordinary Shares generally will continue to be subject to the general PFIC rules with respect to such U.S.
holder&#8217;s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for United States federal
income tax purposes.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not intend to provide information necessary for U.S. holders to make qualified electing fund elections, which, if available, would
result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described above.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
a U.S. holder owns our ADSs or Ordinary Shares during any taxable year that we are a PFIC, such holder would generally be required to
file an annual IRS Form 8621. Each U.S. holder is advised to consult its tax advisors regarding the potential tax consequences to such
holder if we are or become a PFIC, including the possibility of making a mark-to-market election.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_049"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F.
<b><i>Dividends and Paying Agents.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_050"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">G.
<b><i>Statement by Experts.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_051"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">H.
<b><i>Documents on Display.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required
to file annually a Form 20-F containing financial statements audited by an independent registered public accounting firm no later than
120 days after the close of each fiscal year, which is December 31 of each year. The SEC also maintains a web site at www.sec.gov that
contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the
SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing
and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting
and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
also make available on our website, free of charge, our Annual Report and the text of our reports on Form 6-K, including any amendments
to these reports, as well as some other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished
to the SEC. Our website address is <i>www.xiaoi.com</i>. The reference to our website is an inactive textual reference only, and information
contained therein or connected thereto is not incorporated into this Annual Report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_052"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">I.
<b><i>Subsidiary Information.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_052a"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>J.
Annual Report to Security Holders.</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_053"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
11. Quantitative and Qualitative Disclosures About Market Risk.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Concentration of Credit Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="text-align: justify; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Financial instruments that potentially expose us to concentrations
of credit risk consist primarily of accounts receivable. We conduct credit evaluations of our customers, and generally do not require
collateral or other security from them. We evaluate our collection experience and long outstanding balances to determine the need for
an allowance for doubtful accounts. We conduct periodic reviews of the financial condition and payment practices of our customers to minimize
collection risk on accounts receivable. For the years ended December 31, 2020, 2021 and 2022, the percentage of our revenue attributable
to our largest customer amounted to 17.7%, 41.2% and 20.4%, respectively, while the percentage of our revenue attributable our five largest
customers for the years ended December 31, 2021 and 2022 amounted to 42.8%, 67.1% and 58.4%, respectively.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Concentration of Suppliers Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">We rely on a limited
number of suppliers for certain essential services to operate our network and provide products and solutions to our customers. Due to
the limited number of relevant suppliers available in China, we rely on a limited number of suppliers for cloud, internet data center
services and hardware. Our purchase from top-three suppliers in aggregate accounted for 62.5%, 79.2% and 66.8% of total purchase for the
years ended December 31, 2020, 2021 and 2022, respectively. We may experience shortages in components or delays in delivery as a result
of natural disasters, increased demand in the industry or our suppliers&#8217; lacking sufficient rights to supply the servers or other
products or services.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Foreign Exchange Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">Foreign currency risk
arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Substantially
all of our revenue-generating transactions, and a majority of our expense-related transactions, are denominated in Renminbi, which is
the functional currency of our operations. We do not hedge against currency risk.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">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.
To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar
would reduce the Renminbi amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the
purpose of making payments for dividends to holders of our ADSs, or for other business purposes, appreciation of the U.S. dollar against
the Renminbi would reduce the U.S. dollar amounts available to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">Our functional currency
is the RMB, and our financial statements are presented in U.S. dollars. The RMB appreciated by 8.23% and depreciated by 2.34% for the
years ended December 31, 2022 and 2021, respectively. It is difficult to predict how market forces or PRC or U.S. government policy may
impact the exchange rate between the RMB and the U.S. dollar in the future. The change in the value of the RMB relative to the U.S. dollar
may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying changes in our business or
results of operations. Currently, our assets, liabilities, revenues and costs are denominated in RMB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; "><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; "><b><i>Interest Rate Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">We are not currently
exposed to interest rate risk. We do not own any interest-bearing instruments and our interest-bearing debt carries a fixed rate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; "><b><i>Market Price Risk</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">We are not currently
exposed to commodity price risk or market price risk.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; "><b><i>Seasonality</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">Seasonality does not
materially affect our business or the results of our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Liquidity
risk</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
aim to maintain sufficient cash, cash equivalents and short-term investments in wealth management products to meet obligations coming
due as well as future operating and capital requirements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inflation
Risk</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
do not believe that inflation has had a material effect on our business, financial condition, or results of operations. If our costs
become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our
inability or failure to do so could harm our business, financial condition, and operating results.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 131; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->123<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_054"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
12. Description of Securities Other than Equity Securities.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_055"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
<b><i>Debt Securities.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_056"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.
<b><i>Warrants and Rights.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_057"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">C.
<b><i>Other Securities.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_058"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">D.
<b><i>American Depositary Shares.</i></b></span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Citibank,
N.A. has, as depositary, will register and deliver the ADSs. Citibank&#8217;s depositary offices are located at 388 Greenwich Street,
New&#160;York, New&#160;York 10013. Each ADS represents one-third&#160;of an Ordinary Share deposited with Citibank, N.A. &#8212; Hong&#160;Kong,
located at 9/F Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon, Hong&#160;Kong, as custodian for the depositary.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
depositary will hold the Ordinary Shares underlying your ADSs. As an ADS holder, you will not be treated as one of Xiao-I&#8217;s shareholders
and you will not have direct shareholder rights. You will have the rights of an ADS holder as provided in the deposit agreement among
Xiao-I, the depositary and holders and beneficial owners of ADSs from time to time.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Xiao-I&#160;does
not expect to pay dividends in the foreseeable future. If, however, it declares dividends on its Ordinary Shares, the depositary will
pay you the cash dividends and other distributions it receives on Xiao-I&#8217;s Ordinary Shares after deducting its fees and expenses
in accordance with the terms set forth in the deposit agreement.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">You
may surrender your ADSs to the depositary in exchange for Ordinary Shares. The depositary will charge you fees for any exchange.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="text-decoration:underline">Fees
and Charges</span></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
an ADS holder, you will be required to pay the following fees under the terms of the deposit agreement:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 59%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Service</b></span></td>
    <td style="padding-bottom: 1.5pt; width: 2%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 39%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Rate</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)
    Issuance of ADSs (<i>e.g.</i>, an issuance upon a deposit of Shares, upon a change in the ADS(s)-to-Share(s) ratio, or for any other
    reason), excluding issuances as a result of distributions described in paragraph (4) below.</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) issued.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)
    Cancellation of ADSs (<i>e.g.</i>, a cancellation of ADSs for Delivery of deposited Shares, upon a change in the ADS(s)-to-Share(s)
    ratio, or for any other reason).</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) cancelled.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)
    Distribution of cash dividends or other cash distributions (<i>e.g.</i>, upon a sale of rights and other entitlements).</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) held.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)
    Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii)&#160;an exercise of rights to purchase
    additional ADSs.</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) held.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)
    Distribution of securities other than ADSs or rights to purchase additional ADSs (<i>e.g.</i>, spin-off shares).</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) held.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)
    ADS Services.</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) held on the applicable record date(s) established by the Depositary.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)
    Registration of ADS Transfers (<i>e.g.</i>, upon a registration of the transfer of registered ownership of ADSs, upon a transfer
    of ADSs into DTC and&#160;<i>vice versa</i>, or for any other reason).</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) transferred.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif">&#160;</td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(8)
    Conversion of ADSs of one series for ADSs of another series (<i>e.g.</i>, upon conversion of Partial Entitlement ADSs for Full Entitlement
    ADSs, or upon conversion of Restricted ADSs into freely transferable ADSs, and&#160;<i>vice versa</i>).</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) converted.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 132; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->124<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
an ADS holder, you will also be responsible to pay certain charges such as:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">taxes
(including applicable interest and penalties) and other governmental charges;</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
registration fees as may from time to time be in effect for the registration of Ordinary Shares on the share register and applicable
to transfers of Ordinary Shares to or from the name of the custodian, the depositary or any nominees upon the making of deposits and
withdrawals, respectively;</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">certain
cable, telex and facsimile transmission and delivery expenses;</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
fees, expenses, spreads, taxes and other charges of the depositary and/or service providers (which may be a division, branch or affiliate
of the depositary) in the conversion of foreign currency;</span></td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#160;</td><td style="text-align: justify">&#160;</td>
</tr></table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
reasonable and customary out-of-pocket&#160;expenses incurred by the depositary in connection with compliance with exchange control regulations
and other regulatory requirements applicable to Ordinary Shares, ADSs and ADRs;</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
fees, charges, costs and expenses incurred by the depositary, the custodian, or any nominee in connection with the ADR program; and</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
amounts payable to the depositary by any party to the deposit agreement pursuant to any ancillary agreement to the deposit agreement
in respect of the ADR program, the ADSs and the ADRs.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ADS
fees and charges for (i)&#160;the issuance of ADSs, and (ii)&#160;the cancellation of ADSs are charged to the person for whom the ADSs
are issued (in the case of ADS issuances) and to the person for whom ADSs are cancelled (in the case of ADS cancellations). In the case
of ADSs issued by the depositary into The Depository Trust Company (&#8220;DTC&#8221;), the ADS issuance and cancellation fees and charges
may be deducted from distributions made through DTC, and may be charged to the DTC participant(s)&#160;receiving the ADSs being issued
or the DTC participant(s)&#160;holding the ADSs being cancelled, as the case may be, on behalf of the beneficial owner(s)&#160;and will
be charged by the DTC participant(s)&#160;to the account of the applicable beneficial owner(s)&#160;in accordance with the procedures
and practices of the DTC participants as in effect at the time. ADS fees and charges in respect of distributions and the ADS service
fee are charged to the holders as of the applicable ADS record date. In the case of distributions of cash, the amount of the applicable
ADS fees and charges is deducted from the funds being distributed. In the case of (i)&#160;distributions other than cash and (ii)&#160;the
ADS service fee, holders as of the ADS record date will be invoiced for the amount of the ADS fees and charges and such ADS fees and
charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADS&#160;fees and charges for distributions
other than cash and the ADS service fee may be deducted from distributions made through DTC, and may be charged to the DTC participants
in accordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADS fees
and charges to the beneficial owners for whom they hold ADSs. In the case of (i)&#160;registration of ADS transfers, the ADS transfer
fee will be payable by the ADS Holder whose ADSs are being transferred or by the person to whom the ADSs are transferred, and (ii)&#160;conversion
of ADSs of one series for ADSs of another series, the ADS conversion fee will be payable by the Holder whose ADSs are converted or by
the person to whom the converted ADSs are delivered.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service
until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder. Note that
the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior
notice of such changes. The depositary may reimburse us for certain expenses incurred by us in respect of the ADR program, by making
available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the
depositary agree from time to time.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><span style="text-decoration:underline">Payments
by Depositary</span></b></span></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
of April 25, 2023, we had not received any  payments  from Citibank, N.A., the current depositary bank for our
ADR program.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-weight: normal">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_059"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART
II</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_060"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
13. Defaults, Dividend Arrearages and Delinquencies.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_061"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
14. Material Modifications to the Rights of Security Holders and Use of Proceeds.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On
March&#160;8, 2023, the SEC declared effective our registration statement on Form F-1 (File No. 333-268889), as amended, filed in connection
with our IPO (the &#8220;Registration Statement&#8221;). Pursuant to the Registration Statement, we registered the offer and sale of
6,900,000 of our ADSs, including up to 900,000 ADSs pursuant to the underwriters&#8217; option to purchase additional ADSs. Prime Number
Capital LLC acted as representative of the underwriters for the offering.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March&#160;13, 2023, we issued and sold 5,700,000
of our ADSs, at a price to the public of $6.80 per share. The aggregate offering price of the shares sold was approximately $38.76 million.
We received net proceeds of $35.44 million, after deducting underwriting discounts, commissions and offering expenses of $3.32 million.
No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any
persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates. The offering terminated after the sale
of all securities registered pursuant to the Registration Statement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Below
is a summary of the currently expected use of the net proceeds from our IPO: </span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">research
                                            and development;</span></td></tr><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
                                                                             </table><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">investment
                                            in technology infrastructure, marketing and branding, and other capital expenditure; and</span></td></tr><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif">&#160;</td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
                                                                                                                                                     </table><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"></td><td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">other
                                            general corporate purposes.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_062"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
15. Controls and Procedures.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)
<span style="text-decoration:underline">Disclosure Controls and Procedures.</span></span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
required by Rule 13a-15 under the Exchange Act, management, including our chief executive officer and our chief financial officer, has
evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Disclosure
controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports
we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC. Disclosure controls and procedures include, without limitations, controls and procedures designed to ensure that
information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated
to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate
to allow timely decisions regarding our required disclosures.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Based
on the foregoing, our chief executive officer and our chief financial officer have concluded that, as of December 31, 2022, our disclosure
controls and procedures were not effective due to two material weaknesses in our internal control over the financial statement closing
process.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>(b) <span style="text-decoration:underline">Management&#8217;s Annual Report on Internal
Control over Financial Reporting</span>.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>
</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
Annual Report does not include a report of management&#8217;s assessment regarding internal control over financial reporting due to a
transition period established by rules of the SEC for newly public companies.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 134; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->126<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the audit of our consolidated
financial statements, as of and for the years ended December 31, 2021 and 2022, we identified two material weaknesses in our internal
control over the financial statement closing process. 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 consolidated
financial statements will not be prevented or detected on a timely basis. The material weakness that have been identified relates to (i)
our lack of sufficient and competent financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and reporting
requirements set forth by the SEC to address complex U.S. GAAP technical accounting issues, and to prepare and review consolidated financial
statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements and (ii) our lack of internal file management
procedures and effective recognition procedures to recognize revenue and costs timely.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are working to remediate these material weaknesses
and are taking steps to strengthen our internal control. Specifically, we are working to develop and implement a staffing plan for hiring
additional accounting and finance personnel in 2023, hire additional qualified resources with appropriate knowledge and expertise to handle
complex accounting issues and effectively prepare financial statements and conduct regular and continuous U.S. GAAP accounting and financial
reporting training programs for our financial reporting and accounting personnel. In order to maintain and improve the effectiveness of
our disclosure controls and procedures and internal controls over financial reporting, we will need to expend significant resources and
provide significant management oversight. We plan to adopt measures to improve our internal file management procedures and an effective
recognition procedure by (i) establishing internal document management policies and systems, (ii) continuing our efforts to implement
necessary review and controls at relevant levels and all important documents and contracts will be submitted to the office of our chief
administrative officers for retention and review, and (iii) establishing standard procedures to recognize revenue and costs based on the
contracts service periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><b><i>(c) &#160; <span style="text-decoration:underline">Attestation Report of the Registered
Public Accounting Firm</span>.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This
Annual Report does not include an attestation report of the Company&#8217;s registered public accounting firm due to a transition period
established by rules of the SEC for newly public companies and because we are an emerging growth company under the JOBS Act.</span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in">&#160;</p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(d)
<span style="text-decoration:underline">Changes in Internal Control over Financial Reporting.</span></span></p><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other than as described above, there were no changes in our internal
control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the year ended December 31, 2022
that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_063"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
16. [Reserved]</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_064"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
16.A. Audit Committee Financial Expert.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our audit committee, which consists of H. David
Sherman, Jun Xu and Zhong Lin, assists the board in overseeing our accounting and financial reporting processes and the audits of our
consolidated financial statements. H. David Sherman serves as Chairman of the committee. Each committee member satisfies the &#8220;independence&#8221;
requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Global Market and meets the independence standards under Rule 10A-3
under the Exchange Act. In addition, our board of directors has determined that H. David Sherman qualifies as an &#8220;audit committee
financial expert&#8221; as defined in Item 16A of the Instructions to Form 20-F and meets NASDAQ&#8217;s financial sophistication requirements
due to his current and past experience in various companies in which he was responsible for, amongst others, the financial oversight responsibilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->127<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_065"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
16.B. Code of Ethics.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
board has adopted, a Code of Business Conduct and Ethics that is applicable to all our employees, directors and executive officers, a
copy of which is available under the &#8220;Governance Documents&#8221; section of our website at https://ir.xiaoi.com/. We expect to
disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and
Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons
performing similar functions.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_066"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
16.C. Principal Accountant Fees and Services.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered
by Marcum Asia CPAs LLP, our principal external auditors, for the periods indicated.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Year Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 0.75pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left; padding-left: 0.75pt"><span style="text-decoration:underline">Audit fees</span> (1)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">377,000</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">340,000</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 0.75pt"><span style="text-decoration:underline">All other fees</span> (2)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8211;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8211;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; padding-left: 0.75pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">377,000</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">340,000</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Audit
                                            fees&#8221; means the aggregate fees billed in each of the fiscal years listed for professional
                                            services rendered by our principal auditors for the audit of our consolidated and subsidiary
                                            financial statements and other audit or interim review services provided in connection with
                                            statutory and regulatory filings or engagements.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
<td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;All
                                            other fees&#8221; means the aggregate fees billed in each of the fiscal years listed for
                                            products and services provided by our principal auditors, other than the services reported
                                            under audit fees, audit-related fees and tax fees.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
audit committee pre-approves all audit and non-audit services to be performed by the independent auditors and the related fees for such
services other than prohibited nonauditing services as promulgated under rules and regulations of the SEC (subject to the inadvertent
de minimis exceptions set forth in the Exchange Act and the SEC rules).</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_067"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"> <span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item 16.D. Exemptions from the Listing Standards for Audit Committees.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_068"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_069"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
16.F. Change in Registrant&#8217;s Certifying Accountant.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">None.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_070"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
16.G. Corporate Governance.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are a &#8220;foreign private issuer,&#8221;
as defined by the SEC. Under the federal securities laws of the United States, foreign private issuers are subject to different disclosure
requirements than U.S.-domiciled registrants. As a result, in accordance with the rules and regulations of Nasdaq, we may at our option
comply with home country governance requirements and certain exemptions thereunder rather than complying with Nasdaq Global Market corporate
governance standards. We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable
corporate governance requirements of the Sarbanes-Oxley Act, the rules adopted by the SEC and the Nasdaq Global Market listing standards.
We currently intend to rely on the home country practices that will exempt us from having a compensation committee or a nominating and
corporate governance committee consisting entirely of independent directors. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;
SUMMARY OF RISK FACTORS&#8212;Foreign Private Issuer&#8221; and &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Relating
to the ADSs&#8212; As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation
to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may
afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->128<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accordingly,
our shareholders will not have the same protections afforded to shareholders of companies that are mandatorily subject to all of the
corporate governance requirements of Nasdaq and the domestic reporting requirements of the SEC. We may utilize these exemptions for as
long as we continue to qualify as a foreign private issuer.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_071"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
16.H. Mine Safety Disclosure.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_072"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
16.I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Not
applicable.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_073"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Item
16.J. Insider Trading Policies.</b></span></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We have adopted an insider trading policy (the &#8220;Policy&#8221;)
to promote compliance with applicable securities laws and regulations, including those that prohibit insider trading. The Policy applies
to all officers, directors, and employees of the Company. As someone subject to the Policy, individuals are responsible for ensuring that
members of their immediate family and household also comply with the Policy. The Policy also applies to any entities that individuals
control, including any corporations, partnerships, or trusts, and transactions by such entities should be treated for the purposes of
the Policy and applicable securities laws as if they were for their own account. The Company may determine that the Policy applies to
additional persons with access to material nonpublic information, such as contractors or consultants. The Policy extends to all activities
within and outside individuals&#8217; Company duties.&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The insider trading policy establishes the following guidelines and
procedures:&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
                                            officer, director, or employee (or any other person designated as subject to this Policy)
                                            shall purchase or sell any type of security while in possession of material nonpublic information
                                            relating to the security or the issuer of such security, whether the issuer of such security
                                            is the Company or any other company.</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
                                                                                                                                                  </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additionally,
                                            no officer, director or employee shall purchase or sell any security of the Company during
                                            the period beginning on the 14th calendar day before the end of any fiscal quarter of the
                                            Company and ending upon completion of the second full trading day after the public release
                                            of earnings data for such fiscal quarter or during any other trading suspension period declared
                                            by the Company.</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
                                                                                       </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">From
                                            time to time, events will occur that are material to the Company and cause certain officers,
                                            directors, or employees to be in possession of material nonpublic information. When that
                                            happens, the Company will recommend that those in possession of the material nonpublic information
                                            suspend all trading in the Company&#8217;s securities until the information is no longer
                                            material or has been publicly disclosed.</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
                                                                                                       </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">When
                                            such event-specific blackout periods occur, those subject to it will be notified by the Company.
                                            The event-specific blackout period will not be announced to those not subject to it, and
                                            those subject to it or otherwise aware of it should not disclose it to others.</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
                                                                                                       </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Even
                                            if the Company has not notified you that you are subject to an event-specific blackout period,
                                            if you are aware of material nonpublic information about the Company, you should not trade
                                            in Company securities. Any failure by the Company to designate you as subject to an event-specific
                                            blackout period, or to notify you of such designation, does not relieve you of your obligation
                                            not to trade in the Company&#8217;s securities while possessing material nonpublic information.</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
                                       </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">No
                                            officer, director, or employee shall directly or indirectly communicate (or &#8220;tip&#8221;)
                                            material nonpublic information to anyone outside the Company (except in accordance with the
                                            Company&#8217;s policies regarding the protection or authorized external disclosure of Company
                                            information) or to anyone within the Company other than on a &#8220;need-to-know&#8221; basis.</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
                                                                          </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"></td><td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insiders
                                            may be liable for communicating or tipping material nonpublic information to a third party
                                            (&#8220;tippee&#8221;), and insider trading violations are not limited to trading or tipping
                                            by insiders. Persons other than insiders can also be liable for insider trading, including
                                            tippees who trade on material nonpublic information tipped to them or individuals who trade
                                            on material nonpublic information that has been misappropriated. Insiders may be held liable
                                            for tipping even if they receive no personal benefit from tipping and even if no close personal
                                            relationship exists between them and the tippee.</span></td></tr><tr style="vertical-align: top">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
                                                                                                                                                             </table><div>

</div><table cellpadding="0" cellspacing="0" style="font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tippees
                                            inherit an insider&#8217;s duties and are liable for trading on material nonpublic information
                                            illegally tipped to them by an insider. Similarly, just as insiders are liable for the insider
                                            trading of their tippees, so are tippees who pass the information along to others who trade.
                                            In other words, a tippee&#8217;s liability for insider trading is no different from that
                                            of an insider. Tippees can obtain material nonpublic information by receiving overt tips
                                            from others or through, among other things, conversations at social, business, or other gatherings.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We are committed to maintaining the highest standards of ethical conduct
and have implemented these insider trading policies and procedures to ensure compliance with applicable securities laws and to protect
the interests of our shareholders.&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 137; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->129<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_074"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART
III</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_075"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
17. Financial Statements.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
have elected to furnish financial statements and related information specified in Item 18.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_076"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
18. Financial Statements.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Financial
statements are filed as part of this Annual Report beginning on page F-1.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><div><a id="a_077"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Item
19. Exhibits.</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <td style="text-align: left; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 9%"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b style="text-decoration: none">Exhibit<br/>
Number</b></span>&#160;</p></td>
    <td style="width: 1%">&#160;</td>
    <td style="text-align: justify; border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; width: 90%"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Description
of Document</b></span></p></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.1*</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex1-1_xiaoicorp.htm">Amended and Restated Memorandum and Articles of Association of the Registrant</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.1</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1472033/000119380523000083/e618220_ex99-a.htm">Registrant&#8217;s Specimen American Depositary Receipt (included in Exhibit 2.3) (1)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.2</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex4-2_xiao1corp.htm">Registrant&#8217;s Specimen Certificate for Ordinary Shares (2)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.3</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1472033/000119380523000083/e618220_ex99-a.htm">Form of Deposit Agreement, among the Registrant, the depositary and the holders and beneficial owners of American Depositary Shares issued thereunder (3)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.4*</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex2-4_xiaoicorp.htm">Description of Securities</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.1</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-1_xiao1corp.htm">2023 Share Incentive Plan (4)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.2</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-2_xiao1corp.htm">Form of Indemnification Agreement between the Registrant and its directors and executive officers (5)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.3</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-3_xiao1corp.htm">English Translation of Exclusive Business Cooperation Agreement between Zhizhen Artificial Intelligence Technology (Shanghai) Company Limited and Shanghai Xiao-i Robot Technology Company Limited dated March&#160;29, 2019 (6)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.4</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-4_xiao1corp.htm">English Translation of Exclusive Option Agreement among Zhizhen Artificial Intelligence Technology (Shanghai) Company Limited, Shanghai Xiao-i Robot Technology Company Limited and Each Shareholder of Shanghai Xiao-i Robot Technology Company Limited dated March&#160;29, 2019 (7)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.5</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-5_xiao1corp.htm">English Translation of Share Interest Pledge Agreement among Zhizhen Artificial Intelligence Technology (Shanghai) Company Limited and Each Shareholder of Shanghai Xiao-i Robot Technology Company Limited dated March&#160;29, 2019 (8)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.6</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-6_xiao1corp.htm">English Translation of Power of Attorney Agreement granted to Zhizhen Artificial Intelligence Technology (Shanghai) Company Limited by each shareholder of Shanghai Robot Technology Company Limited dated March&#160;29, 2019 (9)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.7</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-7_xiao1corp.htm">English Translation of Form of Spousal Commitment Letters Signed by Each Spouse of the Shareholders of Shanghai Xiao-i Robot Technology Co., Ltd. (10)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.8</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-8_xiao1corp.htm">English Translation of Form Investment Agreement Related to Convertible Loans (11)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.9</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-9_xiao1corp.htm">English Translation of Intelligent Drawing Review Platform License Agreement between Shanghai Xiao-i Robot Technology Company Limited and China Construction Third Engineering Bureau Group Limited. (Customer A) (12)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.10</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-10_xiao1corp.htm">English Translation of Cloud Computing Technical Services Cooperation Agreement between Shanghai Xiao-i Robot Technology Company Limited and Beijing Blanstar Technology Co., Ltd. (Supplier A) (13)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.11</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-11_xiao1corp.htm">English Translation of Operation and Technical Service Agreement of Intelligent Plan Review Platform Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and China Construction Third Engineering Bureau Group Limited (Customer A) (14)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.12</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-12_xiao1corp.htm">English Translation of AI Core Product Cloud Platform Lease Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Beijing Wanjie Data Technology Co., Ltd. (Customer B) (15)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.13</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390022081122/ff12022ex10-13_xiao1corp.htm">English Translation of Software Procurement Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Beijing Kaiwu Digital Intelligence Technology Co., Ltd. (Supplier B) (16)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.14</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390023010711/ff12023a1ex10-14_xiaoicorp.htm">English Translation of Services Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and China Construction Third Bureau Installation Engineering Co., Ltd. (Customer C) (17)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.15</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390023010711/ff12023a1ex10-15_xiaoicorp.htm">English Translation of Supplier Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and Beijing Telecom Tongchangda Information Co., Ltd. (Supplier C) (18)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.16</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390023010711/ff12023a1ex10-16_xiaoicorp.htm">English Translation of Services Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and Fengzhuo Jiye Technology Innovation (Beijing) Co., Ltd. (Customer D) (19)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.17</span></td>
    <td>&#160;</td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390023010711/ff12023a1ex10-17_xiaoicorp.htm">English Translation of Services Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and Shanghai Lirui Water Treatment Technology Co., Ltd. (Customer E) (20)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.18</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390023010711/ff12023a1ex10-18_xiaoicorp.htm">Independent Director Agreement, Dated on January 18, 2023, between H. David Sherman and Xiao-I Corporation (21)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">4.19*</td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><a href="f20f2022ex4-19_xiaoicorp.htm">English Translation of AI Cloud Platform Service Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Customer F dated June 27, 2022</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">4.20*</td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><a href="f20f2022ex4-20_xiaoicorp.htm">English Translation of Beijing Housing Lease Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Supplier D dated September 25, 2019</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">4.21*</td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><a href="f20f2022ex4-21_xiaoicorp.htm">English Translation of Software License Use and Development Service Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Supplier E dated November 30, 2020</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">4.22*</td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><a href="f20f2022ex4-22_xiaoicorp.htm">English Translation of Supplemental Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and Supplier F dated December 24, 2020</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">4.23*</td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><a href="f20f2022ex4-23_xiaoicorp.htm">English Translation of Talefull Human Resource Management Software Deployment Service Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Supplier F date August 1, 2018</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8.1*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex8-1_xiaoicorp.htm">List of Significant Subsidiaries and VIE of the Registrant</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">11.1</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1935172/000121390023010711/ff12023a1ex99-8_xiaoicorp.htm">Code of Business Conduct and Ethics of the Registrant (22)</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left">11.2*</td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><a href="f20f2022ex11-2_xiaoicorp.htm">Insider Trading Policy</a></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.1*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex12-1_xiaoicorp.htm">CEO Certification Pursuant to Section&#160;302 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12.2*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex12-2_xiaoicorp.htm">CFO Certification Pursuant to Section&#160;302 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.1**</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex13-1_xiaoicorp.htm">CEO Certification Pursuant to Section&#160;906 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">13.2**</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex13-2_xiaoicorp.htm">CFO Certification Pursuant to Section&#160;906 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.INS*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline
    XBRL Instance Document</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.SCH*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline
    XBRL Taxonomy Extension Schema Document</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.CAL*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline
    XBRL Taxonomy Extension Calculation Linkbase Document</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.DEF*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline
    XBRL Taxonomy Extension Definition Linkbase Document</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.LAB*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline
    XBRL Taxonomy Extension Label Linkbase Document</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; background-color: rgb(204,238,255)">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">101.PRE*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline
    XBRL Taxonomy Extension Presentation Linkbase Document</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; ">
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">104</span></td>
    <td>&#160;</td>
    <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cover
    Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 6%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 94%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit (a) to the Registrant&#8217;s registration statement on Form F-6 (File No.&#160;333- 268889) filed with the
    SEC on February 1, 2023.</span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

</div><!-- Field: Page; Sequence: 138; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->130<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 6%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify; width: 94%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 4.2 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>

<tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif; width: 6%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 94%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit (a) to the Registrant&#8217;s registration statement on Form F-6 (File No.&#160;333- 268889) filed with the
    SEC on February 1, 2023.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.1 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.2 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(6)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.3 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(7)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.4 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(8)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.5 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(9)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.6 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(10)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.7 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(11)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.8 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(12)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.9 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with the
    SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(13)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.10 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with
    the SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(14)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.11 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with
    the SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(15)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.12 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with
    the SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(16)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.13 to the Registrant&#8217;s Registration Statement on Form F-1 (File No.&#160;333-268889) filed with
    the SEC on December 20, 2022.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(17)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.14 to the Registrant&#8217;s Amendment No.1 to Registration Statement on Form F-1 (File No.&#160;333-268889)
    filed with the SEC on February 13, 2023.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(18)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.15 to the Registrant&#8217;s Amendment No.1 to Registration Statement on Form F-1 (File No.&#160;333-268889)
    filed with the SEC on February 13, 2023.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(19)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.16 to the Registrant&#8217;s Amendment No.1 to Registration Statement on Form F-1 (File No.&#160;333-268889)
    filed with the SEC on February 13, 2023.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(20)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.17 to the Registrant&#8217;s Amendment No.1 to Registration Statement on Form F-1 (File No.&#160;333-268889)
    filed with the SEC on February 13, 2023.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(21)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 10.18 to the Registrant&#8217;s Amendment No.1 to Registration Statement on Form F-1 (File No.&#160;333-268889)
    filed with the SEC on February 13, 2023.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(22)</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Incorporated
    by reference to Exhibit 99.8 to the Registrant&#8217;s Amendment No.1 to Registration Statement on Form F-1 (File No.&#160;333-268889)
    filed with the SEC on February 13, 2023.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Filed
    with this annual report on Form 20-F.</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif; vertical-align: top">
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">**</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furnished
    with this annual report on Form 20-F.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Some
agreements filed as exhibits to this Annual Report contain representations and warranties that the parties thereto made to each other.
These representations and warranties have been made solely for the benefit of the other parties to such agreements and may have been
qualified by specific information that has been disclosed to the other parties to such agreements and that may not be reflected in such
agreements. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements
contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such
representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter
of any such representations and warranties may have changed since the date of such agreements.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->131<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_078"></a></div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SIGNATURES</span></p><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 15.1pt 0pt 15.95pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>XIAO-I
    CORPORATION</b></span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td colspan="2" style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top; width: 60%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Date:
    April 28, 2023</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; width: 4%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">By:</span></td>
    <td style="border-bottom: Black 1.5pt solid; font: 10pt Times New Roman, Times, Serif; vertical-align: top; width: 36%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/
    Hui Yuan</span></td></tr>
  <tr style="font: 10pt Times New Roman, Times, Serif">
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="font: 10pt Times New Roman, Times, Serif; vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hui
    Yuan<br/>
    Chief Executive Officer</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->132<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><div><a id="a_079"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="b_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To the Shareholders and Board of Directors of</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">XIAO-I CORPORATION</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Opinion on the Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying consolidated
balance sheets of XIAO-I CORPORATION (the &#8220;Company&#8221;) as of December 31, 2021 and 2022, the related consolidated statements
of operations and comprehensive (loss)/income<b>,</b> changes in deficit and cash flows for each of the three years in the period ended
December 31, 2022, and the related notes (collectively referred to as the &#8220;financial statements&#8221;). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2022, and the results
of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles
generally accepted in the United States of America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Basis for Opinion</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These financial statements are the responsibility
of the Company&#8217;s management. Our responsibility is to express an opinion on the Company&#8217;s financial statements based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (&#8220;PCAOB&#8221;) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company&#8217;s internal
control over financial reporting. Accordingly, we express no such opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top; text-align: left"> <td style="border-bottom: Black 1.5pt solid; width: 30%">/s/ <ix:nonNumeric contextRef="c0" name="dei:AuditorName">Marcum Asia CPAs LLP</ix:nonNumeric></td> <td style="width: 70%">&#160;</td> </tr>
<tr style="vertical-align: top; text-align: left"> <td>Marcum Asia CPAs LLP</td> <td>&#160;</td> </tr>
</table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have served as the Company&#8217;s auditor since 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><ix:nonNumeric contextRef="c0" name="dei:AuditorLocation">New York, NY</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">April 28, 2023</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><!-- Field: Page; Sequence: 142; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="b_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED BALANCE SHEETS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In U.S.&#160;dollars, except for share and
per share data, or otherwise noted)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Assets</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Current assets:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 5.4pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PropertyPlantAndEquipmentNet" scale="0" unitRef="usd">207,989</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Intangible assets, net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IntangibleAssetsNetExcludingGoodwill" scale="0" unitRef="usd">798,459</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LongTermInvestments" scale="0" unitRef="usd">335,448</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Right of use assets</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Deferred tax assets, net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxAssetsNet" scale="0" unitRef="usd">4,906,287</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: 10pt; padding-left: 5.4pt">Prepaid expenses and other, non-current assets</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PrepaidExpenseAndOtherAssetsNoncurrent" scale="0" unitRef="usd">3,941,346</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PrepaidExpenseAndOtherAssetsNoncurrent" scale="0" unitRef="usd">3,697,675</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; padding-left: 5.4pt">Total non-current assets</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsNoncurrent" scale="0" unitRef="usd">11,384,388</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsNoncurrent" scale="0" unitRef="usd">12,160,724</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 5.4pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; padding-left: 5.4pt">TOTAL ASSETS</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Assets" scale="0" unitRef="usd">60,584,144</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 5.4pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-left: 5.4pt">Commitments and Contingencies</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-2">&#160;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-3">&#160;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 5.4pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; padding-left: 5.4pt">Liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-left: 5.4pt">Current liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Short-term borrowings</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="0" unitRef="usd">9,117,158</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="0" unitRef="usd">18,784,459</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Accounts payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableCurrent" scale="0" unitRef="usd">5,581,879</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableCurrent" scale="0" unitRef="usd">9,180,532</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Amount due to related parties-current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrent" scale="0" unitRef="usd">1,558,642</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrent" scale="0" unitRef="usd">896,431</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Deferred revenue</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenueCurrent" scale="0" unitRef="usd">2,953,238</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenueCurrent" scale="0" unitRef="usd">2,553,808</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Convertible loans</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConvertibleDebtCurrent" scale="0" unitRef="usd">5,717,737</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConvertibleDebtCurrent" scale="0" unitRef="usd">3,754,269</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Accrued expenses and other current liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableAndOtherAccruedLiabilitiesCurrent" scale="0" unitRef="usd">10,316,432</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableAndOtherAccruedLiabilitiesCurrent" scale="0" unitRef="usd">17,006,713</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: 10pt; padding-left: 5.4pt">Lease liabilities, current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityCurrent" scale="0" unitRef="usd">800,658</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityCurrent" scale="0" unitRef="usd">435,462</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: 10pt; padding-left: 5.4pt">Income tax payable</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TaxesPayableCurrent" scale="0" unitRef="usd">17,904</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RetainedEarningsAccumulatedDeficit" scale="0" sign="-" unitRef="usd">72,584,621</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax" scale="0" sign="-" unitRef="usd">3,464,423</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax" scale="0" sign="-" unitRef="usd">3,262,666</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; text-indent: 10.05pt; padding-left: 5.4pt">XIAO-I CORPORATION shareholders&#8217; deficit</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquity" scale="0" sign="-" unitRef="usd">189,158</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: 10pt; padding-left: 5.4pt">Non-controlling interests</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:MinorityInterest" scale="0" sign="-" unitRef="usd">3,193,503</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; padding-left: 5.4pt">Total shareholders&#8217; deficit</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; padding-left: 5.4pt">TOTAL LIABILITIES AND SHAREHOLDERS&#8217; DEFICIT</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="b_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION<br/>
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME<br/>
(In U.S.&#160;dollars, except for share and per share data, or otherwise noted)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the years ended&#160;December 31,</td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">Sale of cloud platform products</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SellingExpense" scale="0" unitRef="usd">4,566,760</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GeneralAndAdministrativeExpense" scale="0" unitRef="usd">5,694,785</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">Research and development expenses</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ResearchAndDevelopmentExpense" scale="0" unitRef="usd">4,236,723</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total operating expenses</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">Interest expense</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">Foreign currency exchange gain/(loss)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total other income/(loss)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NonoperatingIncomeExpense" scale="0" unitRef="usd">577,684</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NonoperatingIncomeExpense" scale="0" sign="-" unitRef="usd">2,208,880</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#12288;</b></span></td><td style="font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">(Loss)/Income before income tax expense</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" scale="0" sign="-" unitRef="usd">7,291,896</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" scale="0" unitRef="usd">3,917,357</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" scale="0" sign="-" unitRef="usd">5,344,659</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">Income tax benefit/(expense)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxExpenseBenefit" scale="0" sign="-" unitRef="usd">235,854</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxExpenseBenefit" scale="0" unitRef="usd">552,355</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxExpenseBenefit" scale="0" unitRef="usd">660,655</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt">Net (loss)/income</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="0" sign="-" unitRef="usd">7,056,042</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="0" unitRef="usd">3,365,002</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="0" sign="-" unitRef="usd">6,005,314</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">Net loss attributable to non-controlling interests</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLossAttributableToNoncontrollingInterest" scale="0" sign="-" unitRef="usd">247,677</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLossAttributableToNoncontrollingInterest" scale="0" sign="-" unitRef="usd">312,811</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLossAttributableToNoncontrollingInterest" scale="0" sign="-" unitRef="usd">106,779</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">Net (loss)/income attributable to XIAO-I CORPORATION shareholders</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic" scale="0" sign="-" unitRef="usd">6,808,365</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic" scale="0" unitRef="usd">3,677,813</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic" scale="0" sign="-" unitRef="usd">5,898,535</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left">Other comprehensive (loss)/income</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">Foreign currency translation change, net of nil income taxes</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax" scale="0" sign="-" unitRef="usd">357,695</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax" scale="0" sign="-" unitRef="usd">117,291</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax" scale="0" unitRef="usd">403,816</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">Total other comprehensive (loss)/income</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTax" scale="0" sign="-" unitRef="usd">357,695</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTax" scale="0" sign="-" unitRef="usd">117,291</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTax" scale="0" unitRef="usd">403,816</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt">Total comprehensive (loss)/income</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTax" scale="0" sign="-" unitRef="usd">7,413,737</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTax" scale="0" unitRef="usd">3,247,711</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTax" scale="0" sign="-" unitRef="usd">5,601,498</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">Total comprehensive (loss)/income attributable to non-controlling interests</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTaxPortionAttributableToParent" scale="0" sign="-" unitRef="usd">386,914</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTaxPortionAttributableToParent" scale="0" sign="-" unitRef="usd">370,503</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTaxPortionAttributableToParent" scale="0" unitRef="usd">95,280</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">Total comprehensive (loss)/income attributable to XIAO-I CORPORATION shareholders</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTaxAttributableToNoncontrollingInterest" scale="0" unitRef="usd">7,026,823</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTaxAttributableToNoncontrollingInterest" scale="0" sign="-" unitRef="usd">3,618,214</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTaxAttributableToNoncontrollingInterest" scale="0" unitRef="usd">5,696,778</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left">(Loss)/Earnings per ordinary share attributable to XIAO-I CORPORATION shareholders</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in">Basic</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares">0.31</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" unitRef="usdPershares">0.17</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 144; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><div><a id="b_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION<br/>
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT<br/>
(In U.S.&#160;dollars, except for share and per share data, or otherwise noted)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="font: 8pt Times New Roman, Times, Serif; vertical-align: bottom">
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    <td colspan="2" style="white-space: nowrap; font: 8pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt"><b>Accumulated</b></span></td><td style="white-space: nowrap; font: 8pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap; font: 8pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt"><b>&#160;</b></span></td>
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    <td colspan="2" style="white-space: nowrap; font: 8pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt"><b>shareholder&#8217;s</b></span></td><td style="white-space: nowrap; font: 8pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt"><b>&#160;</b></span></td><td style="white-space: nowrap; font: 8pt Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt"><b>&#160;</b></span></td>
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  <tr style="font: 8pt Times New Roman, Times, Serif; vertical-align: bottom">
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    <td style="border-bottom: Black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><span style="-sec-ix-hidden: hidden-fact-11; font-family: Times New Roman, Times, Serif; font-size: 9pt">-</span></td><td style="font: 8pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt">&#160;</span></td><td style="font: 8pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt">&#160;</span></td>
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  <tr style="font: 8pt Times New Roman, Times, Serif; vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; font: 8pt Times New Roman, Times, Serif; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt">&#12288;<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax" scale="0" unitRef="usd">403,816</ix:nonFraction> </span></td><td style="font: 8pt Times New Roman, Times, Serif; padding-bottom: 1.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt">&#160;</span></td></tr>
  <tr style="font: 8pt Times New Roman, Times, Serif; vertical-align: bottom; ">
    <td style="font: bold 8pt Times New Roman, Times, Serif; padding-left: 0.125in; text-indent: -0.125in; padding-bottom: 4pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 9pt"><b>Balance
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><div><a id="b_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF CASH FLOWS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(In U.S.&#160;dollars, except for share and
per share data, or otherwise noted)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the years ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">CASH FLOWS FROM OPERATING ACTIVITIES:</td><td>&#160;</td>
    <td colspan="2">&#12288;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#12288;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-23">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-30">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredIncomeTaxExpenseBenefit" scale="0" sign="-" unitRef="usd">235,854</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 0.5in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Changes in assets and liabilities</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Accounts receivable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsReceivable" scale="0" unitRef="usd">701,260</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsReceivable" scale="0" unitRef="usd">23,393,437</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsReceivable" scale="0" unitRef="usd">15,012,712</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 0.5in">Inventories</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInInventories" scale="0" sign="-" unitRef="usd">256,507</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInInventories" scale="0" unitRef="usd">495,398</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Contract costs</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInContractWithCustomerAsset" scale="0" sign="-" unitRef="usd">313,541</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInContractWithCustomerAsset" scale="0" unitRef="usd">607,850</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Prepaid expenses and other current assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidExpensesOther" scale="0" sign="-" unitRef="usd">957,035</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Amount due from related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueFromRelatedParties" scale="0" unitRef="usd">4,332</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueFromRelatedParties" scale="0" unitRef="usd">368,847</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-31">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Accounts payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="0" sign="-" unitRef="usd">614,200</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="0" unitRef="usd">4,123,775</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Deferred revenue</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDeferredRevenue" scale="0" sign="-" unitRef="usd">10,785</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDeferredRevenue" scale="0" unitRef="usd">1,038,149</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDeferredRevenue" scale="0" sign="-" unitRef="usd">179,177</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Accrued expenses and other current liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedLiabilitiesAndOtherOperatingLiabilities" scale="0" unitRef="usd">1,019,524</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedLiabilitiesAndOtherOperatingLiabilities" scale="0" unitRef="usd">2,693,914</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedLiabilitiesAndOtherOperatingLiabilities" scale="0" unitRef="usd">5,163,654</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Amount due to related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueToRelatedParties" scale="0" unitRef="usd">208,249</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueToRelatedParties" scale="0" sign="-" unitRef="usd">56,030</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueToRelatedParties" scale="0" unitRef="usd">100,315</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Income tax payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInIncomeTaxes" scale="0" sign="-" unitRef="usd">16,399</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInIncomeTaxes" scale="0" unitRef="usd">17,904</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInIncomeTaxes" scale="0" sign="-" unitRef="usd">16,956</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Lease payment liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOperatingLeaseLiability" scale="0" sign="-" unitRef="usd">1,312,365</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOperatingLeaseLiability" scale="0" sign="-" unitRef="usd">1,071,775</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOperatingLeaseLiability" scale="0" sign="-" unitRef="usd">893,276</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Prepaid expenses and other, non-current assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" scale="0" unitRef="usd">3,786,999</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" scale="0" sign="-" unitRef="usd">61,130</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" scale="0" unitRef="usd">57,510</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.5in">Accrued liabilities, non-current</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherAccruedLiabilities" scale="0" unitRef="usd">5,038,643</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherAccruedLiabilities" scale="0" sign="-" unitRef="usd">1,156</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Net cash used in operating activities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInOperatingActivities" scale="0" sign="-" unitRef="usd">3,463,094</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInOperatingActivities" scale="0" sign="-" unitRef="usd">11,887,122</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInOperatingActivities" scale="0" sign="-" unitRef="usd">10,923,346</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">CASH FLOWS FROM INVESTING ACTIVITIES:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Purchase of intangible assets</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">CASH FLOWS FROM FINANCING ACTIVITIES:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Proceeds from short-term borrowings</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromShortTermDebt" scale="0" unitRef="usd">10,392,225</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromShortTermDebt" scale="0" unitRef="usd">21,252,786</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Repayments of short-term borrowings</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfShortTermDebt" scale="0" unitRef="usd">11,005,324</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfShortTermDebt" scale="0" unitRef="usd">16,470,788</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfShortTermDebt" scale="0" unitRef="usd">10,633,055</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Proceeds from interests-free borrowings from related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromRelatedPartyDebt" scale="0" unitRef="usd">1,448</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromRelatedPartyDebt" scale="0" unitRef="usd">16,764,954</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromRelatedPartyDebt" scale="0" unitRef="usd">2,315,351</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Repayments of interests-free borrowings from related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-36">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfRelatedPartyDebt" scale="0" unitRef="usd">6,893,702</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfRelatedPartyDebt" scale="0" unitRef="usd">2,314,311</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Proceeds from borrowings from third-parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="hkg:ProceedsFromBorrowingsFromThirdparties" scale="0" unitRef="usd">2,911,271</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="hkg:ProceedsFromBorrowingsFromThirdparties" scale="0" unitRef="usd">15,115,236</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="hkg:ProceedsFromBorrowingsFromThirdparties" scale="0" unitRef="usd">7,950,661</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Repayments of borrowings from third-parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="hkg:RepaymentsOfBorrowingsFromThirdparties" scale="0" unitRef="usd">506,938</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="hkg:RepaymentsOfBorrowingsFromThirdparties" scale="0" unitRef="usd">7,716,658</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="hkg:RepaymentsOfBorrowingsFromThirdparties" scale="0" unitRef="usd">2,065,948</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Repayment of convertible loans</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-37">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-38">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConvertibleDebt" scale="0" unitRef="usd">1,634,715</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.5in">Deferred offering costs</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-39">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-40">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsOfFinancingCosts" scale="0" unitRef="usd">1,364,169</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Net cash provided by financing activities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="0" unitRef="usd">1,792,682</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="0" unitRef="usd">12,192,952</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="0" unitRef="usd">13,506,600</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#12288;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Effect of exchange rate changes</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" sign="-" unitRef="usd">797,954</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" unitRef="usd">101,728</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" sign="-" unitRef="usd">12,439</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#12288;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#12288;</span></td><td style="text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">The accompanying notes are an integral part of
these consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><div><a id="b_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><ix:nonNumeric contextRef="c0" continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>1.</b></span></td><td style="text-align: justify"><b>ORGANIZATION AND PRINCIPAL ACTIVITIES</b></td>
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</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_2" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">XIAO-I CORPORATION. (&#8220;Xiao-I&#8221;,
or the &#8220;Company&#8221;) was incorporated under the laws of the Cayman Islands on August&#160;20, 2018. The Company through its wholly-owned
subsidiaries, variable interest entity (&#8220;VIE&#8221;) and VIE&#8217;s subsidiaries (collectively, the &#8220;Group&#8221;) primarily
engages in Internet technology development in the People&#8217;s Republic of China (&#8220;PRC&#8221; or &#8220;China&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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    <td>&#160;</td><td>&#160;</td>
    <td>&#160;</td><td>&#160;</td>
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</div><div>

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    <td>&#160;</td></tr>
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  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>


</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_7" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-indent: 0in; text-align: justify"><b><i>Reorganization</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_8" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">The Company undertook a reorganization
and became the ultimate holding company of AI PLUS, Xiaoi Robot and WFOE, in which the shareholding percentages and rights of each shareholder
are the same before and after the Reorganization. Effective on March&#160;29, 2019, shareholders of Shanghai Xiao-i and WFOE entered into
a series of contractual arrangements (&#8220;VIE Agreements&#8221;) which are described below.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 147; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>1.</b></td><td><b>ORGANIZATION AND PRINCIPAL ACTIVITIES</b> (cont.)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_9" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><span style="text-decoration:underline">The VIE Agreements</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_10" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The PRC government regulates the telecommunications
and internet industry, including software industry, through strict business licensing requirements and other government regulations. These
laws and regulations also include limitations on foreign ownership of PRC companies that engage in software business. The Company, AI
Plus, Zhizhen Technology, are considered as foreign invested enterprises. To comply with these regulations, the Group conducts the majority
of its activities in PRC through Shanghai Xiao-i (the &#8220;VIE&#8221;), and the VIE&#8217;s subsidiaries.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_11" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The currently effective contractual arrangements,
as described in more detail below, by and among Zhizhen Technology, the VIE, and 61 of the VIE&#8217;s shareholders include (i) certain
exclusive call option agreement, proxy agreement and share interest pledge agreement, that enable the Company to exercise operational
control over the VIE, and (ii) exclusive business cooperation agreement, that enable the Company to realize all of the economic risks
and benefits arising from Shanghai Xiao-i and its subsidiaries (excluding non-controlling interests). Therefore, the Group, through its
wholly owned subsidiaries AI Plus and Zhizhen Technology, has been determined to be the primary beneficiary of Shanghai Xiao-i and its
subsidiaries for accounting purposes and has consolidated Shanghai Xiao-i&#8217;s and its subsidiaries&#8217; assets, liabilities, results
of operations, and cash flows in the accompanying consolidated financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_12" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Immediately before and after reorganization,
the Company together with its wholly-owned subsidiaries AI Plus and Zhizhen Technology and its VIE were effectively controlled by the
same shareholders; therefore, the Reorganization is accounted for in a manner similar to a common control transaction because it is determined
that the transfers lack economic substance. The accompanying consolidated financial statements have been prepared as if the current corporate
structure has been in existence throughout the periods presented. The consolidation of the Company and its subsidiaries and VIE has been
accounted for at historical cost as of the beginning of the first period presented in the accompanying financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_13" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Exclusive Call Option Agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_14" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Pursuant to the Exclusive Call Option
Agreement among Zhizhen Technology, Shanghai Xiao-i and its shareholders, the shareholders irrevocably granted Zhizhen Technology or any
third party designated by Zhizhen Technology an option to purchase all or part of their equity interests in Shanghai Xiao-i at any time
at a price determined at Zhizhen Technology&#8217;s discretion. According to the Exclusive Call Option Agreement, the purchase price to
be paid by the Company to each shareholder of Shanghai Xiao-i will be the minimum price permitted by applicable PRC Law at the time when
such share transfer occurs. Without Zhizhen Technology&#8217;s prior written consent, the shareholders and Shanghai Xiao-i agreed not
to, among other things: set encumbrance on, transfer all or part of, or dispose of the equity interests; amend the articles of association
of Shanghai Xiao-i; change the registered capital of Shanghai Xiao-i or holding structure; change Shanghai Xiao-i&#8217;s business activities;
sell, assign, mortgage or dispose of any legal or beneficial rights to or in any of Shanghai Xiao-i&#8217;s assets, business, or revenue;
incur, assume or guarantee any debts; enter into any material contract; extend any loan or credit to any party, or provide any guarantee
or assume any obligation of any party; merge or consolidate with any third party or acquire or invest in any third party; or distribute
dividends. The shareholders and Shanghai Xiao-i agreed to manage business and handle financial and commercial affairs prudently and in
accordance with relevant laws and codes of practice. This Agreement will continue with full force and effect until the earlier of the
date on which Zhizhen Technology has acquired all of the Equity Interests in Shanghai Xiao-i, or this Agreement is terminated by the mutual
written consent.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 148; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>1.</b></td><td><b>ORGANIZATION AND PRINCIPAL ACTIVITIES</b> (cont.)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>&#160;</i></p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_15" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Exclusive Business Cooperation Agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_16" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On March 29, 2019, Zhizhen Technology
entered into an Exclusive Business Cooperation Agreement with Shanghai Xiao-i to enable Zhizhen Technology to engage in the development
and operation of the Internet technology development in accordance with applicable laws. Under this Agreement, Zhizhen Technology intends
to use its labor, technology and information advantages to provide exclusive technical services, technical consultation and other services
to Shanghai Xiao-i, and Shanghai Xiao-i agrees to accept such services. The term of the Services provided by Zhizhen Technology shall
be 10 years from the effective date of March 29, 2019, and will be automatically extended after the expiration until when terminated in
writing by Zhizhen Technology. Additionally, Zhizhen Technology has the full and exclusive right to manage and direct all cash flow and
assets of Shanghai Xiao-i and to direct and administrate the financial affairs and daily operation of Shanghai Xiao-i. Shanghai Xiao-i
pays service fees to Zhizhen Technology in an amount determined by Zhizhen Technology in its sole discretion. If Shanghai Xiao-i is unable
to pay the service fees due to the actual managing situation, with the written consent of Zhizhen Technology, the unpaid part of the service
fees in the previous fiscal year can be deferred to the end of the next year and settled together. During the validity term of this agreement,
Zhizhen Technology will bear all the economic benefits and risks arising from the business of Shanghai Xiao-i and its subsidiaries. Zhizhen
Technology will provide financial support to Shanghai Xiao-i or its subsidiaries in the event of a loss or serious operational difficulties.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_17" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Power of Attorney Agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_18" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On March&#160;29, 2019, each shareholder
of Shanghai Xiao-i, signed the Power of Attorney Agreement to irrevocably entrust Zhizhen Technology or any person(s)&#160;designated
by Zhizhen Technology to act as its attorney-in-fact to exercise any and all of its rights as a shareholder of Shanghai Xiao-i, including,
but not limited to, the right to convene, attend and present the shareholders&#8217; meetings, vote, sign and perform as a shareholder;
transfer, pledge or dispose of all the equity interest of Shanghai Xiao-i held by the shareholder; collect the dividend, and participate
in litigation procedures. This agreement is effective and irrevocable until all of each shareholder&#8217;s equity interest in Shanghai
Xiao-i has been transferred to Shanghai Xiao-i or the person(s)&#160;designated by Zhizhen Technology.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_19" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Share Interest Pledge Agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_20" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Under the Share Interest Pledge Agreement
signed on March&#160;29, 2019 by and among Zhizhen Technology and each shareholder of Shanghai Xiao-i, the shareholders of Shanghai Xiao-i
have agreed to pledge <ix:nonFraction contextRef="c54" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:BusinessCombinationStepAcquisitionEquityInterestInAcquireePercentage" scale="-2" unitRef="pure">100</ix:nonFraction>% equity interest in Shanghai Xiao-i to Zhizhen Technology to guarantee the performance obligations of Shanghai
Xiao-i under the Exclusive Business Cooperation Agreement, and the performance obligations of each shareholder under the Exclusive Call
Option Agreement. If Shanghai Xiao-i or its shareholders breach their contractual obligations under these agreements, Zhizhen Technology,
as pledgee, will have the right to exercise the pledge.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_21" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The shareholders also agreed that,
without prior written consent of Zhizhen Technology, they will not dispose of the pledged equity interests or create or allow any encumbrance
on the pledged equity interests. The pledge of equity interests in Shanghai Xiao-i has been registered with the relevant office of the
State Administration for Market Regulation in accordance with the Civil Code of the People&#8217;s Republic of China.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_22" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><i>Spousal Commitment Letters</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_23" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">The spouses of each individual shareholder of Shanghai Xiao-i
have each signed Spousal Commitment Letters. Under the Spousal Commitment Letter, the signing spouse unconditionally and irrevocably has
agreed to the execution by his or her spouse of the above-mentioned Exclusive Business Cooperation Agreement, Exclusive Call Option Agreement,
Power of Attorney Agreement and Share Interest Pledge Agreement, and that his or her spouse may perform, amend or terminate such agreements
without his or her consent. In addition, in the event that the spouse obtains any equity interest in Shanghai Xiao-i held by his or her
spouse for any reason, he or she agrees to be bound by and sign any legal documents substantially similar to the contractual arrangements
entered into by his or her spouse, as may be amended from time to time.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 149; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>1.</b></td><td><b>ORGANIZATION AND PRINCIPAL ACTIVITIES</b> (cont.)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_24" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="text-decoration:underline">Risks in relation to the VIE structure</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_25" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company believes that the contractual
arrangements with its VIE and their respective shareholders are in compliance with PRC laws and regulations and are legally enforceable.
However, uncertainties in the PRC legal system could limit the Company&#8217;s ability to enforce the contractual arrangements. If the
legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could, among
others:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_26" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_25"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">revoke the business licenses and/or operating licenses of
the Company;</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_27" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_26"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">discontinue or place restrictions or onerous conditions on
the operations;</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_28" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">impose fines, confiscate the income from Zhizhen Technology
or the VIE, or impose other requirements with which the Company or the VIE may not be able to comply;</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_29" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_28"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">require the Company to restructure the ownership structure
or operations, including terminate the contractual arrangements with the VIE and deregister the equity pledges of the VIE, which in turn
would affect our ability to consolidate, derive economic interests from, or exert operational control over the VIE, or impose restrictions
on the Company&#8217;s right to collect revenues;</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_30" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_29"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">impose additional conditions or requirements with which the
Company may not be able to comply;</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_31" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_30"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">require the Company to restructure the operations in such
a way as to compel the Company to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and
assets; or</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_32" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_31"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">restrict or prohibiting the Company use of the proceeds of
overseas offering to finance the business and operations in China.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_33" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The revenue producing assets that are
held by the VIE and the VIE&#8217;s subsidiaries primarily comprise of leasehold improvements, electronic equipment, office equipment
and software. Substantially all of such assets are recognized in the Group&#8217;s consolidated financial statements, except for certain
Internet Content Provider Licenses, internally developed software, trademarks and patent applications which were not recorded in the Company&#8217;s
consolidated balance sheets as they do not meet all the capitalization criteria. The Internet content provision and other licenses are
required under relevant PRC laws, rules and regulations for the operation of Internet businesses in the PRC, and therefore are integral
to the Company&#8217;s operations. The Internet content provision licenses require that core PRC trademark registrations and domain names
are held by the VIE and the VIE&#8217;s subsidiaries that provide the relevant services. The VIE and the VIE&#8217;s subsidiaries also
hire assembled work force on sales, research and development and operations whose costs are expensed as incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_34" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company&#8217;s ability to conduct
its business may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, The
Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to exert operational
control over the VIE and their respective shareholders and it may lose the ability to receive economic benefits from the VIE. The Company,
however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiaries and VIE.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_35" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The interests of the shareholders of
VIE may diverge from that of the Company and that may potentially increase the risk that they would seek to act contrary to the contractual
terms, for example by influencing VIE not to pay the service fees when required to do so. The Company cannot assure that when conflicts
of interest arise, shareholders of VIE will act in the best interests of the Company or that conflicts of interests will be resolved in
the Company&#8217;s favor. The Company believes the shareholders of VIE will not act contrary to any of the contractual arrangements and
the exclusive option agreements provide the Company with a mechanism to remove the current shareholders of VIE should they act to the
detriment of the Company. The Company relies on certain current shareholders of VIE to fulfill their fiduciary duties and abide by laws
of the PRC and act in the best interest of the Company. If the Company cannot resolve any conflicts of interest or disputes between the
Company and the shareholders of VIE, the Company would have to rely on legal proceedings, which could result in disruption of its business,
and there is substantial uncertainty as to the outcome of any such legal proceedings.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 150; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>1.</b></td><td><b>ORGANIZATION AND PRINCIPAL ACTIVITIES</b> (cont.)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_36" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0 0pt 0.25in">The following financial statement amounts and balances of
the VIE and its subsidiaries were included in the accompanying consolidated financial statements after elimination of intercompany transactions:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_37" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_36"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><i><span style="text-decoration:underline">Consolidated Balance Sheets Information</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_38" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_37"><ix:nonNumeric contextRef="c55" escape="true" name="srt:ScheduleOfCondensedBalanceSheetTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="font-weight: bold">Assets</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: 10pt">Deferred offering costs</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif">&#12288;</span></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 151; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; font-size: 10pt"><span style="font-size: 10pt"><b>1. </b></span></td>
    <td style="font-size: 10pt"><span style="font-size: 10pt"><b>ORGANIZATION AND PRINCIPAL ACTIVITIES</b> (cont.)</span></td></tr>
  </table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_39" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_38"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i><span style="text-decoration:underline">Consolidated Statements of Operations
and Comprehensive (loss)/Income</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_40" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_39"><ix:nonNumeric contextRef="c55" escape="true" name="srt:CondensedStatementOfComprehensiveIncomeTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_41" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_40"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i><span style="text-decoration:underline">Consolidated Cash Flows Information</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>


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</div><div>

</div><ix:continuation id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_42"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December&#160;31, 2020, 2021
and 2022, there were no pledge or collateralization of the VIE&#8217;s assets that can only be used to settle obligations of the VIE.&#160;The
amount of the net liabilities of the VIE was $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilities" scale="0" unitRef="usd">3,383,770</ix:nonFraction> and $<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxLiabilities" scale="0" unitRef="usd">8,950,579</ix:nonFraction> as of December&#160;31, 2021 and 2022, respectively. The creditors
of the VIE&#8217;s third party liabilities did not have recourse to the general credit of the Company in normal course of business. Currently
there is a contractual arrangement that would require the Company or its subsidiaries to provide financial support to the VIE. Under the
Exclusive Business Cooperation Agreement signed on March 29, 2019 between WFOE and the VIE, WFOE will provide financial support to the
VIE or the VIE&#8217;s subsidiaries in the event of a loss or serious operational difficulties during the validity term of this agreement.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>



</div><ix:nonNumeric contextRef="c0" continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_1" escape="true" name="us-gaap:SignificantAccountingPoliciesTextBlock"><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>2.</b></td><td><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_2" id="_SignificantAccountingPoliciesTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b><i>(a).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:BasisOfAccountingPolicyPolicyTextBlock"><b><i>Basis of presentation</i></b></ix:nonNumeric></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_3" id="_SignificantAccountingPoliciesTextBlock-c0_cont_2"><ix:continuation continuedAt="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_2" id="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The accompanying consolidated financial
statements are prepared in accordance with accounting principles generally accepted in the United&#160;States of America (&#8220;US GAAP&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_4" id="_SignificantAccountingPoliciesTextBlock-c0_cont_3"><ix:continuation id="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The accompanying consolidated financial
statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The realization
of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Group&#8217;s
ability to operate profitably, to generate cash flows from operations, and its ability to attract investors and to borrow funds on reasonable
economic terms.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_5" id="_SignificantAccountingPoliciesTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(b).</i></b></td><td><ix:nonNumeric contextRef="c0" continuedAt="_ConsolidationPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ConsolidationPolicyTextBlock"><b><i>Principles of consolidation</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_6" id="_SignificantAccountingPoliciesTextBlock-c0_cont_5"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_2" id="_ConsolidationPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The consolidated financial statements
include the financial statements of the Company, its subsidiaries, the VIE in which the Company, through its WFOE, has a controlling financial
interest, and the VIE&#8217;s subsidiaries.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_7" id="_SignificantAccountingPoliciesTextBlock-c0_cont_6"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_3" id="_ConsolidationPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Subsidiaries are those entities in which
the Company, directly or indirectly, controls more than one half of the voting power or has the power to govern the financial and operating
policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of
directors. A VIE is an entity in which the Company, or its WFOE, through contractual arrangements, is fully and exclusively responsible
for the management of the entity, absorbs all risk of losses of the entity (excluding non-controlling interests), receives the benefits
of the entity that could be significant to the entity (excluding non-controlling interests), and has the exclusive right to exercise all
voting rights of the entity, and therefore the Company or its WFOE is the primary beneficiary of the entity for accounting purposes. However,
the contractual arrangements with the VIE and its shareholders may not be as effective as equity ownership in providing operational control.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_8" id="_SignificantAccountingPoliciesTextBlock-c0_cont_7"><ix:continuation id="_ConsolidationPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">All intercompany transactions and balances
among the Company, its subsidiaries, the VIE, and the VIE&#8217;s subsidiaries have been eliminated upon consolidation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_9" id="_SignificantAccountingPoliciesTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(c).</i></b></td><td><ix:nonNumeric contextRef="c0" continuedAt="_UseOfEstimates-c0_cont_1" escape="true" name="us-gaap:UseOfEstimates"><b><i>Use of estimates</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_10" id="_SignificantAccountingPoliciesTextBlock-c0_cont_9"><ix:continuation id="_UseOfEstimates-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The preparation of the consolidated financial
statements in accordance with US 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 periods in the consolidated financial statements and accompanying notes. Significant accounting estimates include,
but not limited to, the allowance for doubtful accounts, net realizable value of inventories, depreciable lives and recoverability of
property and equipment, the realization of deferred income tax assets and other equity investments, transaction price allocation between
software income and maintenance service income. Changes in facts and circumstances may result in revised estimates. Actual results could
differ from those estimates, and as such, differences may be material to the consolidated financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_11" id="_SignificantAccountingPoliciesTextBlock-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(d).</i></b></td><td><ix:nonNumeric contextRef="c0" continuedAt="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock"><b><i>Cash and cash equivalents</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_12" id="_SignificantAccountingPoliciesTextBlock-c0_cont_11"><ix:continuation id="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Cash and cash equivalents consist of
cash on hand, the Group&#8217;s demand deposit placed with financial institutions, which have original maturities of less than three&#160;months
and unrestricted as to withdrawal and use.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_13" id="_SignificantAccountingPoliciesTextBlock-c0_cont_12"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(e).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_CashAndCashEquivalentsRestrictedCashAndCashEquivalentsPolicy-c0_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsRestrictedCashAndCashEquivalentsPolicy"><b><i>Restricted cash</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_14" id="_SignificantAccountingPoliciesTextBlock-c0_cont_13"><ix:continuation id="_CashAndCashEquivalentsRestrictedCashAndCashEquivalentsPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Restricted cash represented a time deposit
pledged for bank loan facilities within one-year maturities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 153; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>2.</b></td><td><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.3pt; text-align: justify; text-indent: -22.3pt"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_15" id="_SignificantAccountingPoliciesTextBlock-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(f).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_TradeAndOtherAccountsReceivablePolicy-c0_cont_1" escape="true" name="us-gaap:TradeAndOtherAccountsReceivablePolicy"><b><i>Accounts receivable, net</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_16" id="_SignificantAccountingPoliciesTextBlock-c0_cont_15"><ix:continuation id="_TradeAndOtherAccountsReceivablePolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Accounts receivable, net are stated at
the original amount less an allowance for doubtful accounts. Accounts receivable are recognized in the period when the Group has provided
services to its customers and when its right to consideration is unconditional. The Group reviews the accounts receivable on a periodic
basis and makes specific allowances when there is doubt as to the collectability of individual balances. The Group considers many factors
in assessing the collectability of its receivables, such as the age of the amounts due, the customer&#8217;s payment history, credit-worthiness
and other specific circumstances related to the accounts. An allowance for doubtful accounts is recorded in the period in which a loss
is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_17" id="_SignificantAccountingPoliciesTextBlock-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(g).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_PrecontractCostsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:PrecontractCostsPolicyTextBlock"><b><i>Contract costs</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_18" id="_SignificantAccountingPoliciesTextBlock-c0_cont_17"><ix:continuation id="_PrecontractCostsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Contract costs represented the costs
directly related to a contract with a customer including labor costs and direct materials used in fulfilling the contract and other allocations
of costs that relate directly to the contract or to contract activities. The contract costs are determined principally by the specific
identification method, and recognize as cost of revenues on a systematic basis that is consistent with the transfer to the customer of
the related services.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_19" id="_SignificantAccountingPoliciesTextBlock-c0_cont_18"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(h).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_InventoryPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:InventoryPolicyTextBlock"><b><i>Inventories</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_20" id="_SignificantAccountingPoliciesTextBlock-c0_cont_19"><ix:continuation id="_InventoryPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Inventories, primarily consisting of
robot, displayer, server and software, are stated at the lower of cost or net realizable value, with net realized value represented by
estimated selling prices in the ordinary course of business, less reasonably predictable costs of disposal and transportation. Cost of
inventory is determined using the specific identification method. Adjustments are recorded to write down the cost of inventory to the
estimated net realizable value due to slow-moving merchandise and damaged products, which is dependent upon factors such as historical
and forecasted consumer demand. There was <span style="-sec-ix-hidden: hidden-fact-44">nil</span>, <span style="-sec-ix-hidden: hidden-fact-45">nil</span> and $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryWriteDown" scale="0" unitRef="usd">154,664</ix:nonFraction> of inventory write-down for the year ended December&#160;31, 2020, 2021
and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_21" id="_SignificantAccountingPoliciesTextBlock-c0_cont_20"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(i).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock"><b><i>Property and equipment, net</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_22" id="_SignificantAccountingPoliciesTextBlock-c0_cont_21"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Property and equipment are stated at
cost less accumulated depreciation and impairment, if any, and depreciated on a straight-line basis over the estimated useful lives of
the assets. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its intended use. Estimated
useful lives are as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_23" id="_SignificantAccountingPoliciesTextBlock-c0_cont_22"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfPublicUtilityPropertyPlantAndEquipmentTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfPublicUtilityPropertyPlantAndEquipmentTextBlock"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_3" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; ">
    <td style="border-bottom: Black 1.5pt solid; width: 49%; font-weight: bold">Category</td><td style="padding-bottom: 1.5pt; width: 2%; font-weight: bold">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 49%; font-weight: bold; text-align: center">Estimated useful lives</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Electronic equipment</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c80" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric>&#160;years</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Office equipment</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c81" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric>&#160;years</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">Leasehold improvement</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c0" name="us-gaap:PropertyPlantAndEquipmentEstimatedUsefulLives">Shorter of the lease term or the estimated useful life of the assets</ix:nonNumeric></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_24" id="_SignificantAccountingPoliciesTextBlock-c0_cont_23"><ix:continuation id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Repair and maintenance costs are charged
to expenses as incurred, whereas the cost of renewals and betterment that extends the useful lives of property and equipment are capitalized
as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the costs, accumulated depreciation
and impairment with any resulting gain or loss recognized in the consolidated statements of (loss)/income.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 154; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>2.</b></td><td><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_25" id="_SignificantAccountingPoliciesTextBlock-c0_cont_24"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(j).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_IntangibleAssetsFiniteLivedPolicy-c0_cont_1" escape="true" name="us-gaap:IntangibleAssetsFiniteLivedPolicy"><b><i>Intangible assets, net</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_26" id="_SignificantAccountingPoliciesTextBlock-c0_cont_25"><ix:continuation continuedAt="_IntangibleAssetsFiniteLivedPolicy-c0_cont_2" id="_IntangibleAssetsFiniteLivedPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Intangible assets are carried at cost
less accumulated amortization and any recorded impairment. Intangible assets are amortized using the straight-line approach over the estimated
economic useful lives of the assets as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_27" id="_SignificantAccountingPoliciesTextBlock-c0_cont_26"><ix:continuation id="_ScheduleOfPublicUtilityPropertyPlantAndEquipmentTextBlock-c0_cont_1"><ix:continuation id="_IntangibleAssetsFiniteLivedPolicy-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; ">
    <td style="border-bottom: Black 1.5pt solid; width: 49%; font-weight: bold">Category</td><td style="width: 2%; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 49%; font-weight: bold; text-align: center">Estimated useful lives</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Software</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c82" format="ixt-sec:duryear" name="us-gaap:PropertyPlantAndEquipmentUsefulLife">5</ix:nonNumeric>&#160;years</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_28" id="_SignificantAccountingPoliciesTextBlock-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(k).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock"><b><i>Impairment of long-lived assets</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_29" id="_SignificantAccountingPoliciesTextBlock-c0_cont_28"><ix:continuation id="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable.
When these events occur, the Group measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted
future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted
cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss, which is the excess of carrying
amount over the fair value of the assets, using the expected future discounted cash flows. There was no impairment of long-lived assets
for the&#160;years ended December&#160;31, 2020, 2021 and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_30" id="_SignificantAccountingPoliciesTextBlock-c0_cont_29"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(l).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_InvestmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:InvestmentPolicyTextBlock"><b><i>Long-term investments</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_31" id="_SignificantAccountingPoliciesTextBlock-c0_cont_30"><ix:continuation continuedAt="_InvestmentPolicyTextBlock-c0_cont_2" id="_InvestmentPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">For an investee over which the Group
holds less than <ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">20</ix:nonFraction>% voting interest and has no ability to exercise significant influence, the investments are accounted for under the
cost method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_32" id="_SignificantAccountingPoliciesTextBlock-c0_cont_31"><ix:continuation continuedAt="_InvestmentPolicyTextBlock-c0_cont_3" id="_InvestmentPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">For an investee over which the Group
has the ability to exercise significant influence, but does not own a majority equity interest or otherwise control, the Group accounted
for those using the equity method. Significant influence is generally considered to exist when the Group has an ownership interest in
the voting stock of the investee between <ix:nonFraction contextRef="c73" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">20</ix:nonFraction>% and <ix:nonFraction contextRef="c74" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">50</ix:nonFraction>%. Other factors, such as representation on the investee&#8217;s board of directors,
voting rights and the impact of commercial arrangements, are also considered in determining whether the equity method of accounting is
appropriate. Under the equity method of accounting, the Group&#8217;s share of the investee&#8217;s results of operations is reported
as share of losses of equity method investments in the consolidated statements of comprehensive (loss)/income.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_33" id="_SignificantAccountingPoliciesTextBlock-c0_cont_32"><ix:continuation id="_InvestmentPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The process of assessing and determining
whether impairment on an investment is other than temporary requires a significant amount of judgment. To determine whether an impairment
is other than temporary, management considers whether it has the ability and intent to hold the investment until recovery and whether
evidence indicating the carrying value of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this
assessment includes the reasons for the impairment, the severity and duration of the decline in value, any change in value subsequent
to the period end, and forecasted performance of the investee. As of December&#160;31, 2020, 2021 and 2022, management believes no impairment
charge is necessary.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_34" id="_SignificantAccountingPoliciesTextBlock-c0_cont_33"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(m).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:FairValueMeasurementPolicyPolicyTextBlock"><b><i>Fair value measurement</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_35" id="_SignificantAccountingPoliciesTextBlock-c0_cont_34"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_2" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Accounting guidance defines fair value
as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded
at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that
market participants would use when pricing the asset or liability.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 155; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>2.</b></td><td style="text-align: justify"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td>
</tr></table><div>

</div><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.3pt; text-align: justify; text-indent: -22.3pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: italic bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<tr style="vertical-align: top">
<td style="width: 0.25in">(m)</td><td style="text-align: justify">Fair value measurement (cont.)</td></tr>
</table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_36" id="_SignificantAccountingPoliciesTextBlock-c0_cont_35"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Accounting guidance establishes a fair
value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. A financial instrument&#8217;s categorization within the fair value hierarchy is based upon the lowest level of input that
is significant to the fair value measurement. The three levels of inputs are:</p><p style="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.3pt; text-align: justify; text-indent: -22.3pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_37" id="_SignificantAccountingPoliciesTextBlock-c0_cont_36"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_4" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(a)</td><td style="text-align: justify">Level 1 &#8212;&#160;Observable inputs that reflect quoted
prices (unadjusted) for identical assets or liabilities in active markets.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_38" id="_SignificantAccountingPoliciesTextBlock-c0_cont_37"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_5" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(b)</td><td style="text-align: justify">Level 2 &#8212;&#160;Include other inputs that are directly
or indirectly observable in the marketplace.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_39" id="_SignificantAccountingPoliciesTextBlock-c0_cont_38"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_6" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(c)</td><td style="text-align: justify">Level 3 &#8212;&#160;Unobservable inputs which are supported
by little or no market activity.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_40" id="_SignificantAccountingPoliciesTextBlock-c0_cont_39"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_7" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Accounting guidance also describes three
main approaches to measuring the fair value of assets and liabilities: (1)&#160;market approach; (2)&#160;income approach and (3)&#160;cost
approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable
assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement
is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that
would currently be required to replace an asset.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_41" id="_SignificantAccountingPoliciesTextBlock-c0_cont_40"><ix:continuation id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Financial assets and liabilities of the
Group primarily consist of cash and cash equivalents, accounts receivable, amounts due from related parties, other receivables included
in prepayments and other current assets, equity investment, short-term borrowings, accounts payable, amounts due to related parties, other
payables included in accrued expenses and other current liabilities. The Group&#8217;s non-financial assets, such as property and equipment
as well as intangible assets, would be measured at fair value only if they were determined to be impaired.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_42" id="_SignificantAccountingPoliciesTextBlock-c0_cont_41"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(n).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_CommitmentsAndContingenciesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CommitmentsAndContingenciesPolicyTextBlock"><b><i>Commitments and contingencies</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_43" id="_SignificantAccountingPoliciesTextBlock-c0_cont_42"><ix:continuation id="_CommitmentsAndContingenciesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In the normal course of business, the
Group is subject to commitments and contingencies, including operating lease commitments, legal proceedings and claims arising out of
its business that relate to a wide range of matters, such as government investigations and tax matters. The Group recognizes a liability
for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Group
may consider many factors in making these assessments on liability for contingencies, including historical and the specific facts and
circumstances of each matter.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_44" id="_SignificantAccountingPoliciesTextBlock-c0_cont_43"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(o).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:RevenueRecognitionPolicyTextBlock"><b><i>Revenue recognition</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_45" id="_SignificantAccountingPoliciesTextBlock-c0_cont_44"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_2" id="_RevenueRecognitionPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group&#8217;s revenues are mainly
generated from (1) sale of software products; (2) sale of hardware products; (3) technology development services; (4) maintenance and
support service, and (5) sale of cloud platform products, etc.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_46" id="_SignificantAccountingPoliciesTextBlock-c0_cont_45"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_3" id="_RevenueRecognitionPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group recognizes revenue pursuant
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from contracts with customers are recognized when control of the promised goods or services is transferred to the Group&#8217;s customers,
in an amount that reflects the consideration the Group expects to be entitled to in exchange for those goods or services, reduced by Value
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_47" id="_SignificantAccountingPoliciesTextBlock-c0_cont_46"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_4" id="_RevenueRecognitionPolicyTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">1.</td><td style="text-align: justify">Identification of the contract, or contracts, with the customer;</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_48" id="_SignificantAccountingPoliciesTextBlock-c0_cont_47"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_5" id="_RevenueRecognitionPolicyTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">2.</td><td style="text-align: justify">Identification of the performance obligations in the contract;</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_49" id="_SignificantAccountingPoliciesTextBlock-c0_cont_48"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_6" id="_RevenueRecognitionPolicyTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">3.</td><td style="text-align: justify">Determination of the transaction price;</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_50" id="_SignificantAccountingPoliciesTextBlock-c0_cont_49"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_7" id="_RevenueRecognitionPolicyTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">4.</td><td style="text-align: justify">Allocation of the transaction price to the performance obligations
in the contract; and</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_51" id="_SignificantAccountingPoliciesTextBlock-c0_cont_50"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_8" id="_RevenueRecognitionPolicyTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">5.</td><td style="text-align: justify">Recognition of the revenue when, or as, a performance obligation
is satisfied.</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 156; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>2.</b></td><td style="text-align: justify"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 23.75pt; text-align: justify; text-indent: -23.75pt"><b><i>&#160;</i></b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b><i>(o)</i></b></td><td style="text-align: justify"><b><i>Revenue recognition </i></b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_52" id="_SignificantAccountingPoliciesTextBlock-c0_cont_51"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_9" id="_RevenueRecognitionPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group enters into <ix:nonFraction contextRef="c0" decimals="0" format="ixt-sec:numwordsen" name="hkg:NumberOfCustomers" scale="0" unitRef="pure">two</ix:nonFraction> major kinds
of revenue arrangements with customers. The first kind of contract can include various combinations of software products, hardware products
and maintenance and support service which are generally distinct and accounted for as separate performance obligations. The other kind
of contract is sale of cloud platform products, which include software products and cloud platform service as <ix:nonFraction contextRef="c0" decimals="0" format="ixt-sec:numwordsen" name="hkg:NumberOfPerformanceObligations" scale="0" unitRef="pure">two</ix:nonFraction> separate performance
obligations. As a result, the Group&#8217;s contracts may contain multiple performance obligations. The Group determines whether arrangements
are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are
readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other
obligations in the contract.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_53" id="_SignificantAccountingPoliciesTextBlock-c0_cont_52"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_10" id="_RevenueRecognitionPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i><span style="text-decoration:underline">Sale of software products</span></i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_54" id="_SignificantAccountingPoliciesTextBlock-c0_cont_53"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_11" id="_RevenueRecognitionPolicyTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group&#8217;s software products sold
to customers comprising customized software products for specific needs. The software products sold by the Group are intended to provide
the customer with full control of software, which means that revenues from the sale of such products are recognized at the point-in-time
at which the control over the products is transferred to the customer upon the acceptance. Typically, the software delivery period is
less than six months from the date of signing the contract. Payments are made by the customers in multiple instalments according to the
payment schedule determined in the contract.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_55" id="_SignificantAccountingPoliciesTextBlock-c0_cont_54"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_12" id="_RevenueRecognitionPolicyTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i><span style="text-decoration:underline">Sale of hardware products</span></i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_56" id="_SignificantAccountingPoliciesTextBlock-c0_cont_55"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_13" id="_RevenueRecognitionPolicyTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Hardware products sold to customers comprising
the hardware designed for specific needs. Revenue is recognized at the point-in-time when the customer is able to use and benefit from
the hardware products, which is generally upon delivery to the customer.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_57" id="_SignificantAccountingPoliciesTextBlock-c0_cont_56"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_14" id="_RevenueRecognitionPolicyTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i><span style="text-decoration:underline">Technology development services</span></i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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to customers comprises customized technology development services for specific needs. Revenue is recognized at the point-in-time when
the service is completed and the customer can benefit from it upon acceptance. Payments are made by the customers in multiple installments
according to the payment schedule determined in the contract.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_59" id="_SignificantAccountingPoliciesTextBlock-c0_cont_58"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_16" id="_RevenueRecognitionPolicyTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i><span style="text-decoration:underline">Maintenance and support service</span></i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_60" id="_SignificantAccountingPoliciesTextBlock-c0_cont_59"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_17" id="_RevenueRecognitionPolicyTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Maintenance and support (&#8220;M&amp;S&#8221;)
service is provided for software products contracts and consists of unspecified future software updates, upgrades, and enhancements as
well as technical product support services, and the provision of unspecified updates and upgrades on a when-and-if-available basis. Maintenance
and support services are renewable, generally on an annual basis, at the option of the customer. Maintenance represents stand-ready obligations
for which revenue is recognized ratably over the term of the arrangement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_61" id="_SignificantAccountingPoliciesTextBlock-c0_cont_60"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_18" id="_RevenueRecognitionPolicyTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i><span style="text-decoration:underline">Sale of cloud platform products</span></i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_62" id="_SignificantAccountingPoliciesTextBlock-c0_cont_61"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_19" id="_RevenueRecognitionPolicyTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Cloud platform products sold to customers
comprising software products uploaded in the cloud platform. The Group does not provide any cancellation and refund provisions to customers.
Pursuant to contract terms, customers can benefit from the software products and cloud platform from each on its own, meanwhile the Group
fulfils its promise by transferring software products and cloud platform services independently. Therefore, the software products and
the cloud platform services are distinct performance obligations. The transaction prices for <ix:nonFraction contextRef="c75" decimals="0" format="ixt-sec:numwordsen" name="hkg:NumberOfPerformanceObligations" scale="0" unitRef="pure">two</ix:nonFraction> performance obligations were determined
separately in the contract, which also reflects their stand-alone selling price (&#8220;SSP&#8221;) respectively. Since customers continuously
consume the benefits from both software products and cloud platform, the Group recognizes revenue from sale of cloud platform products
over time when the Group provides the customer a right to access the Group&#8217;s intellectual property throughout the service period.
The timing and pattern of transfer the right to access software products and cloud platform is the same. The service period is usually
<ix:nonNumeric contextRef="c0" format="ixt-sec:duryear" name="hkg:ServicePeriod">1</ix:nonNumeric> year and customer made quarterly payment after usage.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>2.</b></td><td style="text-align: justify"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b><i>&#160;</i></b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b><i>(o)</i></b></td><td style="text-align: justify"><b><i>Revenue recognition </i></b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_63" id="_SignificantAccountingPoliciesTextBlock-c0_cont_62"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_20" id="_RevenueRecognitionPolicyTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i><span style="text-decoration:underline">Contracts with multiple performance
obligations</span></i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_64" id="_SignificantAccountingPoliciesTextBlock-c0_cont_63"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_21" id="_RevenueRecognitionPolicyTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Most contracts with customers contain
multiple performance obligations that are distinct and are accounted for separately. The transaction price is allocated to the separate
performance obligations on a relative SSP basis. The Group determines SSP for all performance obligations using observable inputs, such
as standalone sales and historical contract pricing. SSP is consistent with the Group&#8217;s overall pricing objectives, taking into
consideration the type of software products, maintenance and support services, and professional services purchased by the customer. SSP
also reflects the amount the Group would charge for that performance obligation if it were sold separately in a standalone sale, and the
price the Group would sell to similar customers in similar circumstances.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_65" id="_SignificantAccountingPoliciesTextBlock-c0_cont_64"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_22" id="_RevenueRecognitionPolicyTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following table disaggregates the
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_66" id="_SignificantAccountingPoliciesTextBlock-c0_cont_65"><ix:nonNumeric contextRef="c0" escape="true" name="hkg:DisaggregationsOfRevenueTableTextBlock"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_23" id="_RevenueRecognitionPolicyTextBlock-c0_cont_22"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Technology development service</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_67" id="_SignificantAccountingPoliciesTextBlock-c0_cont_66"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_24" id="_RevenueRecognitionPolicyTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i><span style="text-decoration:underline">Remaining performance obligations</span></i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_68" id="_SignificantAccountingPoliciesTextBlock-c0_cont_67"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_25" id="_RevenueRecognitionPolicyTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Remaining performance obligations represent the transaction price of
orders meeting the definition of a contract in the new revenue standard for which work has not been performed or has been partially performed
and excludes unexercised contract options. The Company has elected to apply the practical expedient, which allows companies to exclude
remaining performance obligations with an original expected duration of one year or less. The aggregate amount of the transaction price
allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RevenueRemainingPerformanceObligation" scale="0" unitRef="usd">4,176,929</ix:nonFraction> at
December 31, 2022. The Company expects to recognize revenue on approximately $<ix:nonFraction contextRef="c74" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RevenueRemainingPerformanceObligation" scale="0" unitRef="usd">4,129,513</ix:nonFraction> and $<ix:nonFraction contextRef="c73" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RevenueRemainingPerformanceObligation" scale="0" unitRef="usd">47,416</ix:nonFraction> of the remaining performance obligations
over the next 12 and 24 months, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_69" id="_SignificantAccountingPoliciesTextBlock-c0_cont_68"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_26" id="_RevenueRecognitionPolicyTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i><span style="text-decoration:underline">Contract balances</span></i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 20pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_70" id="_SignificantAccountingPoliciesTextBlock-c0_cont_69"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_27" id="_RevenueRecognitionPolicyTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 20pt; text-align: justify">When the Group begins to deliver the
products or services pursuant to the performance obligations in the contract, the Group presents the contract in the consolidated balance
sheet as a contract asset or a contract liability, depending on the relationship between the Group&#8217;s performance and the customer&#8217;s
payment. The contract assets consist of accounts receivable and contract costs. Accounts receivable represent revenue recognized for the
amounts invoiced and/or prior to invoicing when the Group has satisfied its performance obligation and has unconditional right to the
payment. Contract costs are deferred for the contract preparation and will be recognized as cost of revenues when goods or services are
transferred to customers. During the years ended December 31, 2020, 2021 and 2022, the Group recognized $<ix:nonFraction contextRef="c76" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CostOfRevenue" scale="0" unitRef="usd">7,228,046</ix:nonFraction>, $<ix:nonFraction contextRef="c77" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CostOfRevenue" scale="0" unitRef="usd">10,885,731</ix:nonFraction> and $<ix:nonFraction contextRef="c78" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CostOfRevenue" scale="0" unitRef="usd">17,379,144</ix:nonFraction>
of contract costs as cost of revenues.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 20pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_71" id="_SignificantAccountingPoliciesTextBlock-c0_cont_70"><ix:continuation id="_RevenueRecognitionPolicyTextBlock-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 20pt; text-align: justify">The contract liabilities consist of deferred
revenue, which represent the billings or cash received for services in advance of revenue recognition and is recognized as revenue when
all of the Group&#8217;s revenue recognition criteria are met. The Group&#8217;s deferred revenue amounted to $<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenue" scale="0" unitRef="usd">2,953,238</ix:nonFraction> and $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenue" scale="0" unitRef="usd">2,553,808</ix:nonFraction>
as of December&#160;31, 2021 and 2022, respectively. During the years ended December 31, 2020, 2021 and 2022, the Group recognized $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenueRevenueRecognized1" scale="0" unitRef="usd">1,201,576</ix:nonFraction>,
$<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenueRevenueRecognized1" scale="0" unitRef="usd">900,686</ix:nonFraction> and $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenueRevenueRecognized1" scale="0" unitRef="usd">1,545,866</ix:nonFraction> revenue that was included in deferred revenue balance at January 1, 2020,2021 and 2022, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>2.</b></td><td style="text-align: justify"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_72" id="_SignificantAccountingPoliciesTextBlock-c0_cont_71"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(p).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="hkg_CostOfRevenuesPolicyPolicyTextBlock-c0_cont_1" escape="true" name="hkg:CostOfRevenuesPolicyPolicyTextBlock"><b><i>Cost of revenues</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_73" id="_SignificantAccountingPoliciesTextBlock-c0_cont_72"><ix:continuation id="hkg_CostOfRevenuesPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Cost of revenues consists primarily
of (i)&#160;purchased software, (ii)&#160;payroll, (iii)&#160;cloud hosting service fees, and (iv)&#160;depreciation and other costs related
to the business operation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_74" id="_SignificantAccountingPoliciesTextBlock-c0_cont_73"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(q).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_ResearchAndDevelopmentExpensePolicy-c0_cont_1" escape="true" name="us-gaap:ResearchAndDevelopmentExpensePolicy"><b><i>Research and development expenses</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_75" id="_SignificantAccountingPoliciesTextBlock-c0_cont_74"><ix:continuation id="_ResearchAndDevelopmentExpensePolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Research and development costs are
expensed as incurred in accordance with ASC 730. Software development costs required to be capitalized under ASC 985-20. The Company determined
that technology feasibility for the software product is not reached. There is no software development costs capitalized for the years
ended December 31, 2020, 2021 and 2022. Research and development expenses consist primarily of (i) Software development costs, (ii) payroll
and related expenses for research and development professionals, and (iii) depreciation and rental related to technology and development
functions. Research and development expenses are expensed as incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_76" id="_SignificantAccountingPoliciesTextBlock-c0_cont_75"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(r).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="hkg_SellingAndMarketingExpensesPolicyPolicyTextBlock-c0_cont_1" escape="true" name="hkg:SellingAndMarketingExpensesPolicyPolicyTextBlock"><b><i>Selling and marketing expenses</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_77" id="_SignificantAccountingPoliciesTextBlock-c0_cont_76"><ix:continuation id="hkg_SellingAndMarketingExpensesPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Selling and marketing expenses mainly
consist of (i)&#160;staff cost, rental and depreciation related to selling and marketing functions, and (ii)&#160;advertising costs and
market promotion expenses. Advertising costs, which consist primarily of online advertisements, are expensed as incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.3pt; text-align: justify; text-indent: -22.3pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_78" id="_SignificantAccountingPoliciesTextBlock-c0_cont_77"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(s).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_SellingGeneralAndAdministrativeExpensesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:SellingGeneralAndAdministrativeExpensesPolicyTextBlock"><b><i>General and administrative expenses</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_79" id="_SignificantAccountingPoliciesTextBlock-c0_cont_78"><ix:continuation id="_SellingGeneralAndAdministrativeExpensesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">General and administrative expenses
mainly consist of (i)&#160;staff cost, rental and depreciation related to general and administrative personnel, (ii)&#160;professional
service fees, and (iii)&#160;other corporate expenses.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_80" id="_SignificantAccountingPoliciesTextBlock-c0_cont_79"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(t).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_GovernmentAssistancePolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:GovernmentAssistancePolicyTextBlock"><b><i>Government grants</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_81" id="_SignificantAccountingPoliciesTextBlock-c0_cont_80"><ix:continuation id="_GovernmentAssistancePolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Government grant is recognized when
there is reasonable assurance that the Group will comply with the conditions attached to it and the grant will be received. Government
grant for the purpose of giving immediate financial support to the Group with no future related costs or obligation is recognized in the
Group&#8217;s consolidated statements of comprehensive (loss)/income when the grant becomes receivable. The Group recognized government
grants $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherIncome" scale="0" sign="-" unitRef="usd">1,699,231</ix:nonFraction>, $<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherIncome" scale="0" unitRef="usd">853,011</ix:nonFraction> and $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherIncome" scale="0" unitRef="usd">216,893</ix:nonFraction> in other income, net for the&#160;years ended December&#160;31, 2020, 2021 and 2022, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_82" id="_SignificantAccountingPoliciesTextBlock-c0_cont_81"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(u).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_PostemploymentBenefitPlansPolicy-c0_cont_1" escape="true" name="us-gaap:PostemploymentBenefitPlansPolicy"><b><i>Employee benefits</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_83" id="_SignificantAccountingPoliciesTextBlock-c0_cont_82"><ix:continuation id="_PostemploymentBenefitPlansPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group&#8217;s subsidiaries and
VIE and the VIE&#8217;s subsidiary in PRC participate in a government mandated, multiemployer, defined contribution plan, pursuant to
which certain retirement, medical, housing and other welfare benefits are provided to employees. PRC labor laws require the entities incorporated
in the PRC to pay to the local labor bureau a monthly contribution calculated at a stated contribution rate on the monthly basic compensation
of qualified employees. The Group has no further commitments beyond its monthly contribution.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_84" id="_SignificantAccountingPoliciesTextBlock-c0_cont_83"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(v).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeLeasesPolicyTextBlock"><b><i>Leases</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_85" id="_SignificantAccountingPoliciesTextBlock-c0_cont_84"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_2" id="_LesseeLeasesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On January&#160;1, 2020, the Group
adopted Accounting Standards Update (&#8220;ASU&#8221;)&#160;2016-02, Lease (FASB ASC Topic&#160;842). The adoption of Topic&#160;842
resulted in the presentation of operating lease right-of-use (&#8220;ROU&#8221;) assets and operating lease liabilities on the consolidated
balance sheet. The Group has elected the package of practical expedients, which allows the Group not to reassess (1)&#160;whether any
expired or existing contracts as of the adoption date are or contain a lease, (2)&#160;lease classification for any expired or existing
leases as of the adoption date and (3)&#160;initial direct costs for any expired or existing leases as of the adoption date. Lastly, the
Group elected the short-term lease exemption for all contracts with lease terms of 12&#160;months or less.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_86" id="_SignificantAccountingPoliciesTextBlock-c0_cont_85"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_3" id="_LesseeLeasesPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">At inception of a contract, the Group
assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of
an identified asset for a period of time in exchange of a consideration. To assess whether a contract is or contains a lease, the Group
assess whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic
benefits from the use of the asset and whether it has the right to control the use of the asset.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 159; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>2.</b></td><td style="text-align: justify"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -24pt"><b><i>&#160;</i></b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b><i>(v)</i></b></td><td style="text-align: justify"><b><i>Leases </i></b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_87" id="_SignificantAccountingPoliciesTextBlock-c0_cont_86"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_4" id="_LesseeLeasesPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The right-of-use assets and related lease
liabilities are recognized at the lease commencement date. The Group recognizes operating lease expenses on a straight-line basis over
the lease term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_88" id="_SignificantAccountingPoliciesTextBlock-c0_cont_87"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_5" id="_LesseeLeasesPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i><span style="text-decoration:underline">Operating lease right-of-use of
assets</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_89" id="_SignificantAccountingPoliciesTextBlock-c0_cont_88"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_6" id="_LesseeLeasesPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The right-of-use of asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and less any lease incentive received.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>&#160;</i></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_90" id="_SignificantAccountingPoliciesTextBlock-c0_cont_89"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_7" id="_LesseeLeasesPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i><span style="text-decoration:underline">Operating lease liabilities</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_91" id="_SignificantAccountingPoliciesTextBlock-c0_cont_90"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_8" id="_LesseeLeasesPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Lease liability is initially measured
at the present value of the outstanding lease payments at the commencement date, discounted using the Group&#8217;s incremental borrowing
rate. Lease payments included in the measurement of the lease liability comprise fixed lease payments, variable lease payments that depend
on an index or a rate, amounts expected to be payable under a residual value guarantee and any exercise price under a purchase option
that the Group is reasonably certain to exercise.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_92" id="_SignificantAccountingPoliciesTextBlock-c0_cont_91"><ix:continuation id="_LesseeLeasesPolicyTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Lease liability is measured at amortized
cost using the effective interest rate method. It is re-measured when there is a change in future lease payments, if there is a change
in the estimate of the amount expected to be payable under a residual value guarantee, or if there is any change in the Group assessment
of option purchases, contract extensions or termination options.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_93" id="_SignificantAccountingPoliciesTextBlock-c0_cont_92"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(w).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxPolicyTextBlock"><b><i>Income taxes</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_94" id="_SignificantAccountingPoliciesTextBlock-c0_cont_93"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_2" id="_IncomeTaxPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group accounts for income taxes
under ASC&#160;740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_95" id="_SignificantAccountingPoliciesTextBlock-c0_cont_94"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_3" id="_IncomeTaxPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the&#160;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. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_96" id="_SignificantAccountingPoliciesTextBlock-c0_cont_95"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_4" id="_IncomeTaxPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The provisions of ASC 740-10-25, &#8220;Accounting
for Uncertainty in Income Taxes,&#8221; prescribe a more-likely-than-not threshold for consolidated financial statement recognition and
measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition
of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest
and penalties associated with tax positions, and related disclosures. The Group&#8217;s operating subsidiaries in PRC are subject to examination
by the relevant tax authorities. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years
if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations
is extended to five years under special circumstances, where the underpayment of taxes is more than RMB <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefitsInterestOnIncomeTaxesExpense" scale="0" unitRef="cny">100,000</ix:nonFraction> ($<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefitsInterestOnIncomeTaxesExpense" scale="0" sign="-" unitRef="usd">14,537</ix:nonFraction>). In the case
of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. Penalties
and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_97" id="_SignificantAccountingPoliciesTextBlock-c0_cont_96"><ix:continuation id="_IncomeTaxPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group did not accrue any liability,
interest or penalties related to uncertain tax positions in its provision for income taxes line of its consolidated statements of income
for the years ended December 31, 2020, 2021 and 2022, respectively. The Group does not expect that its assessment regarding unrecognized
tax positions will materially change over the next 12 months.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 160; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>2.</b></td><td style="text-align: justify"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_98" id="_SignificantAccountingPoliciesTextBlock-c0_cont_97"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(x).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="hkg_ValueAddedTaxPolicyPolicyTextBlock-c0_cont_1" escape="true" name="hkg:ValueAddedTaxPolicyPolicyTextBlock"><b><i>Value added tax (&#8220;VAT&#8221;)</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_99" id="_SignificantAccountingPoliciesTextBlock-c0_cont_98"><ix:continuation continuedAt="hkg_ValueAddedTaxPolicyPolicyTextBlock-c0_cont_2" id="hkg_ValueAddedTaxPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group is subject to VAT and related
surcharges on revenue generated from sales of products, facilitation services and platform services. The Group records revenue net of
VAT.&#160;This VAT may be offset by qualified input VAT paid by the Group to suppliers. Net VAT balance between input VAT and output VAT
is recorded in the line item of other current assets on the consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_100" id="_SignificantAccountingPoliciesTextBlock-c0_cont_99"><ix:continuation id="hkg_ValueAddedTaxPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The VAT rate is <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="hkg:SellingConsumerProductsRate" scale="-2" unitRef="pure">13</ix:nonFraction>% for taxpayers selling
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related surcharges on revenue generated from providing services. Entities that are VAT general taxpayers are allowed to offset qualified
input VAT, paid to suppliers against their output VAT liabilities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_101" id="_SignificantAccountingPoliciesTextBlock-c0_cont_100"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(y).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock"><b><i>Foreign currency translation</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_102" id="_SignificantAccountingPoliciesTextBlock-c0_cont_101"><ix:continuation continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_2" id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The consolidated financial statements
are presented in United&#160;States dollars (&#8220;USD&#8217;&#8217; or &#8220;$&#8217;&#8217;). The functional currency
of certain of PRC subsidiaries is the Renminbi (&#8220;RMB&#8217;&#8217;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_103" id="_SignificantAccountingPoliciesTextBlock-c0_cont_102"><ix:continuation continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_3" id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Assets and liabilities are translated
at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the reporting period.
Capital accounts of the consolidated financial statements are translated into USD from RMB at their historical exchange rates when the
capital transactions occurred. Transaction gains and losses are recorded in foreign currency exchange gain/(loss) in the consolidated
statements of operations and comprehensive (loss)/income. The rates are obtained from H.10 statistical release of the U.S.&#160;Federal
Reserve Board.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_104" id="_SignificantAccountingPoliciesTextBlock-c0_cont_103"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfForeignExchangeContractsStatementOfFinancialPositionTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfForeignExchangeContractsStatementOfFinancialPositionTableTextBlock"><ix:continuation continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_4" id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_105" id="_SignificantAccountingPoliciesTextBlock-c0_cont_104"><ix:continuation id="_ScheduleOfForeignExchangeContractsStatementOfFinancialPositionTableTextBlock-c0_cont_1"><ix:continuation id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_106" id="_SignificantAccountingPoliciesTextBlock-c0_cont_105"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(z).</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="hkg_NoncontrollingInterestPolicyPolicyTextBlock-c0_cont_1" escape="true" name="hkg:NoncontrollingInterestPolicyPolicyTextBlock"><b><i>Non-controlling interest</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_107" id="_SignificantAccountingPoliciesTextBlock-c0_cont_106"><ix:continuation id="hkg_NoncontrollingInterestPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">For the Group&#8217;s majority-owned
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or indirectly, to the Group&#8217;s consolidated net (loss)/income on the consolidated statements of operation and comprehensive (loss)/income
includes the net (loss)/income attributable to non-controlling interests. The cumulative results of operations attributable to non-controlling
interests, are recorded as non-controlling interests in the Group&#8217;s consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt; text-align: justify; text-indent: -22pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_108" id="_SignificantAccountingPoliciesTextBlock-c0_cont_107"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(aa).&#160;</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="hkg_StatutoryReservesPolicyPolicyTextBlock-c0_cont_1" escape="true" name="hkg:StatutoryReservesPolicyPolicyTextBlock"><b><i>Statutory reserves</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_109" id="_SignificantAccountingPoliciesTextBlock-c0_cont_108"><ix:continuation continuedAt="hkg_StatutoryReservesPolicyPolicyTextBlock-c0_cont_2" id="hkg_StatutoryReservesPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In accordance with the PRC Company Laws,
the Group&#8217;s PRC subsidiaries, VIE and the VIE&#8217;s subsidiary must make appropriations from their after-tax profits as determined
under the generally accepted accounting principles in the PRC (&#8220;PRC GAAP&#8221;) to non-distributable reserve funds including statutory
surplus fund and discretionary surplus fund. The appropriation to the statutory surplus fund must be <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="hkg:StatutorySurplusPercentage" scale="-2" unitRef="pure">10</ix:nonFraction>% of the after-tax profits as determined
under PRC GAAP.&#160;Appropriation is not required if the statutory surplus fund has reached <ix:nonFraction contextRef="c79" decimals="2" format="ixt:num-dot-decimal" name="hkg:StatutorySurplusPercentage" scale="-2" unitRef="pure">50</ix:nonFraction>% of the registered capital of the PRC
companies. Appropriation to the discretionary surplus fund is made at the discretion of the PRC companies.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_110" id="_SignificantAccountingPoliciesTextBlock-c0_cont_109"><ix:continuation continuedAt="hkg_StatutoryReservesPolicyPolicyTextBlock-c0_cont_3" id="hkg_StatutoryReservesPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The statutory surplus fund and discretionary
surplus fund are restricted for use. They may only be applied to offset losses or increase the registered capital of the respective companies.
These reserves are not allowed to be transferred to the Company by way of cash dividends, loans or advances, nor can they be distributed
except for liquidation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 161; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>2.</b></td><td style="text-align: justify"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -24pt"><b><i>&#160;</i></b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b><i>(aa)</i>&#160;</b></td><td style="text-align: justify"><b><i>Statutory reserves </i></b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_111" id="_SignificantAccountingPoliciesTextBlock-c0_cont_110"><ix:continuation id="hkg_StatutoryReservesPolicyPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December&#160;31, 2022, none of
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The profit arrived at must be set off against any accumulated losses sustained by the Company in prior&#160;years, before allocation is
made to the statutory reserve. Therefore, no appropriations from after tax profits were recognized for the&#160;years ended December&#160;31,
2021 and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.3pt; text-align: justify; text-indent: -22.3pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_112" id="_SignificantAccountingPoliciesTextBlock-c0_cont_111"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(bb).&#160;</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_EarningsPerSharePolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:EarningsPerSharePolicyTextBlock"><b><i>(Loss)/Earnings per share</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_113" id="_SignificantAccountingPoliciesTextBlock-c0_cont_112"><ix:continuation continuedAt="_EarningsPerSharePolicyTextBlock-c0_cont_2" id="_EarningsPerSharePolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Basic (loss)/earnings per share is computed
by dividing net (loss)/earnings attributable to ordinary shareholders, taking into consideration the deemed dividends to preferred shareholders
(if any), by the weighted average number of ordinary shares outstanding during the year using the two-class method. Under the two-class
method, net (loss)/income is allocated between ordinary shares and other participating securities based on their participating rights.
Shares issuable for little to no consideration upon the satisfaction of certain conditions are considered as outstanding shares and included
in the computation of basic loss per share as of the date that all necessary conditions have been satisfied. Net losses are not allocated
to other participating securities if based on their contractual terms they are not obligated to share the losses.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_114" id="_SignificantAccountingPoliciesTextBlock-c0_cont_113"><ix:continuation id="_EarningsPerSharePolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Diluted earnings per share is calculated
by dividing net loss attributable to ordinary shareholders, as adjusted for the effect of dilutive ordinary equivalent shares, if any,
by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the year. Ordinary equivalent shares
consist of ordinary shares issuable upon the conversion of the preferred shares, using the if-converted method, and shares issuable upon
the exercise of share options using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted
loss per share calculation when inclusion of such share would be anti-dilutive.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.3pt; text-align: justify; text-indent: -22.3pt"><b><i>&#160;</i></b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_115" id="_SignificantAccountingPoliciesTextBlock-c0_cont_114"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(cc).&#160;</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_SegmentReportingPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:SegmentReportingPolicyPolicyTextBlock"><b><i>Segment reporting</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_116" id="_SignificantAccountingPoliciesTextBlock-c0_cont_115"><ix:continuation id="_SegmentReportingPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group uses the management approach
in determining its operating segments. The Group&#8217;s chief operating decision maker (&#8220;CODM&#8221;) identified as the Group&#8217;s
Chief Executive Officer, relies upon the consolidated results of operations as a whole when making decisions about allocating resources
and assessing the performance of the Group. As a result of the assessment made by CODM, the Group has only <ix:nonFraction contextRef="c0" decimals="0" format="ixt-sec:numwordsen" name="us-gaap:NumberOfReportableSegments" scale="0" unitRef="pure">one</ix:nonFraction> reportable segment. The
Group does not distinguish between markets or segments for the purpose of internal reporting. As the Group&#8217;s long-lived assets are
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_117" id="_SignificantAccountingPoliciesTextBlock-c0_cont_116"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(dd).&#160;</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="hkg_RisksAndUncertaintiesPolicyPolicyTextBlock-c0_cont_1" escape="true" name="hkg:RisksAndUncertaintiesPolicyPolicyTextBlock"><b><i>Risks and uncertainties</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_118" id="_SignificantAccountingPoliciesTextBlock-c0_cont_117"><ix:continuation continuedAt="hkg_RisksAndUncertaintiesPolicyPolicyTextBlock-c0_cont_2" id="hkg_RisksAndUncertaintiesPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">After the initial outbreak of a novel
strain of coronavirus (&#8220;COVID-19&#8221;), from time to time, some instances of COVID-19 infections have emerged in various regions
of China, including infections caused by Omicron variants in early 2022. A wave of infections caused by the Omicron variants emerged in
Shanghai in early 2022, and a series of restrictions and quarantines were implemented to contain the spread. The COVID-19 outbreak in
China made adverse impact on the Group&#8217;s financial condition and results of operations. However, in December 2022, Chinese government
declared to treat COVID-19 as Category B disease, and authorities dropped quarantine measures against people infected with COVID-19 and
stopped designating high-risk and low-risk areas. Hence, the management believed that the adverse impact due to the pandemic was temporary.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_119" id="_SignificantAccountingPoliciesTextBlock-c0_cont_118"><ix:continuation id="hkg_RisksAndUncertaintiesPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In February 2022, the Russian Federation
and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United
States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on the Company&#8217;s
financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 162; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>2.</b></td><td style="text-align: justify"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b>(cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.3pt; text-align: justify; text-indent: -22.3pt"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_120" id="_SignificantAccountingPoliciesTextBlock-c0_cont_119"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b><i>(ee).&#160;</i></b></td><td style="text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:NewAccountingPronouncementsPolicyPolicyTextBlock"><b><i>Recent accounting pronouncements</i></b></ix:nonNumeric></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_121" id="_SignificantAccountingPoliciesTextBlock-c0_cont_120"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_2" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group is an &#8220;emerging growth
company&#8221; (&#8220;EGC&#8221;) as defined in the Jumpstart Our Business Startups Act&#160;of&#160;2012 (the &#8220;JOBS Act&#8221;).
Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until
such time as those standards apply to private companies. The Group does not opt out of extended transition period for complying with any
new or revised financial accounting standards. Therefore, the Group&#8217;s financial statements may not be comparable to companies that
comply with public company effective dates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_122" id="_SignificantAccountingPoliciesTextBlock-c0_cont_121"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_3" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In June&#160;2016, the FASB issued ASU
No.&#160;2016-13, &#8220;Financial Instruments&#160;&#8212;&#160;Credit Losses (Topic&#160;326)&#8221;, which will require the measurement
of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and
reasonable and supportable forecasts. Subsequently, the FASB issued ASU No.&#160;2018-19, Codification Improvements to Topic&#160;326,
to clarify that receivables arising from operating leases are within the scope of lease accounting standards. Further, the FASB issued
ASU No.&#160;2020-04, ASU&#160;2020-05, ASU&#160;2020-10, ASU&#160;2020-11 and ASU&#160;2021-02 to provide additional guidance on the
credit losses standard. For all other entities, the amendments for ASU&#160;2016-13 are effective for fiscal&#160;years beginning after
December&#160;15, 2022, including interim periods within those fiscal&#160;years, with early adoption permitted. Adoption of the ASUs
is on a modified retrospective basis. The Group will adopt ASU&#160;2016-13 from January&#160;1, 2023. The Group considers the effect
of adoption of this ASU was immaterial.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="_SignificantAccountingPoliciesTextBlock-c0_cont_122"><ix:continuation id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Other accounting standards that have
been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption. The Group does not discuss recent standards that are not anticipated to have an impact on or are unrelated to
its consolidated financial condition, results of operations, cash flows or disclosures.</p></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>


</div><!-- Field: Page; Sequence: 163; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_AccountsAndNontradeReceivableTextBlock-c0_cont_1" escape="true" name="us-gaap:AccountsAndNontradeReceivableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>3.</b></td><td><b>ACCOUNTS RECEIVABLE, NET</b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.1pt; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_AccountsAndNontradeReceivableTextBlock-c0_cont_2" id="_AccountsAndNontradeReceivableTextBlock-c0_cont_1"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">Accounts receivable, net consisted
of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.1pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_AccountsAndNontradeReceivableTextBlock-c0_cont_3" id="_AccountsAndNontradeReceivableTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfAccountsNotesLoansAndFinancingReceivableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22.1pt; text-align: justify">&#160;</p><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="hkg_PrepaidExpensesAndOtherAssetsTextBlock-c0_cont_3" id="hkg_PrepaidExpensesAndOtherAssetsTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="hkg_ScheduleOfPrepaymentsAndOtherAssetsTableTextBlock-c0_cont_1" escape="true" name="hkg:ScheduleOfPrepaymentsAndOtherAssetsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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</div><div>

</div><ix:continuation continuedAt="hkg_PrepaidExpensesAndOtherAssetsTextBlock-c0_cont_4" id="hkg_PrepaidExpensesAndOtherAssetsTextBlock-c0_cont_3"><ix:continuation continuedAt="hkg_ScheduleOfPrepaymentsAndOtherAssetsTableTextBlock-c0_cont_2" id="hkg_ScheduleOfPrepaymentsAndOtherAssetsTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(1)</td><td style="text-align: justify"><ix:footnote id="ix_0_footnote" xml:lang="en-US">Receivables from third parties mainly includes funds lent
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Due to the third parties deteriorated financial position affected by COVID -19, the Group recorded bad debt expense for receivables from
third parties of <span style="-sec-ix-hidden: hidden-fact-49">nil</span>, $<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AllowanceForLoanAndLeaseLossRecoveryOfBadDebts" scale="0" unitRef="usd">1,380,331</ix:nonFraction> and $<span style="-sec-ix-hidden: hidden-fact-50">nil</span> for the&#160;years ended December&#160;31, 2020, 2021 and 2022, respectively, and wrote off
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="hkg_PrepaidExpensesAndOtherAssetsTextBlock-c0_cont_5" id="hkg_PrepaidExpensesAndOtherAssetsTextBlock-c0_cont_4"><ix:continuation id="hkg_ScheduleOfPrepaymentsAndOtherAssetsTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(2)</td><td style="text-align: justify"><ix:footnote id="ix_1_footnote" xml:lang="en-US">Prepaid case acceptance fee is the expense paid by the plaintiff
in advance according to PRC law when the court decides to accept civil cases, economic dispute cases, maritime cases and administrative
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="hkg_PrepaidExpensesAndOtherAssetsTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December 31, 2021 and 2022, the
Group wrote off the other current assets of <span style="-sec-ix-hidden: hidden-fact-51">nil</span> and US$<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherAssetsCurrent" scale="0" unitRef="usd">2,201,448</ix:nonFraction>, respectively.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>


</div><!-- Field: Page; Sequence: 164; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<td style="width: 0.25in; text-align: left"><b>5.</b></td><td style="text-align: justify"><b>PROPERTY AND EQUIPMENT, NET</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left">Property and equipment, net, consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_3" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:PropertyPlantAndEquipmentTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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</div><div>

</div><ix:continuation id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: left">Depreciation expense was $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Depreciation" scale="0" unitRef="usd">68,514</ix:nonFraction>, $<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Depreciation" scale="0" unitRef="usd">65,160</ix:nonFraction> and $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Depreciation" scale="0" unitRef="usd">78,831</ix:nonFraction> for
the years ended December 31, 2020, 2021 and 2022, respectively.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:IntangibleAssetsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>6.</b></td><td style="text-align: justify"><b>INTANGIBLE ASSETS, NET</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_2" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfFiniteLivedIntangibleAssetsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IntangibleAssetsNetExcludingGoodwill" scale="0" unitRef="usd">798,459</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_3" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the&#160;years ended December&#160;31, 2020,
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intangible assets is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_IntangibleAssetsDisclosureTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleofFiniteLivedIntangibleAssetsFutureAmortizationExpenseTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FiniteLivedIntangibleAssetsAmortizationExpenseYearTwo" scale="0" unitRef="usd">100,942</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">2025</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">2026</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FiniteLivedIntangibleAssetsAmortizationExpenseYearFour" scale="0" unitRef="usd">100,942</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">2027</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FiniteLivedIntangibleAssetsAmortizationExpenseYearFive" scale="0" unitRef="usd">100,942</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt">&#160;</p><div>


</div><!-- Field: Page; Sequence: 165; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt">&#160;</p><div>

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<td style="width: 0.25in"><b>7.</b></td><td><b>LONG-TERM INVESTMENT</b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_2" id="_LongTermDebtTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">Long-term investment consists of investments
in privately held companies. In September&#160;2015, the Group signed an investment agreement to acquire <ix:nonFraction contextRef="c109" decimals="2" format="ixt:num-dot-decimal" name="hkg:InvestmentAgreementToAcquire" scale="-2" unitRef="pure">20</ix:nonFraction>% of the shares of Shanghai
Shenghan Information Technology Co., Ltd (&#8220;Shanghai Shenghan&#8221;) for RMB <ix:nonFraction contextRef="c110" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:InvestmentCompanyCommittedCapital" scale="6" unitRef="cny">5</ix:nonFraction>&#160;million, of which the registered capital of
RMB <ix:nonFraction contextRef="c109" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentCompanyDistributableEarningsLossAccumulatedCapitalLossCarryforward" scale="0" unitRef="cny">125,000</ix:nonFraction> was subscribed. In January&#160;2018, with the addition of new investors to the investee, Xiao-i&#8217;s shareholding percentage
in Shanghai Shenghan was diluted to <ix:nonFraction contextRef="c111" decimals="3" format="ixt:num-dot-decimal" name="hkg:InvestmentDilutedPercentage" scale="-2" unitRef="pure">17.6</ix:nonFraction>%. In June&#160;2020, with the capital injection of Wuxi Zhixin Integrated Circuit Investment
Center (Limited Partnership), Xiao-i&#8217;s shareholding in Shanghai Shenghan was once again diluted to <ix:nonFraction contextRef="c112" decimals="4" format="ixt:num-dot-decimal" name="hkg:InvestmentDilutedPercentage" scale="-2" unitRef="pure">16.56</ix:nonFraction>%. According to the investment
agreement, Shanghai Shenghan&#8217;s board of directors consists of 3 directors, one of whom is appointed by the Group. Therefore, the
Group recognized it as long-term equity investment and measured in equity method since investor had the ability to exercise significant
influence over Shanghai Shenghan.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_3" id="_LongTermDebtTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">In February 2022, the Group entered into
agreements with third parties to establish Zhizhen Guorui (Shanghai) Information Technology Development Co., Ltd. (&#8220;Zhizhen Guorui&#8221;)
with a total consideration of $<ix:nonFraction contextRef="c113" decimals="-5" format="ixt:num-dot-decimal" name="hkg:TotalConsideration" scale="6" unitRef="usd">2.9</ix:nonFraction>&#160;million. According to the investment agreement, Zhizhen Guorui&#8217;s board of directors consists
of 5 directors, two of whom is appointed by the Group. Therefore, the Group recognized it as long-term equity investment and measured
in equity method since investor had the ability to exercise significant influence over Zhizhen Guorui.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_4" id="_LongTermDebtTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">The following table sets forth the changes
in the Group&#8217;s long-term investment:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_5" id="_LongTermDebtTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" escape="true" name="hkg:ScheduleOfGroupsLongTermInvestmentTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Interest %</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Interest %</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Equity method investments</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation id="_LongTermDebtTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">The Group recognized its share of loss
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt"></p><div>

</div><!-- Field: Page; Sequence: 166; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_ShortTermDebtTextBlock-c0_cont_1" escape="true" name="us-gaap:ShortTermDebtTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; margin-top: 0pt; margin-bottom: 0pt"><tr style="vertical-align: top">
<td style="width: 0.25in"><b>8.</b></td><td><b>SHORT-TERM BORROWINGS</b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 22pt">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_2" id="_ShortTermDebtTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">As of December 31, 2021 and 2022, the bank borrowings were
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</div><div>

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    <td>&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: center"><ix:nonFraction contextRef="c134" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">4.65</ix:nonFraction>%</td><td>&#160;</td>
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    <td style="text-align: center"><ix:nonFraction contextRef="c143" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">4.65</ix:nonFraction>%</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Agricultura Bank of China</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c146" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">4.00</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c147" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">March, 2023</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c147" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">1,159,891</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-63">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c146" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">1,159,891</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Agricultura Bank of China</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c149" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">2.70</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c150" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">May, 2023</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c150" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">1,159,891</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-64">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c149" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">1,159,891</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Shanghai Bank</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c152" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">4.65</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c153" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">November, 2023</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c153" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">869,918</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-65">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c152" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">869,918</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Shanghai Bank</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c155" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">4.65</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c156" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">November, 2023</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c156" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">724,932</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-66">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c155" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">724,932</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>Bank of Nanjing *</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c158" decimals="4" format="ixt:num-dot-decimal" id="ix_5_fact" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.50</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c159" format="ixt:date-monthname-year-en" id="ix_6_fact" name="hkg:Short-TermBorrowingMaturity">June, 2023</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c159" decimals="0" format="ixt:num-dot-decimal" id="ix_7_fact" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">724,932</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-67">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c158" decimals="0" format="ixt:num-dot-decimal" id="ix_8_fact" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">724,932</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Bank of Nanjing *</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c161" decimals="4" format="ixt:num-dot-decimal" id="ix_9_fact" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.50</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c162" format="ixt:date-monthname-year-en" id="ix_10_fact" name="hkg:Short-TermBorrowingMaturity">July, 2023</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c162" decimals="0" format="ixt:num-dot-decimal" id="ix_11_fact" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">724,932</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-68">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c161" decimals="0" format="ixt:num-dot-decimal" id="ix_12_fact" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">724,932</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>Bank of Ningbo</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c164" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.35</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c165" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">June, 2023</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c165" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">724,932</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-69">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c164" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">724,932</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">China Merchants Bank *</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c167" decimals="4" format="ixt:num-dot-decimal" id="ix_13_fact" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.05</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c168" format="ixt:date-monthname-year-en" id="ix_14_fact" name="hkg:Short-TermBorrowingMaturity">August, 2023</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c168" decimals="0" format="ixt:num-dot-decimal" id="ix_15_fact" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">704,634</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-70">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c167" decimals="0" format="ixt:num-dot-decimal" id="ix_16_fact" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">664,062</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Shanghai Bank</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c170" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.20</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c171" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">January, 2023</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c171" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">144,986</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-71">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c170" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">144,986</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">China Merchants Bank *</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c173" decimals="4" format="ixt:num-dot-decimal" id="ix_17_fact" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.05</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c174" format="ixt:date-monthname-year-en" id="ix_18_fact" name="hkg:Short-TermBorrowingMaturity">August, 2022</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c174" decimals="0" format="ixt:num-dot-decimal" id="ix_19_fact" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">1,004,300</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c175" decimals="0" format="ixt:num-dot-decimal" id="ix_20_fact" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">1,004,300</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-72">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">China Merchants Bank *</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c176" decimals="4" format="ixt:num-dot-decimal" id="ix_21_fact" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.05</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c177" format="ixt:date-monthname-year-en" id="ix_22_fact" name="hkg:Short-TermBorrowingMaturity">September, 2022</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c177" decimals="0" format="ixt:num-dot-decimal" id="ix_23_fact" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">1,035,684</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c178" decimals="0" format="ixt:num-dot-decimal" id="ix_24_fact" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">1,035,684</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-73">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Bank of Communications</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c179" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.31</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c180" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">February, 2022</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c180" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">627,687</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c181" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">627,687</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-74">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Xiamen International Bank</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c182" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">6.80</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c183" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">April, 2022</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c183" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">784,609</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c184" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">784,609</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-75">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Shanghai Pudong Development Bank*</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c185" decimals="4" format="ixt:num-dot-decimal" id="ix_25_fact" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.22</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c186" format="ixt:date-monthname-year-en" id="ix_26_fact" name="hkg:Short-TermBorrowingMaturity">March, 2022</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c186" decimals="0" format="ixt:num-dot-decimal" id="ix_27_fact" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">1,114,145</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c187" decimals="0" format="ixt:num-dot-decimal" id="ix_28_fact" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">1,114,145</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-76">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Shanghai Rural Commercial Bank</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c188" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.20</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c189" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">May, 2022</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c189" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">1,412,296</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c190" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">1,412,296</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-77">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Shanghai Bank</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c191" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.20</ix:nonFraction>%</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c192" format="ixt:date-monthname-year-en" name="hkg:Short-TermBorrowingMaturity">November, 2021</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c192" decimals="0" format="ixt:num-dot-decimal" name="hkg:Short-TermBorrowingsPrincipal" scale="0" unitRef="usd">784,609</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c193" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">784,609</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-78">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Shanghai Bank</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonFraction contextRef="c194" decimals="4" format="ixt:num-dot-decimal" name="hkg:AnnualInterestRate" scale="-2" unitRef="pure">5.20</ix:nonFraction>%</td><td>&#160;</td>
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    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_4" id="_ShortTermDebtTextBlock-c0_cont_3"><ix:continuation id="_ScheduleOfShortTermDebtTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify"><ix:footnote id="ix_2_footnote" xml:lang="en-US">These borrowings are guaranteed by Guizhou Xiao-I.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="_ShortTermDebtTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">The interest expense of short-term borrowings
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<td style="width: 0.25in"><b>9.</b></td><td><b>CONVERTIBLE LOANS</b></td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_2" id="_DebtDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">From May to September 2021, the VIE
entered into loan agreements with third parties, pursuant to which the VIE has the option to deliver either ordinary shares or cash to
pay the debt upon the closing of an Initial Public Offering (&#8220;IPO&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_3" id="_DebtDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="_ConvertibleDebtTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ConvertibleDebtTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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Interest<br/>
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December&#160;31, <br/>
2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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    <td>&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="white-space: nowrap">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Guoqiang Chen <sup>(2)</sup></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center"><ix:nonFraction contextRef="c207" decimals="4" format="ixt:num-dot-decimal" id="ix_34_fact" name="us-gaap:DebtInstrumentInterestRateEffectivePercentage" scale="-2" unitRef="pure">12.00</ix:nonFraction>%</td><td style="text-align: left"></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">SUNNY CONCORD INTERNATIONAL LTD <sup>(3)</sup></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center"><ix:nonFraction contextRef="c210" decimals="4" format="ixt:num-dot-decimal" id="ix_39_fact" name="us-gaap:DebtInstrumentInterestRateEffectivePercentage" scale="-2" unitRef="pure">15.00</ix:nonFraction>%</td><td style="text-align: left"></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Senbiao Hu <sup>(4)</sup></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center"><ix:nonFraction contextRef="c213" decimals="4" format="ixt:num-dot-decimal" id="ix_44_fact" name="us-gaap:DebtInstrumentInterestRateEffectivePercentage" scale="-2" unitRef="pure">15.00</ix:nonFraction>%</td><td style="text-align: left"></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Jun Xu <sup>(5)</sup></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center"><ix:nonFraction contextRef="c216" decimals="4" format="ixt:num-dot-decimal" id="ix_49_fact" name="us-gaap:DebtInstrumentInterestRateEffectivePercentage" scale="-2" unitRef="pure">15.00</ix:nonFraction>%</td><td style="text-align: left"></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Jinzhi Li <sup>(6)</sup></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center"><ix:nonFraction contextRef="c219" decimals="4" format="ixt:num-dot-decimal" id="ix_54_fact" name="us-gaap:DebtInstrumentInterestRateEffectivePercentage" scale="-2" unitRef="pure">14.40</ix:nonFraction>%</td><td style="text-align: left"></td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_4" id="_DebtDisclosureTextBlock-c0_cont_3"><ix:continuation continuedAt="_ConvertibleDebtTableTextBlock-c0_cont_2" id="_ConvertibleDebtTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(1)</td><td style="text-align: justify"><ix:footnote id="ix_3_footnote" xml:lang="en-US">The loan was extended in January, 2023. Pursuant to the extension
agreement, the loan would be settled in cash without the conversion option (Note 17). The principal and interest of the loan were repaid
in April, 2023.</ix:footnote></td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr> </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_5" id="_DebtDisclosureTextBlock-c0_cont_4"><ix:continuation continuedAt="_ConvertibleDebtTableTextBlock-c0_cont_3" id="_ConvertibleDebtTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(2)</td><td style="text-align: justify"><ix:footnote id="ix_4_footnote" xml:lang="en-US">The loan was originally matured before September, 2022 and
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</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr> </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_6" id="_DebtDisclosureTextBlock-c0_cont_5"><ix:continuation continuedAt="_ConvertibleDebtTableTextBlock-c0_cont_4" id="_ConvertibleDebtTableTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(3)</td><td style="text-align: justify"><ix:footnote id="ix_5_footnote" xml:lang="en-US">The loan was extended in January, 2023. Pursuant to the extension
agreement, the loan would be settled in cash without the conversion option. In April, 2023, the maturity date of the loan was changed
to May 31, 2023 with annual interest rate of <ix:nonFraction contextRef="c200" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:InvestmentInterestRate" scale="-2" unitRef="pure">15</ix:nonFraction>% (Note 17).</ix:footnote></td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr> </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_7" id="_DebtDisclosureTextBlock-c0_cont_6"><ix:continuation continuedAt="_ConvertibleDebtTableTextBlock-c0_cont_5" id="_ConvertibleDebtTableTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(4)</td><td style="text-align: justify"><ix:footnote id="ix_6_footnote" xml:lang="en-US">The loan was extended in February, 2023. Pursuant to the
extension agreement, the loan would be settled in cash without the conversion option. The principal and interest of the loan were repaid
in March, 2023 (Note 17).</ix:footnote></td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr> </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_8" id="_DebtDisclosureTextBlock-c0_cont_7"><ix:continuation continuedAt="_ConvertibleDebtTableTextBlock-c0_cont_6" id="_ConvertibleDebtTableTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(5)</td><td style="text-align: justify"><ix:footnote id="ix_7_footnote" xml:lang="en-US">The loan was originally matured before May 2022 and extended
in In August, 2022. In April, 2023, the loan was further extended to May 31, 2023.</ix:footnote></td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr> </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_9" id="_DebtDisclosureTextBlock-c0_cont_8"><ix:continuation continuedAt="_ConvertibleDebtTableTextBlock-c0_cont_7" id="_ConvertibleDebtTableTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(6)</td><td style="text-align: justify"><ix:footnote id="ix_8_footnote" xml:lang="en-US">The principal and interest of the loan were repaid in 2022.</ix:footnote></td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr> </table></ix:continuation></ix:continuation><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_10" id="_DebtDisclosureTextBlock-c0_cont_9"><ix:continuation id="_ConvertibleDebtTableTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(7)</td><td style="text-align: justify"><ix:footnote id="ix_9_footnote" xml:lang="en-US">The principal and interest of the loan were repaid in 2022.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b>&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_11" id="_DebtDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">Pursuant to the terms of
agreements, the VIE or a subsidiary of the VIE is required to repay principal and interest of the loans if (i) either an affiliate
of the VIE, including Xiao-I, is unable to consummate an Initial Public Offering (&#8220;IPO&#8221;) before the maturity of loans,
or (ii) even if IPO&#160;is consummated before the maturity of loans, the enterprise market value does not equal or exceed $<ix:nonFraction contextRef="c201" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:MaturitiesOfSeniorDebt" scale="6" unitRef="usd">435</ix:nonFraction>
million (RMB&#160;<ix:nonFraction contextRef="c201" decimals="-9" format="ixt:num-dot-decimal" name="us-gaap:MaturitiesOfSeniorDebt" scale="9" unitRef="cny">3</ix:nonFraction> billion) upon closing of the IPO. If such affiliate of the VIE completes an IPO before the maturity of
convertible loans with enterprise market value above $<ix:nonFraction contextRef="c202" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConvertibleDebt" scale="6" unitRef="usd">435</ix:nonFraction> million, the convertible loan can be paid by the VIE or a subsidiary of
the VIE, at the VIE&#8217;s option, by delivering either ordinary shares of such affiliate or an equivalent amount in cash.
Accordingly, upon completion of an IPO pursuant to the relevant loan agreements, the shares to be issued if such loans
were converted would be ordinary shares of Xiao-I Corporation should the VIE decided to convert shares. Whether the loans are paid
for in cash within <ix:nonFraction contextRef="c0" decimals="0" format="ixt-sec:numwordsen" name="us-gaap:DebtInstrumentConvertibleThresholdTradingDays" scale="0" unitRef="days">ten</ix:nonFraction> working days after completion of the listing or in ordinary shares of Xiao-I Corporation is at the option of
the VIE.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_12" id="_DebtDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">Loans can be extended with both parties&#8217;
consensus. Since the conversion is only exercisable upon closing of the IPO, the Group has determined that the conversion feature embedded
in the convertible loans should not be bifurcated, and accounted the convertible loans as a liability until the contingency event is resolved.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_13" id="_DebtDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">The interest expenses of convertible
loans were <span style="-sec-ix-hidden: hidden-fact-83">nil</span>, $<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InducedConversionOfConvertibleDebtExpense" scale="0" unitRef="usd">405,316</ix:nonFraction> and $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InducedConversionOfConvertibleDebtExpense" scale="0" unitRef="usd">686,022</ix:nonFraction> for the years ended December 31, 2020, 2021 and 2022, respectively. The aggregate number of shares
that would be issued in a hypothetical conversion of the total loans outstanding at December 31, 2022 was <ix:nonFraction contextRef="c203" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesOutstanding" scale="0" unitRef="shares">165,869</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DebtDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">In March, 2023, the Company completed
its initial public offering and was listed on the Nasdaq Global Market while the enterprise market value did not meet the agreed criteria.
In March and April, 2023, the VIE made repayment of the loans and interest of convertible loans of Senbiao Hu and Fumei Shi.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_1" escape="true" name="us-gaap:AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>10.</b></td><td style="text-align: justify"><b>ACCRUED EXPENSES AND OTHER LIABILITIES</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_2" id="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">Accrued expenses and other liabilities
consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_3" id="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfAccruedLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Accrued expenses and other current liabilities:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; width: 76%; text-align: left">Loan from third parties <sup>(1)</sup></td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">Payroll payable</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">Other tax payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="hkg:PayableToStaff" scale="0" unitRef="usd">2,777,187</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_4" id="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_3"><ix:continuation continuedAt="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_2" id="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(1)</td><td style="text-align: justify"><ix:footnote id="ix_10_footnote" xml:lang="en-US">Loan from third parties mainly consisted of the unsecured borrowings
from third parties for ordinary business operation. For the borrowings, the interest rates range from <ix:nonFraction contextRef="c73" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:InvestmentInterestRate" scale="-2" unitRef="pure">3.8</ix:nonFraction>% to <ix:nonFraction contextRef="c74" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:InvestmentInterestRate" scale="-2" unitRef="pure">25.55</ix:nonFraction>% and the interest
expenses were $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseBorrowings" scale="0" unitRef="usd">216,020</ix:nonFraction> $<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseBorrowings" scale="0" unitRef="usd">815,994</ix:nonFraction> and $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseBorrowings" scale="0" unitRef="usd">1,013,209</ix:nonFraction> for the&#160;years ended December&#160;31, 2020, 2021 and 2022. The borrowings are payable
on demand. In April, 2023, the Group made the repayment of principal amounted to $<ix:nonFraction contextRef="c225" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfDebt" scale="0" unitRef="usd">3,133,371</ix:nonFraction> to the third parties.</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24.1pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_5" id="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_4"><ix:continuation continuedAt="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_3" id="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(2)</td><td style="text-align: justify"><ix:footnote id="ix_11_footnote" xml:lang="en-US">Long-term loan from a third party was primarily consisted of:</ix:footnote></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 46.1pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:footnote id="ix_13_footnote" xml:lang="en-US"><ix:continuation continuedAt="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_6" id="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_5"><ix:continuation continuedAt="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_4" id="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify">(i) Long-term loan for the purpose
of investing in Zhizhen Guorui in February 2022, amounted to $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LongTermLoansPayable" scale="0" unitRef="usd">2,682,248</ix:nonFraction> as of December 31, 2022 (Note 7), with free interest rate in the
first <ix:nonNumeric contextRef="c0" format="ixt-sec:durwordsen" name="us-gaap:MaximumLengthOfTimeHedgedInInterestRateCashFlowHedge1">three years</ix:nonNumeric>. The loan is due in <ix:nonNumeric contextRef="c2" format="ixt-sec:durwordsen" name="us-gaap:LoansHeldForSaleTerm">five years</ix:nonNumeric>, and if Zhizhen Guorui declares any cash dividend to the Group, the cash dividend would
become the source to repay the loan in the first priority.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 46.1pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation></ix:footnote><div>

</div><div>

</div><ix:footnote id="ix_14_footnote" xml:lang="en-US"><ix:continuation continuedAt="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_7" id="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_6"><ix:continuation continuedAt="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_5" id="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.5in; text-align: justify">(ii) In October 2022, the Group entered
into an exclusive license agreement with a third party, under which the term of exclusive license was <ix:nonNumeric contextRef="c226" format="ixt-sec:duryear" name="us-gaap:DebtInstrumentTerm">2</ix:nonNumeric> years, and the third party should
pay the license fee of $<ix:nonFraction contextRef="c226" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLicenseFeesReceived" scale="0" unitRef="usd">1,449,864</ix:nonFraction> (RMB<ix:nonFraction contextRef="c226" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLicenseFeesReceived" scale="6" unitRef="cny">10</ix:nonFraction> million) to the Group upon the effective of the agreement. Meanwhile, the same party entered
into the agreement to grant the exclusive right to use these patents to the Group for 2 years at the consideration of $<ix:nonFraction contextRef="c227" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ContingentConsiderationClassifiedAsEquityFairValueDisclosure" scale="0" unitRef="usd">63,608</ix:nonFraction> per month,
aggregately $<ix:nonFraction contextRef="c227" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionContingentConsiderationLiabilityNoncurrent" scale="0" unitRef="usd">1,526,581</ix:nonFraction> (RMB<ix:nonFraction contextRef="c227" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionContingentConsiderationLiabilityNoncurrent" scale="6" unitRef="cny">10.5</ix:nonFraction> million). The patents under the agreements were pledged to the third party. The transaction was substantially
loan from the third party with the patents pledged. The Group accounted for $<ix:nonFraction contextRef="c227" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedParty" scale="0" unitRef="usd">1,449,864</ix:nonFraction> (RMB<ix:nonFraction contextRef="c227" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedParty" scale="6" unitRef="cny">10</ix:nonFraction> million) as the principal of the loan from
the third party, and the interests were calculated under effective interest method. In November 2022, the Group entered into another exclusive
license agreement with the same party in the similar form to obtain another $<ix:nonFraction contextRef="c228" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd">1,449,864</ix:nonFraction> (RMB<ix:nonFraction contextRef="c228" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="6" unitRef="cny">10</ix:nonFraction> million) loan, which was received subsequently
in 2023.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 46.1pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation></ix:footnote><div>

</div><div>

</div><ix:continuation id="_AccountsPayableAccruedLiabilitiesAndOtherLiabilitiesDisclosureCurrentTextBlock-c0_cont_7"><ix:continuation id="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(3)</td><td style="text-align: justify"><ix:footnote id="ix_12_footnote" xml:lang="en-US">Litigation related payable mainly consisted of the litigation
fee of the lawsuit between the Group and Apple paid by the third parties on behalf of the Group.</ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48.2pt; text-align: justify; text-indent: -24.1pt">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>11.</b></td><td style="text-align: justify"><b>TAXATION</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -24pt"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_2" id="_IncomeTaxDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Cayman Islands</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_3" id="_IncomeTaxDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Company is incorporated in the
Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to income or capital gains taxes. In addition,
dividend payments are not subject to withholdings tax in the Cayman Islands.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_4" id="_IncomeTaxDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Hong&#160;Kong</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_5" id="_IncomeTaxDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In accordance with the relevant tax
laws and regulations of Hong&#160;Kong, a company registered in Hong&#160;Kong is subject to income taxes within Hong&#160;Kong at the
applicable tax rate on taxable income. In March&#160;2018, the Hong&#160;Kong Government introduced a two-tiered profit tax rate regime
by enacting the Inland Revenue (Amendment) (No.3) Ordinance 2018 (the &#8220;Ordinance&#8221;). Under the two-tiered profits tax rate
regime, the first HK dollar <ix:nonFraction contextRef="c0" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxReconciliationTaxCreditsOther" scale="6" unitRef="hkd">2</ix:nonFraction>&#160;million of assessable profits of qualifying corporations is taxed at <ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationTaxSettlementsStateAndLocal" scale="-2" unitRef="pure">8.25</ix:nonFraction>% and the remaining assessable
profits at <ix:nonFraction contextRef="c0" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationOtherAdjustments" scale="-2" unitRef="pure">16.5</ix:nonFraction>%. The Ordinance is effective from the year of assessment&#160;2018-2019. According to the policy, if no election has been
made, the whole of the taxpaying entity&#8217;s assessable profits will be chargeable to Profits Tax at the rate of <ix:nonFraction contextRef="c229" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationNondeductibleExpense" scale="-2" unitRef="pure">16.5</ix:nonFraction>% or <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationNondeductibleExpense" scale="-2" unitRef="pure">15</ix:nonFraction>%, as applicable.
Because the preferential tax treatment is not elected by the Group, all the subsidiaries registered in Hong&#160;Kong are subject to income
tax at a rate of <ix:nonFraction contextRef="c0" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationTaxSettlements" scale="-2" unitRef="pure">16.5</ix:nonFraction>%. Payments of dividends by the subsidiary to the Company are not subject to withholding tax in Hong&#160;Kong.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></p><div>



</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; font-size: 10pt"><span style="font-size: 10pt"><b>11. </b></span></td>
    <td style="font-size: 10pt"><span style="font-size: 10pt"><b>TAXATION</b> (cont.)</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_6" id="_IncomeTaxDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>PRC</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_7" id="_IncomeTaxDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Generally, the Group&#8217;s WFOE,
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_8" id="_IncomeTaxDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In accordance with the implementation
rules of EIT Laws, a qualified &#8220;High and New Technology Enterprise&#8221; (&#8220;HNTE&#8221;) is eligible for a preferential tax
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_9" id="_IncomeTaxDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Guizhou Xiao-I was qualified as an
eligible software enterprise before the income tax year-end final settlement in 2017. As a result of this qualification, it is entitled
to a tax holiday of a full exemption for the&#160;years ended December&#160;31, 2017 and 2018, in which its taxable income is greater
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_10" id="_IncomeTaxDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The benefit of the preferred tax treatment
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_11" id="_IncomeTaxDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In general, the PRC tax authority has
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to PRC tax regulations, the PRC net operating loss can generally carry forward for no longer than <ix:nonNumeric contextRef="c2" continuedAt="_AdditionalLiabilityLongDurationInsuranceWeightedAverageDuration-c2_cont_1" format="ixt-sec:durwordsen" name="us-gaap:AdditionalLiabilityLongDurationInsuranceWeightedAverageDuration">five</ix:nonNumeric>&#160;years starting from the<ix:continuation id="_AdditionalLiabilityLongDurationInsuranceWeightedAverageDuration-c2_cont_1"><ix:continuation id="_ConstructionContractorContractDuration-c0_cont_1"> year</ix:continuation></ix:continuation>
subsequent to the year in which the loss was incurred, and that of high-tech enterprises is no more than <ix:nonNumeric contextRef="c0" format="ixt-sec:duryear" name="us-gaap:FiscalPeriodDuration">10</ix:nonNumeric>&#160;years. Carryback of losses
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_12" id="_IncomeTaxDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The income tax provision consists of
the following components:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_13" id="_IncomeTaxDisclosureTextBlock-c0_cont_12"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_14" id="_IncomeTaxDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">A reconciliation between the Group&#8217;s
actual provision for income taxes and the provision at the PRC, mainland statutory rate is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_15" id="_IncomeTaxDisclosureTextBlock-c0_cont_14"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Investment loss</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c237" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxReconciliationForeignIncomeTaxRateDifferential" scale="0" unitRef="usd">13,058</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c238" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxReconciliationForeignIncomeTaxRateDifferential" scale="0" unitRef="usd">134,570</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Effect of preferential tax rates</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c238" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxReconciliationChangeInEnactedTaxRate" scale="0" sign="-" unitRef="usd">356,448</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Deferred tax effect of tax rate change</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-86">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-87">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Change in valuation allowance</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c237" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxReconciliationChangeInDeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd">459,885</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c238" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxReconciliationChangeInDeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd">719,790</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 4pt">Income tax (benefit) expense</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxExpenseBenefit" scale="0" unitRef="usd">660,655</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
<tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="text-align: left; width: 0.25in"><b>11.</b></td><td style="text-align: justify"><b>TAXATION</b> (cont.)</td>
</tr>
</table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_16" id="_IncomeTaxDisclosureTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The significant components of the net
deferred tax assets are summarized below:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>


</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_17" id="_IncomeTaxDisclosureTextBlock-c0_cont_16"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDeferredTaxAssetsAndLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>Deferred tax assets:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Tax losses</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="hkg:TaxLosses" scale="0" unitRef="usd">6,239,757</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Allowance for doubtful accounts</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accrued expenses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccruedLiabilitiesCurrent" scale="0" unitRef="usd">257,966</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>Impairment</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Non-deductible education expense</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="hkg:NondeductibleEducationExpense" scale="0" unitRef="usd">818</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c240" decimals="0" format="ixt:num-dot-decimal" name="hkg:NondeductibleEducationExpense" scale="0" unitRef="usd">756</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Lease liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LeaseDepositLiability" scale="0" unitRef="usd">191,758</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c240" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LeaseDepositLiability" scale="0" unitRef="usd">112,203</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Amortization of intangible assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-89">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c241" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AmortizationOfIntangibleAssets" scale="0" unitRef="usd">972,696</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Valuation allowance</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd">2,685,373</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c240" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd">3,611,707</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Total deferred tax assets</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsGross" scale="0" unitRef="usd">5,089,057</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c240" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsGross" scale="0" unitRef="usd">4,020,178</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Deferred tax liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Right-of-use assets</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="hkg:RightofuseAssets" scale="0" unitRef="usd">182,770</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c240" decimals="0" format="ixt:num-dot-decimal" name="hkg:RightofuseAssets" scale="0" unitRef="usd">131,604</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 4pt">Deferred tax assets, net</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsNet" scale="0" unitRef="usd">4,906,287</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c240" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsNet" scale="0" unitRef="usd">3,888,574</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_18" id="_IncomeTaxDisclosureTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December&#160;31, 2021 and 2022, the Group had net operating
loss carryforwards of approximately $<ix:nonFraction contextRef="c235" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwards" scale="0" unitRef="usd">36,288,770</ix:nonFraction> and $<ix:nonFraction contextRef="c236" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwards" scale="0" unitRef="usd">28,198,108</ix:nonFraction>, respectively, which arose from the Group&#8217;s subsidiaries, the VIE
and the VIE&#8217;s subsidiaries established in the PRC and Hong&#160;Kong. As of December&#160;31, 2021 and 2022, deferred tax assets
from the net operating loss carryforwards amounted to $<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwards" scale="0" unitRef="usd">6,239,757</ix:nonFraction> and $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwards" scale="0" unitRef="usd">4,475,379</ix:nonFraction>, respectively. Due to the Group&#8217;s history of recurrent
losses, the management did not expect the subsidiaries of VIE will generate enough profit to utilize the deferred tax assets in the future.
The Group has recognized an increase to the valuation allowance of $<ix:nonFraction contextRef="c28" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd">570,253</ix:nonFraction>, $<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd">810,159</ix:nonFraction> and $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd">1,723,347</ix:nonFraction> for the years ended December 31,
2020, 2021 and 2022, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_19" id="_IncomeTaxDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Changes in valuation allowance are as
follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_20" id="_IncomeTaxDisclosureTextBlock-c0_cont_19"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:SummaryOfValuationAllowanceTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">As of December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Balance at the beginning of the year</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c242" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="0" unitRef="usd">1,911,048</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="0" unitRef="usd">2,685,373</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Current year addition</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c238" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefitsDecreasesResultingFromPriorPeriodTaxPositions" scale="0" unitRef="usd">90,370</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c241" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefitsDecreasesResultingFromPriorPeriodTaxPositions" scale="0" unitRef="usd">25,844</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Deferred tax effect of tax rate change</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c241" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxReconciliationChangeInEnactedTaxRate" scale="0" unitRef="usd">538,660</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Exchange rate effect</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 4pt">Balance at the end of the year</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="0" unitRef="usd">2,685,373</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c240" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="0" unitRef="usd">3,611,707</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_21" id="_IncomeTaxDisclosureTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December&#160;31, 2022, net operating
loss carryforwards from PRC will expire, if unused, in the following amounts:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_22" id="_IncomeTaxDisclosureTextBlock-c0_cont_21"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:SummaryOfOperatingLossCarryforwardsTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left">2023</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c243" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDueCurrent" scale="0" unitRef="usd">322,766</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c243" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDueInTwoYears" scale="0" unitRef="usd">897,460</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">2025</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c243" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDueInThreeYears" scale="0" unitRef="usd">380,244</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">2026</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c243" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDueInFourYears" scale="0" unitRef="usd">407,436</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">2027</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c243" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDueInFiveYears" scale="0" unitRef="usd">913,779</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c243" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDueThereafter" scale="0" unitRef="usd">21,417,987</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c243" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDue" scale="0" unitRef="usd">24,339,672</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_23" id="_IncomeTaxDisclosureTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As of December&#160;31, 2022, net operating
loss from HK will carry forward indefinitely, in the following amounts:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_IncomeTaxDisclosureTextBlock-c0_cont_23"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:SummaryOfTaxCreditCarryforwardsTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left; padding-bottom: 1.5pt">Net operating loss carryforwards indefinitely</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwardsForeign" scale="0" unitRef="usd">3,858,436</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLossCarryforwards" scale="0" unitRef="usd">3,858,436</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -24pt"><b>&#160;</b></p><div>


</div><!-- Field: Page; Sequence: 171; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeOperatingLeasesTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>12.</b></td><td style="text-align: justify"><b>LEASES</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_2" id="_LesseeOperatingLeasesTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Effective on January&#160;1, 2020, the
Company adopted Topic&#160;842. At the inception of a contract, the Group determines if the arrangement is, or contains, a lease. ROU
assets represent the Group&#8217;s right to use an underlying asset for the lease term and lease liabilities represent its obligation
to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on
the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_3" id="_LesseeOperatingLeasesTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Supplemental balance sheet information
related to operating lease was as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_4" id="_LesseeOperatingLeasesTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:OperatingLeaseLeaseIncomeTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Right-of-use Assets</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseRightOfUseAsset" scale="0" unitRef="usd">1,194,859</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 9%; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseRightOfUseAsset" scale="0" unitRef="usd">865,399</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Lease payment liabilities-current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityCurrent" scale="0" unitRef="usd">800,658</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityCurrent" scale="0" unitRef="usd">435,462</ix:nonFraction></td><td style="text-align: left">)</td></tr>
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    <td style="text-align: left; padding-bottom: 1.5pt">Lease payment liabilities- non-current</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityNoncurrent" scale="0" unitRef="usd">446,140</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityNoncurrent" scale="0" unitRef="usd">300,974</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiability" scale="0" unitRef="usd">1,246,798</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiability" scale="0" unitRef="usd">736,436</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 20pt; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_5" id="_LesseeOperatingLeasesTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 20pt; text-align: justify">The weighted-average discount rate for
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</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_6" id="_LesseeOperatingLeasesTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">For the&#160;years ended December&#160;31,
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</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_7" id="_LesseeOperatingLeasesTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:LeaseCostTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_8" id="_LesseeOperatingLeasesTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following is a schedule of future
minimum payments under our operating leases:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_LesseeOperatingLeasesTextBlock-c0_cont_8"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:LesseeOperatingLeaseLiabilityMaturityTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; text-align: left; font-weight: bold">For the year ended December 31,</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeasesFutureMinimumPaymentsDueInTwoYears" scale="0" unitRef="usd">200,912</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Total lease payments</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="hkg:ImputedInterest" scale="0" unitRef="usd">34,377</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiability" scale="0" unitRef="usd">736,436</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -24pt"><b>&#160;</b></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_RestrictedAssetsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:RestrictedAssetsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>13.</b></td><td style="text-align: justify"><b>RESTRICTED NET ASSETS</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_RestrictedAssetsDisclosureTextBlock-c0_cont_2" id="_RestrictedAssetsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">A significant portion of the Group&#8217;s
operations are conducted through its PRC (excluding Hong&#160;Kong) VIE, the Group&#8217;s ability to pay dividends is primarily dependent
on receiving distributions of funds from its VIE and VIE&#8217;s subsidiaries. Relevant PRC statutory laws and regulations permit payments
of dividends by its VIE and VIE&#8217;s subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC
accounting standards and regulations, and after it has met the PRC requirements for appropriation to statutory reserves. Paid in capital
of the VIE and VIE&#8217;s subsidiaries included in the Group&#8217;s consolidated net assets are also non-distributable for dividend
purposes.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RestrictedAssetsDisclosureTextBlock-c0_cont_3" id="_RestrictedAssetsDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In accordance with the PRC regulations
on Enterprises with Foreign Investment, a WFOE established in the PRC is required to provide certain statutory reserves, namely general
reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the
enterprise&#8217;s PRC statutory accounts. A WFOE is required to allocate at least <ix:nonFraction contextRef="c244" decimals="2" format="ixt:num-dot-decimal" name="hkg:AnnualAftertaxProfitPercentage" scale="-2" unitRef="pure">10</ix:nonFraction>% of its annual after-tax profit to the general reserve
until such reserve has reached <ix:nonFraction contextRef="c244" decimals="2" format="ixt:num-dot-decimal" name="hkg:RegisteredCapitalPercentage" scale="-2" unitRef="pure">50</ix:nonFraction>% of its registered capital based on the enterprise&#8217;s PRC statutory accounts. Appropriations to
the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors. The aforementioned reserves
can only be used for specific purposes and are not distributable as cash dividends. WFOE is subject to the above mandated restrictions
on distributable profits.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RestrictedAssetsDisclosureTextBlock-c0_cont_4" id="_RestrictedAssetsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Additionally, in accordance with the
Company Law of the PRC, a domestic enterprise is required to provide a statutory common reserve of at least <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="hkg:AnnualAftertaxProfitPercentage" scale="-2" unitRef="pure">10</ix:nonFraction>% of its annual after-tax
profit until such reserve has reached <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="hkg:RegisteredCapitalPercentage" scale="-2" unitRef="pure">50</ix:nonFraction>% of its registered capital based on the enterprise&#8217;s PRC statutory accounts. A domestic
enterprise is also required to provide for a discretionary surplus reserve, at the discretion of the board of directors. The aforementioned
reserves can only be used for specific purposes and are not distributable as cash dividends. All of the Group&#8217;s PRC consolidated
VIE and VIE&#8217;s subsidiaries are subject to the above mandated restrictions on distributable profits.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_RestrictedAssetsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">As a result of these PRC laws and regulations,
the Group&#8217;<span style="font-family: Times New Roman, Times, Serif">s VIE and VIE&#8217;s subsidiaries are restricted in their ability
to transfer a portion of their net assets to the Company. As of December&#160;31, 2021 and 2022, net assets restricted in the aggregate,
which include paid-in capital and statutory reserve funds of the Group&#8217;s VIE and VIE&#8217;s subsidiaries, that are included in
the Group&#8217;s consolidated net assets were approximately $<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsNet" scale="0" unitRef="usd">75,858,780</ix:nonFraction> and $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsNet" scale="0" unitRef="usd">75,858,780</ix:nonFraction>, respectively.</span></p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:RelatedPartyTransactionsDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify; text-indent: 0pt"><b>14.&#160;&#160;&#160;&#160;RELATED
PARTY TRANSACTIONS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -24pt"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Related parties</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following is a list of related parties
which the Group has transactions with:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfRelatedPartyTransactionsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; width: 5%; font-size: 10pt"><span style="font-size: 10pt"><b>No.</b></span></td>
    <td style="white-space: nowrap; width: 1%; padding-bottom: 1.5pt; font-size: 10pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 44%; font-size: 10pt; text-align: center"><span style="font-size: 10pt"><b>Name of Related Parties</b></span></td>
    <td style="white-space: nowrap; width: 1%; padding-bottom: 1.5pt; font-size: 10pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 49%; font-size: 10pt; text-align: center"><span style="font-size: 10pt"><b>Relationship</b></span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td style="padding-left: 10pt; font-size: 10pt; text-indent: -10pt"><span style="font-size: 10pt">1</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><span style="font-size: 10pt">Zhejiang Baiqianyin Network Technology Co., Ltd (&#8220;Zhejiang Baiqianyin&#8221;)</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><ix:nonNumeric contextRef="c245" name="hkg:RelatedPartyTransactions"><span style="font-size: 10pt">An entity which has a common director of the Board of Directors with the Group</span></ix:nonNumeric></td></tr>
  <tr style="vertical-align: top">
    <td style="padding-left: 10pt; font-size: 10pt; text-indent: -10pt"><span style="font-size: 10pt">2</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><span style="font-size: 10pt">Shanghai Shenghan</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><ix:nonNumeric contextRef="c246" name="hkg:RelatedPartyTransactions"><span style="font-size: 10pt">An entity which the Group holds 16.56% equity interests</span></ix:nonNumeric></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td style="padding-left: 10pt; font-size: 10pt; text-indent: -10pt"><span style="font-size: 10pt">3</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><span style="font-size: 10pt">Shanghai Aoshu Enterprise Management Partnership (Limited Partnership) (&#8220;Shanghai Aoshu&#8221;)</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><ix:nonNumeric contextRef="c247" name="hkg:RelatedPartyTransactions"><span style="font-size: 10pt">An entity which is the Group&#8217;s employee stock ownership platform, and has a common director of the Board of Directors with the Group</span></ix:nonNumeric></td></tr>
  <tr style="vertical-align: top">
    <td style="padding-left: 10pt; font-size: 10pt; text-indent: -10pt"><span style="font-size: 10pt">4</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><span style="font-size: 10pt">Shanghai Machinemind Intelligent Technology Co., Ltd. </span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><ix:nonNumeric contextRef="c248" name="hkg:RelatedPartyTransactions"><span style="font-size: 10pt">An entity which the Company holds 18% equity interests</span></ix:nonNumeric></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td style="padding-left: 10pt; font-size: 10pt; text-indent: -10pt"><span style="font-size: 10pt">5</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><span style="font-size: 10pt">Jiaxing Sound Core Intelligent Technology Co., LTD</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><ix:nonNumeric contextRef="c249" name="hkg:RelatedPartyTransactions"><span style="font-size: 10pt">An entity which Shanghai Shenghan holds 20% equity interests</span></ix:nonNumeric></td></tr>
  <tr style="vertical-align: top">
    <td style="padding-left: 10pt; font-size: 10pt; text-indent: -10pt"><span style="font-size: 10pt">6</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><span style="font-size: 10pt">Hui Yuan</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><ix:nonNumeric contextRef="c250" name="hkg:RelatedPartyTransactions"><span style="font-size: 10pt">Chairman of the board, one of the major shareholders holding 14.73% equity interests of the Company</span></ix:nonNumeric></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td style="padding-left: 10pt; font-size: 10pt; text-indent: -10pt"><span style="font-size: 10pt">7</span></td>
    <td style="white-space: nowrap; padding-bottom: 2.25pt; font-size: 10pt">&#160;</td>
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  <tr>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: normal 10pt Times New Roman, Times, Serif; text-indent: 0pt; margin: 0pt; text-align: justify"><b>14.&#160;&#160;&#160;&#160;RELATED
PARTY TRANSACTIONS</b> (cont.)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Amounts due from related parties</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_6" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Amounts due from related parties consisted
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_7" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" continuedAt="hkg_ScheduleOfDueFromRelatedPartiesTableTextBlock-c0_cont_1" escape="true" name="hkg:ScheduleOfDueFromRelatedPartiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 3pt; margin-bottom: 3pt; width: 15%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt"></p><div>

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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_9" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_8"><ix:continuation continuedAt="hkg_ScheduleOfDueFromRelatedPartiesTableTextBlock-c0_cont_3" id="hkg_ScheduleOfDueFromRelatedPartiesTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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</div><div>

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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_13" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_12"><ix:continuation continuedAt="hkg_ScheduleOfDueFromRelatedPartiesTableTextBlock-c0_cont_5" id="hkg_ScheduleOfDueFromRelatedPartiesTableTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Interest-free loans (c)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Jiaxing Chiyu Investment Partnership (limited Partnership)</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c269" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestPayableCurrent" scale="0" unitRef="usd">434,959</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">Haiyin Capital Investment (International) Limited</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c270" decimals="0" format="ixt:num-dot-decimal" id="ix_73_fact" name="us-gaap:InterestPayableCurrent" scale="0" unitRef="usd">128,299</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c271" decimals="0" format="ixt:num-dot-decimal" id="ix_74_fact" name="us-gaap:InterestPayableCurrent" scale="0" unitRef="usd">129,517</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Subtotal-due to related parties-current</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" id="ix_75_fact" name="us-gaap:DueToOtherRelatedPartiesNoncurrent" scale="0" unitRef="usd">1,558,642</ix:nonFraction></td><td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" id="ix_76_fact" name="us-gaap:DueToOtherRelatedPartiesNoncurrent" scale="0" unitRef="usd">896,431</ix:nonFraction></td><td style="font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Due to related parties-non current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Interest-free loans (c)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Hui Yuan</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c272" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestPayableCurrentAndNoncurrent" scale="0" unitRef="usd">8,905,313</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c273" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestPayableCurrentAndNoncurrent" scale="0" unitRef="usd">8,581,743</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Subtotal-due to related parties-non current</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherNotesPayable" scale="0" unitRef="usd">8,905,313</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherNotesPayable" scale="0" unitRef="usd">8,581,743</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="0" unitRef="usd">10,463,955</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="0" unitRef="usd">9,478,174</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_14" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_13"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">(c)</td><td style="text-align: justify">The balance represents the advance funds from related parties
for daily operational purposes. The funds are interest-free, unsecured and repayable on demand. <span style="font-family: Times New Roman, Times, Serif">Loans
from Hui Yuan are not required to be settled within one year.</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 174; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>14.</b></td><td style="text-align: justify"><b>RELATED PARTY TRANSACTIONS</b> (cont.)</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_15" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><b><i>Significant transactions with related parties</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>


</div><ix:continuation id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_15"><ix:continuation id="hkg_ScheduleOfDueFromRelatedPartiesTableTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt; font-weight: bold; text-align: center"></td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the years ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-bottom: 1.5pt"><b>Nature</b></td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Software and service income</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left">Zhejiang Baiqianyin</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c274" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForSoftware" scale="0" unitRef="usd">2,449,560</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c275" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForSoftware" scale="0" unitRef="usd">286,875</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><div style="-sec-ix-hidden: hidden-fact-94">-</div></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#12288;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Technology service fee payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Shanghai Shenghan</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c277" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommunicationsAndInformationTechnology" scale="0" unitRef="usd">130,356</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c278" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommunicationsAndInformationTechnology" scale="0" unitRef="usd">465,058</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-95">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Zhizhen Guorui (Shanghai) Information Technology Development Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-96">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-97">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c267" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesReceivableRelatedParties" scale="0" unitRef="usd">100,315</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Interest-free loans from related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Zhejiang Baiqianyin</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c280" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesReceivableRelatedParties" scale="0" unitRef="usd">1,448</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c256" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesReceivableRelatedParties" scale="0" unitRef="usd">5,782,216</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c257" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesReceivableRelatedParties" scale="0" unitRef="usd">1,783,326</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Hui Yuan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-98">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c272" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesReceivableRelatedParties" scale="0" unitRef="usd">9,696,450</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c273" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesReceivableRelatedParties" scale="0" unitRef="usd">532,026</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Haiyin Capital Investment (International) Limited</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-99">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c283" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromRepaymentsOfRelatedPartyDebt" scale="0" unitRef="usd">126,744</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Jiaxing Chiyu Investment Partnership (limited Partnership)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-100">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c268" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesReceivableRelatedParties" scale="0" unitRef="usd">775,097</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-101">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Tianjin Haiyin</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-102">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c286" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesReceivableRelatedParties" scale="0" unitRef="usd">310,038</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-103">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Weng Wei</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-104">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Hui Yuan</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Jiaxing Sound Core Intelligent Technology Co., LTD</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-110">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Shanghai Shenghan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-112">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-113">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Weng Wei</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-114">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-115">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Tianjin Haiyin</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-116">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-117">-</div></td><td style="text-align: left">&#160;</td></tr>
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    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: left">Return of inventories to a related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Shanghai Shenghan</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-118">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Debt relief</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left">Shanghai Machinemind Intelligent Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-120">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-121">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  </table></ix:continuation></ix:continuation><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


</div><!-- Field: Page; Sequence: 175; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:ConcentrationRiskDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>15.</b></td><td style="text-align: justify"><b>CONCENTRATION OF CREDIT RISK</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_2" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Financial instruments that potentially
expose the Group to concentrations of credit risk consist primarily of accounts receivable. The Group conducts credit evaluations of its
customers, and generally does not require collateral or other security from them. The Group evaluates its collection experience and long
outstanding balances to determine the need for an allowance for doubtful accounts. The Group conducts periodic reviews of the financial
condition and payment practices of its customers to minimize collection risk on accounts receivable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_3" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following table sets forth a summary
of single customers who represent <ix:nonFraction contextRef="c305" decimals="2" format="ixt:num-dot-decimal" name="hkg:ConcentrationRiskPercentage" scale="-2" unitRef="pure">10</ix:nonFraction>% or more of the Group&#8217;s total revenue.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>


</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_4" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfRevenueByMajorCustomersByReportingSegmentsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="22" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Years ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: center">%</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">Amount</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">%</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">Amount</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">%</td><td>&#160;</td></tr>
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    <td style="padding-left: 0.125in; width: 28%; text-align: left">Customer A</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.125in; text-align: left">Customer B</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-124">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">Customer C</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-126">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-127">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-128">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-129">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_5" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The following table sets forth a summary
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</div><div>

</div><ix:continuation continuedAt="_ConcentrationRiskDisclosureTextBlock-c0_cont_6" id="_ConcentrationRiskDisclosureTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="hkg:ScheduleOfSingleCustomersTotalAccountsReceivablesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</div><div>

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</div><div>

</div><ix:continuation id="_ConcentrationRiskDisclosureTextBlock-c0_cont_7"><ix:nonNumeric contextRef="c0" escape="true" name="hkg:ScheduleOfSingleSuppliersTotalPurchaseTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; ">
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  </table></ix:nonNumeric></ix:continuation><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -24pt"></p><div>


</div><!-- Field: Page; Sequence: 176; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:CommitmentsAndContingenciesDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>16.</b></td><td style="text-align: justify"><b>COMMITMENTS AND CONTINGENCIES</b></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Lease Commitments</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_3" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group leases offices for operation
under operating leases. Future minimum lease payments under non-cancellable operating leases with initial terms in excess of one year
was included in Note 12.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>Contingencies</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><i>&#160;</i></b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_5" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In the ordinary course of business, the
Group may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters. The Group
records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably
estimable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_6" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">On August 3, 2020, Shanghai Xiao-i
filed a lawsuit with the High People&#8217;s Court of Shanghai in China, against Apple Computer Trading (Shanghai) Co., Ltd., Apple, Inc.,
and Apple Computer Trading (Shanghai) Co., Ltd. (together, &#8220;Apple&#8221;), demanding that Apple cease its infringement of Shanghai
Xiao-i&#8217;s intelligent assistant patent (ZL200410053749.9 invention patent) by its Siri (intelligent assistant) (the &#8220;Patent
Infringement Case&#8221;). The lawsuit seeks various remedies, including but not limited to, requiring Apple to stop manufacturing, using,
offering to sell, selling or importing products that infringe Shanghai Xiao-i&#8217;s patent, and a temporary claim amount of 10 billion
yuan (RMB). On August 10, 2020, the High People&#8217;s Court of Shanghai formally accepted the Patent Infringement Case filed by Shanghai
Xiao-i against Apple. On September 4, 2021, Shanghai Xiao-i filed a behavior preservation application (injunction) with the Shanghai High
People&#8217;s Court, demanding Apple to immediately stop the patent infringement involving Siri, including but not limited to stopping
the production, selling, offering to sell, importing or using of iPhone products that infringe Shanghai Xiao-i&#8217;s patent. As of the
date of this annual report, the Patent Infringement Case is pending in the High People&#8217;s Court of Shanghai.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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were no other pending or threatened claims and litigation as of December 31, 2022 and through the issuance date of these consolidated
financial statements.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>17.</b></td><td style="text-align: justify"><b>SUBSEQUENT EVENTS</b></td>
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</div><div>

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</div><div>

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Shi, Sunny Concord International Ltd., Senbiao Hu, Guoqiang Chen and Jun Xu entered into a series of extension agreements with the VIE.
In the latest extension agreement in April 2023, Guoqiang Chen, Sunny Concord International Ltd. and Jun Xu extended the maturity date
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</div><div>

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</div><div>

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</div><div>

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American depositary shares (each, an &#8220;ADS&#8221;, collectively, &#8220;ADSs&#8221;), each represents one-third of an ordinary
shares, were issued at a price of $<ix:nonFraction contextRef="c387" decimals="1" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares">6.8</ix:nonFraction> per share for net proceeds of approximately $<ix:nonFraction contextRef="c225" decimals="-4" format="ixt:num-dot-decimal" name="hkg:NetProceedsApproximately" scale="6" unitRef="usd">35.44</ix:nonFraction> million, after deducting underwriting
discounts, commissions and other offering expense of $<ix:nonFraction contextRef="c225" decimals="-4" format="ixt:num-dot-decimal" name="hkg:UnderwritingDiscountsAndCommissions" scale="6" unitRef="usd">3.32</ix:nonFraction> million. After the initial public offering, there were <ix:nonFraction contextRef="c225" decimals="0" format="ixt:num-dot-decimal" name="hkg:InitialPublicOffering" scale="0" unitRef="usd">24,015,592</ix:nonFraction>
ordinary shares outstanding, with par value of $<ix:nonFraction contextRef="c387" decimals="5" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares">0.00005</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c0_cont_7" id="_SubsequentEventsTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Collection of accounts receivable</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c0_cont_8" id="_SubsequentEventsTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group has collected accounts receivable
subsequent to December 31, 2022 amounted to $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsReceivableSale" scale="0" unitRef="usd">26,275,295</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c0_cont_9" id="_SubsequentEventsTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><i>Repayments and proceeds of loans</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation id="_SubsequentEventsTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Group has
evaluated subsequent events through April 28th, 2023, the date of issuance of the revised consolidated financial statements, and noted
that there are no other subsequent events.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><!-- Field: Page; Sequence: 177; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>XIAO-I CORPORATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><b>18.</b></td><td style="text-align: justify"><b>CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY</b></td>
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</div><div>

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&#8220;General Notes to Financial Statements&#8221; and concluded that it was applicable for the Group to disclose the financial statements
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</div><div>

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</div><div>

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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2">&#160;</td><td>&#160;</td></tr>
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    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: 10pt">Additional paid-in capital</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; text-indent: 10pt">Accumulated deficit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c393" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RetainedEarningsAccumulatedDeficit" scale="0" sign="-" unitRef="usd">72,584,621</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: 10pt">Accumulated other comprehensive loss</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c393" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax" scale="0" sign="-" unitRef="usd">3,464,423</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="font-weight: bold; text-align: justify; padding-bottom: 4pt">Total shareholders&#8217; deficit</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_5" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_4"><ix:continuation id="_ScheduleOfCondensedBalanceSheetTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify"><ix:footnote id="ix_18_footnote" xml:lang="en-US">The shares and per share information are presented on a retroactive
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</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_6" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b><span style="text-decoration:underline">PARENT COMPANY STATEMENTS OF OPERATIONS
AND COMPREHENSIVE (LOSS)/INCOME</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_7" id="_CondensedFinancialInformationOfParentCompanyOnlyDisclosureTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="srt:CondensedStatementOfComprehensiveIncomeTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-168">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-170">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c395" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromEquityMethodInvestments" scale="0" sign="-" unitRef="usd">6,808,365</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">F-38<b>&#160;</b></p><div>

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{"company-data": {"conformed-name": "Xiao-I Corp", "cik": "0001935172", "assigned-sic": "7372", "irs-number": "000000000", "state-of-incorporation": "E9", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "001-41631", "film-number": "23863336"}, "business-address": {"street1": "7TH FLOOR, BUILDING 398", "street2": "NO. 1555 WEST JINSHAJIANG RD.", "city": "SHANGHAI", "state": "F4", "zip": "201803", "phone": "(86) 021-39512112"}, "mail-address": {"street1": "7TH FLOOR, BUILDING 398", "street2": "NO. 1555 WEST JINSHAJIANG RD.", "city": "SHANGHAI", "state": "F4", "zip": "201803"}}
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
20-F
(Mark
One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended
December 31
,
2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ____ to _____
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date
of event requiring this shell company report _____________
Commission
file number
001-41631
XIAO-I
CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Not Applicable
(Translation of Registrant's Name Into English)
Cayman
Islands
(Jurisdiction of Incorporation or Organization)
7
th
floor, Building 398
,
No. 1555 West
Jinshajiang Rd
Shanghai
,
China
201803
(Address of Principal Executive Offices)
Hui Yuan
, Chief Executive Officer
7
th
floor, Building 398
,
No. 1555 West
Jinshajiang Rd
Shanghai
,
China
201803
Tel: +
86
021-39512112
Fax: +
86 021-39518822
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities
registered or to be registered pursuant to Section 12(b) of the Act.
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on which
Registered
American Depositary Shares, each representing one-third of an Ordinary Share, par value $0.00005 per share
AIXI
Nasdaq Global Market
Securities
registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title
    of Class)
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title
    of Class)
Indicate
the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered
by the annual report.
24,015,592
Ordinary Shares, par value $0.00005 per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
No
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒
No
Note
– Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Yes
☐ No
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Yes
☐ No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See the definitions of "large accelerated filer," "accelerated filer," and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ☐
Accelerated filer  ☐
Non-accelerated filer
☒
Emerging growth company
☒
If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided
pursuant to Section 13(a) of the Exchange Act.
☐
†
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.
Indicate
by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
☒
International Financial Reporting
Standards as issued by the
International Accounting Standards Board ☐
Other  ☐
If
"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow. Item 17 ☐ Item 18 ☐
If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). ☐ Yes
☒
No
TABLE
OF CONTENTS
Page
ABOUT THIS ANNUAL REPORT
iii
PRESENTATION OF FINANCIAL INFORMATION
vi
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
vi
PART I
1
Item 1.
Identity of Directors, Senior Management and Advisers
1
Item 2.
Offer Statistics and Expected Timetable
1
Item 3.
Key Information
1
A.
[Reserved]
1
B.
Capitalization and Indebtedness
1
C.
Reasons for the Offer and Use of Proceeds
1
D.
Risk Factors
1
Item 4.
Information on the Company
52
A.
History and Development of the Company
52
B.
Business Overview
53
C.
Organizational Structure
68
D.
Property, Plants and Equipment
69
Item 5.
Operating and Financial Review and Prospects
69
A.
Operating Results
69
B.
Liquidity and Capital Resources
79
C.
Research and Development, Patents and Licenses, etc
83
D.
Trend Information
83
E.
Critical Accounting Estimates
83
Item 6.
Directors, Senior Management and Employees
85
A.
Directors and Senior Management
85
B.
Compensation
87
C.
Board Practices
88
D.
Employees
90
E.
Share Ownership
91
F.
Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation
91
Item 7.
Major Shareholders and Related Party Transactions
91
A.
Major Shareholders
91
B.
Related Party Transactions
93
C.
Interests of Experts and Counsel
105
Item 8.
Financial Information
105
A.
Consolidated Statements and Other Financial Information
105
B.
Significant Changes
105
Item 9.
The Offer and Listing
106
A.
Offer and Listing Details
106
B.
Plan of Distribution
106
C.
Markets
106
D.
Selling Shareholders
106
E.
Dilution
106
F.
Expenses of the Issuer
106
i
Item 10.
Additional Information
106
A.
Share Capital
106
B.
Memorandum and Articles of Association
106
C.
Material Contracts
114
D.
Exchange Controls
114
E.
Taxation
116
F.
Dividends and Paying Agents
122
G.
Statement by Experts
122
H.
Documents on Display
122
I.
Subsidiary Information
122
J.
Annual Report to Security Holders
122
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
122
Item 12.
Description of Securities Other than Equity Securities
124
A.
Debt Securities
124
B.
Warrants and Rights
124
C.
Other Securities
124
D.
American Depositary Shares
124
PART II
126
Item 13.
Defaults, Dividend Arrearages and Delinquencies
126
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds.
126
Item 15.
Controls and Procedures
126
Item 16.
[Reserved]
127
Item 16.A.
Audit Committee Financial Expert
127
Item 16.B.
Code of Ethics
128
Item 16.C.
Principal Accountant Fees and Services
128
Item 16.D.
Exemptions from the Listing Standards for Audit Committees
128
Item 16.E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
128
Item 16.F.
Change in Registrant's Certifying Accountant
128
Item 16.G.
Corporate Governance
128
Item 16.H.
Mine Safety Disclosure
129
Item 16.I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
129
Item 16.J.
Insider Trading Policies
129
PART III
130
Item 17.
Financial Statements
130
Item 18.
Financial Statements
130
Item 19.
Exhibits
130
SIGNATURES
132
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
ii
ABOUT
THIS ANNUAL REPORT
Unless
otherwise indicated or the context requires otherwise, the reference in this Annual Report to:
●
"Xiao-I"
                                            or the "Company" or "we" or "us" is to Xiao-I Corporation,
                                            an exempted company with limited liability incorporated under the laws of Cayman Islands;
●
"AI
                                            Plus" is to AI Plus Holding Limited, organized under the law of British Virgin Islands,
                                            as Xiao-I's intermediate holding company;
●
"Xiao-i
                                            Technology" is to Xiao-i Technology Limited, organized under the law of Hong Kong,
                                            which is wholly owned by AI Plus;
●
"WFOE"
                                            is to Zhizhen Artificial Technology (Shanghai) Company Limited ("Zhizhen Technology"),
                                            a limited liability company established and existing under the laws of the PRC, which is
                                            wholly owned by Xiao-i Technology;
●
"Shanghai
                                            Xiao-i" or the "VIE" is to Shanghai Xiao-i Robot Technology Company Limited,
                                            a company limited by shares established and existing under the laws of the PRC;
●
"the
                                            PRC operating entities" refers to the VIE, Shanghai Xiao-i, and its subsidiaries;
●
"Memorandum
                                            and Articles of Association" means the amended and restated memorandum of association
                                            ("Memorandum") and the amended and restated articles of association ("Articles
                                            of Association") of Xiao-I;
●
"China"
                                            or the "PRC" are to the People's Republic of China, including the special
                                            administrative regions of Hong Kong and Macau, and excluding Taiwan for the purposes of this
                                            annual report only; the term "Chinese" has a correlative meaning for the purpose
                                            of this annual report;
●
"mainland
                                            China", "mainland of PRC" or "mainland PRC" are to the mainland
                                            China of the PRC, excluding Taiwan, the special administrative regions of Hong Kong and Macau
                                            for the purposes of this annual report only; the term "mainland Chinese" has
                                            a correlative meaning for the purpose of this annual report;
●
"PRC
                                            government", "PRC regulatory authorities", "PRC authorities",
                                            "PRC governmental authorities", "Chinese government", "Chinese
                                            authorities" or "Chinese governmental authorities" is to the government
                                            of mainland China for the purposes of this annual report only; and the similar wordings have
                                            a correlative meaning for the purpose of this annual report;
●
"PRC
                                            laws and regulations", "PRC laws", "laws of PRC", "Chinese
                                            laws and regulations" or "Chinese laws" are to the laws and regulations
                                            of mainland China; and the similar wordings have a correlative meaning for the purpose of
                                            this annual report;
●
"Ordinary
                                            Shares" are to the ordinary shares of the Company, par value US$0.00005 per share;
●
"$,"
                                            "U.S.$," "U.S. dollars," "dollars" and "USD"
                                            are to U.S. dollars;
●
"RMB"
                                            and "¥" are to Renminbi;
●
"Companies
                                            Act" is to the Companies Act (As Revised), Cap. 22 of the Cayman Islands.
●
"ADSs"
                                            refer to Xiao-I's American depositary shares, each of which represents one-third of
                                            an Ordinary Share.
iii
Xiao-I is a holding company incorporated in the
Cayman Islands. As a holding company with no material operations of its own, Xiao-I conducts a substantial majority of its operations
through Shanghai Xiao-i Robot Technology Co., Ltd. ("Shanghai Xiao-i"), a variable interest entity (the "VIE"),
in the People's Republic of China, or "PRC" or "China." Investors in Xiao-I's ADSs should be aware
that they may never hold equity interests in the VIE, but rather purchasing equity interests solely in Xiao-I, the Cayman Islands holding
company, which does not own any of the business in China conducted by the VIE and the VIE's subsidiaries ("the PRC operating
entities"). Xiao-I's indirect wholly owned subsidiary, Zhizhen Artificial Intelligent Technology (Shanghai) Co. Ltd. ("Zhizhen
Technology" or "WFOE") entered into a series of contractual arrangements that establish the VIE structure (the "VIE
Agreements"). The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where
Chinese law prohibits direct foreign investment in the operating companies. Xiao-I has evaluated the guidance in FASB ASC 810 and determined
that Xiao-I is the primary beneficiary of the VIE, for accounting purposes, based upon such contractual arrangements. ASC 810 requires
a VIE to be consolidated if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority
of the VIE's residual returns. A VIE is an entity in which a company or its WFOE, through contractual arrangements, is fully and
exclusively responsible for the management of the entity, absorbs all risk of losses of the entity (excluding non-controlling interests),
receives the benefits of the entity that could be significant to the entity (excluding non-controlling interests), and has the exclusive
right to exercise all voting rights of the entity, and therefore the company or its WFOE is the primary beneficiary of the entity for
accounting purposes. Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE,
if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly
affect the VIE's economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially
be significant to the VIE. Through the VIE Agreements, the Company is deemed the primary beneficiary of the VIE for accounting purposes.
The VIE has no assets that are collateral for or restricted solely to settle its obligations. The creditors of the VIE do not have recourse
to the Company's general credit. Accordingly, under U.S. GAAP, the results of the PRC operating entities are consolidated in Xiao-I's
financial statements. However, investors will not and may never hold equity interests in the PRC operating entities. The VIE Agreements
may not be effective in providing control over Shanghai Xiao-i. Uncertainties exist as to Xiao-I's ability to enforce the VIE Agreements,
and the VIE Agreements have not been tested in a court of law. The Chinese regulatory authorities could disallow this VIE structure,
which would likely result in a material change in the PRC operating entities' operations and the value of Xiao-I's ADSs,
including that it could cause the value of such securities to significantly decline or become worthless. See "Item 3. Key Information—D.
Risk Factors —Risks Related to Our Corporate Structure" and "Item 7. Major Shareholders and Related Party Transactions
—B. Related Party Transactions —Consolidation."
Xiao-I is a holding company with no operations
of its own. Xiao-I conducts its operations in China primarily through the PRC operating entities in China. As a result, although other
means are available for us to obtain financing at the holding company level, Xiao-I's ability to pay dividends and other distributions
to its shareholders and to service any debt it may incur may depend upon dividends and other distributions paid by Xiao-I's PRC
subsidiaries, which relies on dividends and other distributions paid by the PRC operating entities pursuant to the VIE Agreements. If
any of these entities incurs debt on its own in the future, the instruments governing such debt may restrict its ability to pay dividends
and other distributions to Xiao-I.
In addition, dividends and distributions from
WFOE and the VIE are subject to regulations and restrictions on dividends and payment to parties outside of China. Applicable PRC law
permits payment of dividends to Xiao-I by WFOE only out of net income, if any, determined in accordance with PRC accounting standards
and regulations. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset
by general reserve fund and profits (if general reserve fund is not enough). Profits retained from prior fiscal years may be distributed
together with distributable profits from the current fiscal year. In addition, a wholly foreign-owned enterprise is required to set aside
at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount
of such fund reaches 50% of its registered capital. As of December 31, 2022, our PRC operating entities had restricted amount of US$237,486 (RMB1,569,546) the reserve fund. Moreover, registered share capital and capital reserve accounts are also restricted from withdrawal
in the PRC, up to the amount of net assets held in each operating subsidiary. In contrast, there is presently no foreign exchange control
or restrictions on capital flows into and out of Hong Kong. Hence, Xiao-I's Hong Kong subsidiary is able to transfer
cash without any limitation to the Cayman Islands under normal circumstances.
iv
Further, the PRC government also imposes controls
on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Xiao-I's WFOE generates
primarily all of its revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency
exchange may limit the ability of Xiao-I's WFOE to use its Renminbi revenues to pay dividends to Xiao-I. The PRC government may
continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by State Administration
of Foreign Exchange (the "SAFE") for cross-border transactions falling under both the current account and the capital account.
Any limitation on the ability of Xiao-I's WFOE to pay dividends or make other kinds of payments to Xiao-I could materially and
adversely limit its ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise
fund and conduct our business.
Additionally, the transfer of funds among
the PRC operating entities are subject to the Provisions on Private Lending Cases, which was implemented on January 1, 2021 to
regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private
Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated PRC operating
entity's operations. Xiao-I or the PRC operating entities have not been notified of any other restriction which could limit
the PRC operating entities' ability to transfer cash among each other. As of the date of this annual report, cash was
transferred among the Company, WFOE, other subsidiaries of the Company, the VIE and its consolidated subsidiaries, in the following
manners: (i) the Company provided a total of US$10,000,550 in cash to its other subsidiaries while other subsidiaries transferred
US$4,500 to the Company; (ii) Other subsidiaries of the Company provided a total of US$10,000,000 in cash to WFOE; (iii) WFOE
provided a total of US$9,859,073 (RMB68,000,000) to VIE and its subsidiaries while VIE and its subsidiaries transferred US$36,247
(RMB250,000) to WFOE; (iv) VIE and its subsidiaries transferred US$8,000 to other subsidiaries of the Company. The aforementioned
cash transfers were generally for working capital purpose among the Company, WFOE, VIE and its consolidated subsidiaries, and other
subsidiaries. Xiao-I intends to keep any future earnings to finance the expansion of its business, and it does not anticipate that
any cash dividends will be paid in the foreseeable future. In the future, cash proceeds from overseas financing activities,
including the IPO proceeds, may be transferred by Xiao-I to AI Plus, and then transferred to Xiao-i Technology, and then transferred
to WFOE via capital contribution or shareholder loans, as the case may be. Cash proceeds may flow to Shanghai Xiao-i from WFOE
pursuant to certain contractual arrangements between WFOE and Shanghai Xiao-i as permitted by the applicable PRC regulations. As a
result of these PRC laws and regulations, the PRC operating entities are restricted in their ability to transfer a portion of their
net assets to the Company. For details about the applicable PRC laws and regulations that limit transfer of funds from overseas to
the PRC operating entities, see "Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds —
Use of Proceeds", "Item 3. Key Information—D. Risk Factors —Risks Related to Our Corporate Structure—
Some of our shareholders are not in compliance with the PRC's regulations relating to offshore investment activities by PRC
residents, and as a result, currently WFOE is unable to open a new capital account with banks within China, and may be restricted
from remitting funds or handling other foreign exchange businesses within China unless and until we remediate the
non-compliance," and "Item 3. Key Information—D. 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 our available funds to make loans to our PRC subsidiary and consolidated
affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect
our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities."
As of December 31, 2021 and 2022, US$1,254,528 and US$908,614
of cash and cash equivalents were denominated in RMB, US$15,170 and US$11,224 of cash and cash equivalents were denominated in US dollars,
US$42,148 and US$106,407 of cash and cash equivalents were denominated in Hong Kong dollars, respectively.
v
PRESENTATION
OF FINANCIAL INFORMATION
The
consolidated financial statements included in this Annual Report have been prepared in accordance with accounting principles generally
accepted in the United States of America, or U.S. GAAP. The reporting currency is United States dollar. Unless otherwise indicated, all
monetary amounts in this annual report are in U.S. dollars.
This
Annual Report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise
stated, all translations from Renminbi to U.S. dollars were made at RMB6.8972 to $1.00 on December 30, 2022, representing the noon buying
rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Board. Xiao-I makes
no representation that the Renminbi or U.S. dollar amounts referred to in this Annual Report could have been or could be converted into
U.S. dollars or Renminbi, as the case may be, at any particular rate or at all.
TRADEMARKS,
SERVICE MARKS AND TRADE NAMES
Solely
for convenience, the trademarks, service marks, logos, copyrights and trade names referred to in this Annual Report are without the ®
and ™ symbols. Such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable
law, our rights or the rights of the applicable licensors to these trademarks, service marks, logos, copyrights and trade names or that
the applicable owner will not assert its rights to these trademarks, service marks, logos, copyrights and trade names. This Annual Report
contains additional trademarks, service marks, logos, copyrights and trade names of others, which are the property of their respective
owners. All trademarks, service marks, logos, copyrights and trade names appearing in this Annual Report are, to our knowledge, the property
of their respective owners. We do not intend our use or display of other companies' trademarks, service marks, logos, copyrights
or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
annual report contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this
annual report can be identified by the use of forward-looking words such as "anticipate," "believe," "could,"
"expect," "should," "plan," "intend," "estimate" and "potential,"
among others.
Forward-looking
statements appear in a number of places in this annual report and include, but are not limited to, statements regarding our intent, belief
or current expectations. Forward-looking statements are based on our management's beliefs and assumptions and on information currently
available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those
expressed or implied in the forward-looking statements due to of various factors, including, but not limited to, those identified under
the section entitled "Risk Factors" in this annual report. These risks and uncertainties include factors relating to:
●
general
                                            economic, political, demographic and business conditions in China and globally;
●
The
                                            PRC operating entities' ability to implement their growth strategy;
●
the
                                            success of operating initiatives, including marketing and promotional efforts and new product
                                            and service development by us and the PRC operating entities' competitors;
●
The
                                            PRC operating entities' ability to develop and apply their technologies to support
                                            and expand their product and service offerings;
●
the
                                            availability of qualified personnel and the ability to retain such personnel;
●
competition
                                            in the AI industries;
●
changes
                                            in government policies and regulation;
●
other
                                            factors that may affect our financial condition, liquidity and results of operations; and
●
other
                                            risk factors discussed under "Risk Factors."
Forward-looking
statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information
or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or
to reflect the occurrence of unanticipated events.
vi
PART
I
Item
1.  Identity of Directors, Senior Management and Advisers.
Not
applicable.
Item
2.  Offer Statistics and Expected Timetable.
Not
applicable.
Item
3.  Key Information.
A.
[Reserved]
B.
Capitalization and Indebtedness.
Not
applicable.
C.
Reasons for the Offer and Use of Proceeds.
Not
applicable.
D.
Risk Factors.
SUMMARY
OF RISK FACTORS
An
investment in our ADSs is subject to a number of risks, including but not limited to risks related to doing business in China, risks
related to our corporate structure, risks related to our business and industry, , and risks related to ownership of our ADSs. Investors
should carefully consider all of the information in this Annual Report before making an investment in the ADSs. The following list summarizes
some, but not all, of these risks. Please read the information in the section below entitled "Risk Factors" for a more thorough
description of these and other risks.
Risks
Relating to Our Business and Industry
●
We
                                            have had net losses (except for 2021) and negative cash flows from operating activities in
                                            the past, and we may not achieve or sustain profitability.
●
If
                                            we fail to maintain and grow our customer base, keep our customers engaged through our products
                                            and solutions, our business growth may not be sustainable.
●
If
                                            we fail to maintain and enhance the functions, performance, reliability, design, security,
                                            and scalability of our platforms to meet our customers' evolving needs, we may lose
                                            our customers.
●
If
                                            our products and solutions do not achieve sufficient market acceptance, our business and
                                            competitive position will suffer.
●
If
                                            our expansion into new industries is not successful, our business, prospects and growth momentum
                                            may be materially and adversely affected.
●
The
                                            market in which we participate is competitive, and if we do not compete effectively, our
                                            business, operating results and financial condition could be harmed.
1
●
If we fail to adapt and respond effectively to rapidly changing technology,
evolving industry standards, changing regulations, and changing customer needs, requirements or preferences, our business may be materially
and adversely affected.
●
To
                                            support our business growth, we continue to invest heavily in our research and development
                                            efforts, the expenses of which may negatively impact our cash flow, and may not generate
                                            the results we expect to achieve.
●
If
                                            our platforms experience material errors, defects or security issues, we may lose our customers,
                                            fail to honor our obligations in respect of our contract liabilities, and incur significant
                                            remedial costs.
●
Our
                                            brand is integral to our success. If we fail to effectively maintain, promote and enhance
                                            our brand, our business and competitive advantage may be harmed.
●
Security
                                            breaches and attacks against our systems and network, and any failure to otherwise protect
                                            personal, confidential and proprietary information, could damage our reputation and negatively
                                            impact our business, as well as materially and adversely affect our financial condition and
                                            results of operations.
●
We
                                            partially rely on third-party service providers to conduct our business and any interruption
                                            or delay in such third parties or our own failure may impair our customers' experience.
●
Our
                                            products and solutions rely on the stable performance of servers, and any disruption to our
                                            servers due to internal and external factors could diminish demand for our products and solutions,
                                            harm our business, our reputation and results of operations and subject us to liability.
●
Our
                                            and our business partners' business operations have been adversely affected by the
                                            COVID-19 outbreak, and may in the future continue to be affected by the COVID-19 outbreak.
●
If
                                            the adoption of our products and solutions by our customers are slower than we expected,
                                            our business, results of operations and financial condition may be adversely affected.
●
We
                                            may fail to conduct our sales and marketing activities in a cost-effective manner and we
                                            are subject to limitations in promoting our products and solutions.
●
If
                                            we fail to provide high quality customer services, our brand, business, and results of operations
                                            may be harmed.
●
We
                                            had a concentration of major customers during the years ended December 31, 2020, 2021 and
                                            2022 (the "Track Record Period") and if our existing major customers cease to
                                            engage our services, we may be unable to find new customers with similar attributable revenue
                                            within a reasonable time or at all.
●
The
                                            intensifying competition, change in sector trend and landscape and government policies may
                                            have a direct impact on the industries where our clients operate their businesses, and negatively
                                            affect the stability of our clients, which may subsequently have negative impact on our business.
●
Our
                                            reliance on a limited number of suppliers for certain essential services could adversely
                                            affect our ability to manage our business effectively and subsequently harm our business.
●
We
                                            may fail to obtain or maintain all required licenses, permits and approvals to operate our
                                            business.
●
We
                                            may fail to obtain, maintain and protect our intellectual property rights and proprietary
                                            information or prevent third parties from any unauthorized use of our technologies.
2
●
We
                                            may become subject to intellectual property disputes, which are costly and may subject us
                                            to significant liability and increased costs of business.
●
We
                                            and our management may from time to time be subject to claims, disputes, lawsuits and other
                                            legal and administrative proceedings.
●
Changes
                                            in laws and regulations related to the internet or changes in the internet infrastructure
                                            itself may diminish the demand for our products and solutions and have a negative impact
                                            on our business.
●
We
                                            are dependent on the continuous services of our senior management and other key employees.
                                            If we fail to attract, retain and motivate qualified personnel, our business could be materially
                                            and adversely affected.
●
Future
                                            strategic acquisitions and investments may fail and may result in material and adverse impact
                                            on our financial condition and results of operations.
●
We
                                            may, in the future, grow and expand our international operations, which may expose us to
                                            significant risks.
●
We
                                            may be unable to obtain any additional capital required in a timely manner or on acceptable
                                            terms, or at all. Moreover, our future capital needs may require us to sell additional equity
                                            or debt securities that may dilute our shareholders' shareholdings or subject us to
                                            covenants that may restrict our operations or our ability to pay dividends.
●
We
                                            have not independently verified the accuracy or completeness of data, estimates, and projections
                                            in this annual report that we obtained from third-party sources, and such information involves
                                            assumptions and liabilities.
●
We
                                            have identified two material weaknesses in our internal control over financial reporting.
                                            If our remediation of the material weaknesses is not effective, or if we experience additional
                                            material weaknesses in the future or otherwise fail to maintain proper and effective internal
                                            control over financial reporting, our ability to produce accurate and timely consolidated
                                            financial statements could be impaired, investors may lose confidence in our financial reporting
                                            and the trading price of the ADSs may decline.
●
We
                                            face risks related to natural disasters, health epidemics and other outbreaks, which could
                                            significantly disrupt our business operations.
●
Economic
                                            substance legislation of the Cayman Islands may adversely impact us or our operations.
●
It
                                            is unclear what ramifications, if any, the addition of the Cayman Islands to the "FATF
                                            grey list" will have for us.
●
It
                                            is unclear how long the designation of the Cayman Islands to the EU AML High-Risk Third Countries
                                            List will remain in place and what ramifications, if any, the designation will have for us.
Risks
Relating to Our Corporate Structure
●
In
                                            the following discussion of risks relating to our corporate structure, "we,"
                                            "us," or "our" refer to Xiao-I.
●
If
                                            the PRC government finds that the agreements that establish the structure for operating our
                                            businesses in China do not comply with PRC regulations on foreign investment in internet
                                            and other related businesses, or if these regulations or their interpretation change in the
                                            future, we could be subject to severe penalties or be forced to relinquish our interests
                                            in those operations and our ADSs may decline in value dramatically or even become worthless.
3
●
The
                                            contractual arrangements with the VIE and its shareholders may not be as effective as equity
                                            ownership in providing operational control.
●
Any
                                            failure by the VIE or its shareholders to perform their obligations under our contractual
                                            arrangements with them would have a material and adverse effect on our business.
●
The
                                            contractual arrangements with the VIE are governed by PRC law. Accordingly, these contracts
                                            would be interpreted in accordance with PRC law, and any disputes would be resolved in accordance
                                            with PRC legal procedures, which may not protect you as much as those of other jurisdictions,
                                            such as the United States.
●
Contractual
                                            arrangements we have entered into with the VIE and its shareholders may be subject to scrutiny
                                            by the PRC tax authorities. A finding that we owe additional taxes could significantly reduce
                                            our consolidated net income and the value of your investment.
●
We
                                            are a holding company, and will rely on dividends paid by our subsidiaries for our cash needs.
                                            Any limitation on the ability of our subsidiaries to make dividend payments to us, or any
                                            tax implications of making dividend payments to us, could limit our ability to pay our parent
                                            company expenses or pay dividends to holders of our ADSs.
●
If
                                            the chops of our PRC subsidiary, the VIE, is not kept safely, is stolen or are used by unauthorized
                                            persons or for unauthorized purposes, the corporate governance of these entities could be
                                            severely and adversely compromised.
●
We
                                            may lose the ability to use and enjoy assets held by the VIE that are critical to the operation
                                            of our business if the VIE declares bankruptcy or become subject to a dissolution or liquidation
                                            proceeding.
●
Substantial
                                            uncertainties exist with respect to the interpretation and implementation of the newly enacted
                                            PRC Foreign Investment Law and how it may impact the viability of our current corporate structure
                                            and business operations.
●
Some
                                            of our shareholders are not in compliance with the PRC's regulations relating to offshore
                                            investment activities by PRC residents, and as a result, the shareholders may be subject
                                            to penalties if we are not able to remediate the non-compliance.
Risks
Relating to Doing Business in China
●
In
                                            the following discussion of risks relating to doing business in China "we," "us,"
                                            or "our" refer to the PRC operating entities.
●
China's
                                            economic, political and social conditions, as well as changes in any government policies,
                                            laws and regulations may be quick with little advance notice and, could have a material adverse
                                            effect on our business and the value of Xiao-I's ADSs.
●
Uncertainties
                                            in the interpretation and enforcement of PRC laws and regulations could limit the legal protections
                                            available to you and us.
●
Content
                                            posted or displayed on our platform may be found objectionable by PRC regulatory authorities
                                            and may subject us to penalties and other severe consequences.
●
Advertisements
                                            shown on our platform may subject us to penalties and other administrative actions.
●
The
newly enacted Holding Foreign Companies Accountable Act ("HFCAA") and the Accelerating Holding Foreign Companies Accountable
Act ("AHFCAA") passed by the U.S. Senate, all call for additional and more stringent criteria to be applied to emerging
market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected
by the Public Company Accounting Oversight Board ("PCAOB"). These developments could add uncertainties to our offering
and listing on the Nasdaq Global Market, and Nasdaq may determine to delist our securities if in the future the PCAOB determines that
it cannot inspect or fully investigate our auditor.
4
●
It
                                            may be difficult for overseas regulators to conduct investigation or collect evidence within
                                            China.
●
The approval, filing or other requirements of the CSRC or other PRC
government authorities may be required under PRC laws.
●
The
                                            Chinese government exerts substantial influence over the manner in which we must conduct
                                            our business activities and may intervene or influence our operations at any time, which
                                            could result in a material change in our operations and the value of Xiao-I's ADSs.
●
The
                                            custodians or authorized users of our controlling non-tangible assets, including chops and
                                            seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets.
●
Under
                                            the PRC Enterprise Income Tax Law, we may be classified as a PRC "resident enterprise,"
                                            which could result in unfavorable tax consequences to us and our shareholders and have a
                                            material adverse effect on our results of operations and the value of your investment.
●
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.
●
We
                                            face uncertainty with respect to indirect transfer of equity interests in PRC resident enterprises
                                            by their non-PRC holding companies. We face uncertainties regarding the reporting on and
                                            consequences of previous private equity financing transactions involving the transfer and
                                            exchange of shares in our company by non-resident investors.
●
China's
                                            M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions
                                            of Chinese companies by foreign investors, which could make it more difficult for us to pursue
                                            growth through acquisitions in China.
●
PRC
                                            regulations relating to offshore investment activities by PRC residents may limit our PRC
                                            subsidiary's ability to increase its registered capital or distribute profits to us
                                            or otherwise expose us to liability and penalties under PRC law.
●
Failure
                                            to comply with PRC regulations regarding the registration requirements for employee stock
                                            ownership plans or share option plans may subject the PRC plan participants or us to fines
                                            and other legal or administrative sanctions.
●
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 our available funds
                                            to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional
                                            capital contributions to our PRC subsidiary, which could materially and adversely affect
                                            our liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated
                                            affiliated entities.
●
Fluctuation
                                            in the value of the RMB may have a material adverse effect on the value of your investment.
●
If
                                            additional remedial measures are imposed on major PRC-based accounting firms, including our
                                            independent registered public accounting firm, our financial statements could be determined
                                            not to be in compliance with the SEC requirements.
●
We
                                            face uncertainties with respect to the enactment, interpretation and implementation of draft
                                            Anti-Monopoly Guidelines for the Internet Platform Economy Sector.
5
Risks
Relating to Doing Business in Hong Kong
●
We
                                            may be subject to uncertainty about any changes in the economic, political and legal environment
                                            in Hong Kong, and it is possible that most of the legal and operational risks associated
                                            with operating in the PRC may also apply to operations in Hong Kong in the future.
●
Our
                                            operations in Hong Kong are governed by the laws and regulations in Hong Kong. If there is
                                            significant change to current political arrangements between mainland China and Hong Kong,
                                            the PRC government may intervene or influence our Hong Kong operations, which could result
                                            in a material change in our operations in Hong Kong.
●
You
                                            may incur additional costs and procedural obstacles in effecting service of legal process,
                                            enforcing foreign judgments or bringing actions in Hong Kong against Xiao-I or its management
                                            named in the annual report based on Hong Kong laws.
Risks
Relating to the ADSs
●
Because
                                            we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation
                                            of the ADSs for a return on your investment.
●
A
                                            large, active trading market for the ADSs may not develop and you may not be able to resell
                                            your ADSs at or above the public offering price.
●
The
                                            trading price of the ADSs is likely to be volatile, which could result in substantial losses
                                            to investors.
●
The
                                            sale or availability for sale of substantial amounts of ADSs could adversely affect their
                                            market price.
●
Holders
                                            of ADSs have fewer rights than shareholders and must act through the depositary to exercise
                                            their rights.
●
Except
                                            in limited circumstances, the depositary for our ADSs will give us a discretionary proxy
                                            to vote the Ordinary Shares underlying your ADSs if you do not vote at shareholders'
                                            meetings, which could adversely affect your interests.
●
You
                                            may not receive distributions on the ADSs or any value for them if such distribution is illegal
                                            or impractical or if any required government approval cannot be obtained in order to make
                                            such distribution available to you.
●
Your
                                            right to participate in any future rights offerings may be limited, which may cause dilution
                                            to your holdings.
●
You
                                            may be subject to limitations on transfers of your ADSs.
●
Your
                                            rights to pursue claims against the depositary as a holder of ADSs are limited by the terms
                                            of the deposit agreement.
●
ADS
                                            holders may not be entitled to a jury trial with respect to claims arising under the deposit
                                            agreement, which could result in less favorable outcomes to the plaintiff(s) in any such
                                            action.
●
The
                                            deposit agreement may be amended or terminated without your consent.
●
Holders
                                            or beneficial owners of the ADSs have limited recourse if we or the depositary fail to meet
                                            our respective obligations under the deposit agreement.
6
●
Techniques
                                            employed by short sellers may drive down the market price of the ADSs.
●
If
                                            securities or industry analysts do not publish research or publish inaccurate or unfavorable
                                            research about our business, the market price for the ADSs and trading volume could decline.
●
Our
                                            failure to meet the continued listing requirements of Nasdaq could result in a delisting
                                            of the ADSs.
●
Because
                                            we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting
                                            your interests, and your ability to protect your rights through the U.S. Federal courts may
                                            be limited.
●
United
                                            States civil liabilities and certain judgments obtained against us by our shareholders may
                                            not be enforceable.
●
The
                                            ability of U.S. authorities to bring actions for violations of U.S. securities law and regulations
                                            against us, our directors and executive officers named in this annual report (except H. David
                                            Sherman) may be limited. Therefore, you may not be afforded the same protection as provided
                                            to investors in U.S. domestic companies.
●
You
                                            may experience difficulties in effecting service of legal process, enforcing foreign judgments
                                            or bringing original actions in the PRC, based on United States or other foreign laws, against
                                            us, our directors and executive officers named in this annual report (except H. David Sherman).
                                            Therefore, you may not be able to enjoy the protection of such laws in an effective manner.
●
As
                                            a company incorporated in the Cayman Islands, we are permitted to adopt certain home country
                                            practices in relation to corporate governance matters that differ significantly from the
                                            Nasdaq corporate governance listing standards; these practices may afford less protection
                                            to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance
                                            listing standards.
●
Our
                                            articles of association contain anti-takeover provisions that could discourage a third party
                                            from acquiring us, which could limit our shareholders' opportunity to sell their shares,
                                            including Ordinary Shares represented by the ADSs, at a premium, as a result, it could materially
                                            adversely affect the rights of holders of our ADSs.
●
We
                                            are an emerging growth company within the meaning of the Securities Act and may take advantage
                                            of certain reduced reporting requirements.
●
We
                                            are a foreign private issuer within the meaning of the rules under the Exchange Act, and
                                            as such we are exempt from certain provisions applicable to U.S. domestic public companies.
●
We
                                            will incur increased costs as a result of being a public company, particularly after we cease
                                            to qualify as an "emerging growth company."
●
There
                                            can be no assurance we will not be a passive foreign investment company ("PFIC"),
                                            for any taxable year, which could result in adverse U.S. federal income tax consequences
                                            to U.S. investors in our ADSs or Ordinary Shares.
●
We
                                            are not required to disclose compensation of Directors and Officers under Cayman Islands
                                            law.
7
Holding Foreign Companies Accountable Act
Pursuant to the HFCAA if the SEC determines that
we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two
consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter
trading market in the United States. As a result of such trading prohibition, the Nasdaq Global Market may make a determination to delist
our securities. 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 Board 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 (the "Determinations"). 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 uncertainties and depends on a
number of factors out of our and our auditor's control. The PCAOB continues to demand complete access in mainland China and Hong
Kong moving forward and is 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. Our financial statements contained in this annual report of Form 20-F have been
audited by Marcum Asia CPAs LLP ("Marcum Asia"), the independent registered public accounting firm that issues the audit report
included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered
with the PCAOB, is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to assess its compliance with
the applicable professional standards. Marcum Asia, whose audit report is included in this annual report, is headquartered in New York,
New York. Marcum Asia's audit working papers related to Xiao-I are located in China. With respect to audits of companies with operations
in China, such as the Company, there are uncertainties about the ability of Xiao-I's auditor to fully cooperate with a request by
the PCAOB for audit working papers in China without the approval of Chinese authorities. As such, as of the date of this annual report,
Xiao-I's auditor is not subject to the Determinations announced by the PCAOB. However, Xiao-I cannot assure you whether Nasdaq or
regulatory authorities would apply additional and more stringent criteria to it after considering the effectiveness of its auditor's
audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or
experience as related to the audit of our financial statements. Furthermore, there is a risk that Xiao-I's auditor cannot be inspected
by the PCAOB because of a position taken by an authority in a foreign jurisdiction in the future, and that the PCAOB may re-evaluate its
determination as a result of any obstruction with the implementation of the Statement of Protocol. Such lack of inspection or re-evaluation
could cause trading in Xiao-I's securities to be prohibited on a national exchange or in the over-the-counter trading market under
the HFCAA, and, as a result, Nasdaq may determine to delist Xiao-I's securities, which may cause the value of Xiao-I's securities
to decline or become worthless. For more detailed information, see "Item 3. Key Information—D. Risk Factors —Risks Relating
to Doing Business in China— The newly enacted HFCCA and the AHFCCA passed by the U.S. Senate, all call for additional and more stringent
criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors
who are not inspected by the PCAOB. These developments could add uncertainties to our offering and listing on the Nasdaq Global Market,
and Nasdaq may determine to delist our securities if in the future the PCAOB determines that it cannot inspect or fully investigate our
auditor."
Permissions, Approvals, Licenses and Permits
Required from the PRC Government Authorities for Our Operations and for Offering of Our Securities to Foreign Investors
The PRC operating entities' operations in China are governed
by PRC laws and regulations. Xiao-I, its subsidiaries, the PRC operating entities have received all requisite permissions and approvals
from the PRC government authorities for their business operations currently conducted in China. Neither has Xiao-I nor its subsidiaries,
nor the PRC operating entities received any denial of permissions for their business operations currently conducted in China. These
permissions and approvals include (without limitation) License for Value-added Telecommunications Services, Business License, Record
Registration Form for Foreign Trade Business Operators, Customs Declaration Entity Registration Certificate. Xiao-I, its subsidiaries,
the PRC operating entities are currently not required to obtain permission from any of the PRC authorities to issue ADSs or Ordinary Shares
to foreign investors. However, Xiao-I is subject to the risks of uncertainty of any future actions of the PRC government in this
regard including the risk that Xiao-I inadvertently concludes that the permissions or approvals discussed here are not required,
that applicable laws, regulations or interpretations change such that Xiao-I is required to obtain approvals in the future, or that
the PRC government could disallow Xiao-I's holding company structure, which would likely result in a material change in its
operations, including its ability to continue its existing holding company structure, carry on its current business, accept foreign investments,
and offer or continue to offer securities to its investors. These adverse actions could cause the value of Xiao-I's ADSs to significantly
decline or become worthless. Xiao-I may also be subject to penalties and sanctions imposed by the PRC regulatory agencies, including
the CSRC, if it fails to comply with such rules and regulations, which would likely adversely affect the ability of Xiao-I's securities
to be listed on a U.S. exchange, which would likely cause the value of Xiao-I's securities to significantly decline or become worthless.
For more detailed information, see "Item 3. Key Information—D. Risk Factors —Risks Relating to Doing Business in China—The
approval, filing or other requirements of the CSRC or other PRC government authorities may be required under PRC laws."
Implications of Being an Emerging Growth Company and a Foreign Private
Issuer
Emerging
Growth Company
We
are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such,
we may take advantage of specific exemptions from various reporting requirements that are applicable to other publicly traded entities
that are not emerging growth companies. These exemptions include:
●
not
                                            being required to comply with the auditor attestation requirements of Section 404 of the
                                            Sarbanes-Oxley Act of 2002;
8
●
not
                                            being required to comply with any requirement that may be adopted by the Public Company Accounting
                                            Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's
                                            report providing additional information about the audit and the financial statements (i.e.,
                                            an auditor discussion and analysis); not being required to submit some executive compensation
                                            matters to shareholder advisory votes, such as "say-on-pay," "say-on-frequency"
                                            and "say-on-golden parachutes;" and
●
not
                                            being required to disclose some executive compensation related items such as the correlation
                                            between executive compensation and performance and comparisons of the chief executive officer's
                                            compensation to median employee compensation.
As
a result, we do not know if some investors will find our ADSs less attractive. The result may be a less active trading market for our
ADSs, and the price of our ADSs may become more volatile.
We
will remain an emerging growth company until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues
exceed $ $1.235billion; (ii) the last day of the fiscal year following the fifth anniversary of the completion of our initial public
offering; (iii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which
would occur if the market value of our common equity held by non-affiliates exceeds $700 million as of the last business day of our most
recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1 billion in non-convertible debt securities
during any three-year period.
Foreign
Private Issuer
We
report under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging
growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from specific provisions
of the Exchange Act that are applicable to U.S. domestic public companies, including:
●
the
                                            sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations
                                            in respect of a security registered under the Exchange Act;
●
the
                                            sections of the Exchange Act requiring insiders to file public reports of their stock ownership
                                            and trading activities and liability for insiders who profit from trades made in a short
                                            period of time; and
●
the
                                            rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form
                                            10-Q containing unaudited financial and other specific information, or current reports on
                                            Form 8-K, upon the occurrence of specified significant events.
●
In
                                            addition, we will not be required to file annual reports and consolidated financial statements
                                            with the SEC as promptly as U.S. domestic companies whose securities are registered under
                                            the Exchange Act, and we will not be required to comply with Regulation FD, which restricts
                                            the selective disclosure of material information.
Both
foreign private issuers and emerging growth companies also are exempt from some more stringent executive compensation disclosure rules.
Thus, even if we no longer qualify as an emerging growth company, but remain a foreign private issuer, we will continue to be exempt
from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private
issuer.
RISK
FACTORS
An
investment in Xiao-I's ADSs involves significant risks. You should carefully consider all of the information in this Annual Report,
including the risks and uncertainties described below, before making an investment in its ADSs. Any of the following risks could have
a material adverse effect on the business, financial condition and results of operations of Xiao-I, its subsidiaries and the PRC operating
entities. In any such case, the market price of Xiao-I's ADSs could decline, and you may lose all or part of your investment.
9
In
the following discussion of risks relating to of our business, operations and financial information, "we," "us,"
or "our" refer to the PRC operating entities except where consolidated financial information is presented in which case "we",
"us" or "our" refer to Xiao-I and its subsidiaries and the PRC operating entities on a consolidated basis.
Risks
Relating to Our Business and Industry
We
have had net losses (except for 2021) and negative cash flows from operating activities in the past, and we may not achieve or sustain
profitability.
We
had a net loss of US$7.1 million and negative cash flows from operations of US$3.5 million in 2020 and net income of US$3.4 million and
negative cash flows from operations of US$11.9 million in 2021. In 2022, we had net loss of US$6.0 million and negative cash flows from
operations of US$10.2 million. We cannot assure you that we will be able to generate net profit or positive cash flows from operating
activities in the future. Our future revenue growth and profitability will depend on a variety of factors, many of which are beyond our
control. These factors include market acceptance of our products, effectiveness of our monetization strategy, our ability to control
cost and expenses and to manage our growth effectively, market competition, macroeconomic and regulatory environment. We also expect
our costs and expenses to increase in the future as we continue to expand our operations and to increase our investments in research
and development, which will place significant demands on our management and our operational and financial resources. Continuous expansion
may increase the complexity of our business, and we may encounter various difficulties. We may fail to develop and improve our operational,
financial and managerial controls, enhance our financial reporting systems and procedures, recruit, train and retain skilled professional
personnel, or maintain customer satisfaction to effectively support and manage our growth. If we invest substantial time and resources
to expand our operations but fail to manage the growth of our business and capitalize on our growth opportunities effectively, we may
not be able to achieve profitability, and our business, financial condition, results of operations and prospects would be materially
and adversely affected.
If
we fail to maintain and grow our customer base, keep our customers engaged through our products and solutions, our business growth may
not be sustainable.
To
achieve the sustainable growth of our business, we must continuously attract new customers, retain existing customers and increase their
incremental spending on our products and solutions. To keep pace with our customers' evolving demands, we need to improve our existing
products and solutions, and launch new products and solutions, on a timely basis. If we fail to accurately identify our customers'
demands or continuously provide them with products and solutions that add value to their businesses, our customers may be reluctant to
increase their spending on our platform, and as a result, the growth of our business may be stalled.
If
we fail to maintain and enhance the functions, performance, reliability, design, security, and scalability of our platforms to meet our
customers' evolving needs, we may lose our customers.
The
market for AI industry services in China is constantly changing with innovations. Our success has been based on our dedication to the
development of innovative and high-quality products and solutions on our platforms. Our ability to continue to attract and retain customers
and increase sales depends largely on our ability to continue improving and enhancing the functions, performance, reliability, design,
security, and scalability of our platforms.
We
may experience difficulties in developing new technologies as it is costly and time consuming, which in turn could delay or prevent the
development, introduction or implementation of new products and solutions. While we have invested a significant amount of time and money
in our service development to date, we may not have sufficient resources to invest at the same level going forward. To the extent we
are unable to improve and enhance the functions, performance, reliability, design, security, and scalability of our platforms in a manner
that timely and effectively responds to our customers' evolving needs, we may lose our customers and our business, financial condition,
results of operations, and prospects may be materially and adversely affected.
10
If
our products and solutions do not achieve sufficient market acceptance, our business and competitive position will suffer.
To
meet our customers' rapidly evolving demands, we invest substantial resources in research and development to enhance our products
and solutions, as well as in improving our platforms. When we develop or acquire new or enhanced products and solutions, we typically
incur significant expenses and expend resources upfront to develop, market, promote and sell the new offerings. Therefore, when we develop
or acquire and introduce new or enhanced products and solutions, they must achieve high levels of market acceptance in order to justify
the amount of our investment in developing and bringing them to market. Our new products and solutions, or enhancements and changes to
our existing products and solutions, could fail to attain sufficient market acceptance for many reasons, including, among others:
●
failure
                                            to predict market demand accurately in terms of functionality and a failure to supply products
                                            and solutions that meet this demand in a timely manner;
●
defects,
                                            errors, or disruptions;
●
negative
                                            publicity about our platform's performance or effectiveness;
●
changes
                                            in the legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely
                                            affecting our platform;
●
emergence
                                            of competitors that achieve market acceptance before we do;
●
delays
                                            in releasing enhancements to our platform to the market; and
●
introduction
                                            or anticipated introduction of competing products or solutions by our competitors.
If
our new products and solutions, or any enhancements, do not achieve adequate acceptance in the market, or if products and solutions developed
by others achieve greater acceptance in the market, our business could be harmed.
If
our expansion into new industries is not successful, our business, prospects and growth momentum may be materially and adversely affected.
Our
products and solutions are specifically designed to address the diversified needs of our customers across different industries. Through
our platform resources and years of technology accumulation, we have a track record of successful expansion into and becoming a leader
in new industries. We cannot assure you, however, that we will be able to maintain this momentum in the future. Expanding into new industries
involves new risks and challenges. Our lack of familiarity with new industries may make it more difficult for us to keep pace with the
evolving customer needs and preferences. In addition, there may be one or more existing market leaders in any industry that we decide
to expand into. Such companies may be able to compete more effectively than us by leveraging their experience in doing business in that
market as well as their deeper industry insight and greater brand recognition among customers. We will need to comply with new laws and
regulations applicable to these businesses, the failure of which would adversely affect our reputation, business, results of operations
and financial condition. Expansion into any new vertical may place significant strain on our management and resources, and failure to
expand successfully could have a material adverse effect on our business and prospects.
The
market in which we participate is competitive, and if we do not compete effectively, our business, operating results and financial condition
could be harmed.
The
AI industry market is competitive and rapidly evolving. The principal competitive factors in our market include research and development
capabilities, industry know-how, continuous capital investment, product portfolio, among others. Some of our existing competitors might
have substantial competitive advantages, including larger scale, longer operating history, greater brand recognition, more established
relationships with customers, suppliers and partners, and greater financial, research and development, marketing and other resources.
As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies,
standards or customer requirements. In addition, some competitors may offer products, solutions and services that address one or more
number of functions at lower prices, with greater depth than our products, solutions and services or in different geographies. Our existing
and potential competitors may develop and market new products, solutions and services with functionality comparable to ours, and this
could force us to decrease prices in order to remain competitive. If we are unable to compete successfully against our current or potential
competitors, our business, financial condition, and results of operations may be materially and adversely impacted.
11
If
we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing
customer needs, requirements or preferences, our business may be materially and adversely affected.
The
AI industry market is subject to rapid technological changes, evolving industry standards, regulations and customer needs, requirements
and preferences. The success of our business will depend, in part, on our ability to adapt and respond to these changes on an effective
and timely basis. If we fail to upgrade products and solutions that satisfy customers and end-users and provide enhancements and new
features for existing products that keep pace with rapid technological and industry changes, our business, operating results and financial
condition could be adversely affected. If new technologies emerge that are able to deliver competitive products, solutions and services
at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete
effectively.
Our
platforms must integrate with a variety of network, hardware, mobile and software platforms and technologies, and we need to continuously
modify and enhance our products and solutions to adapt to changes and innovation in these technologies. Any failure of our products and
solutions to function effectively with evolving technologies could reduce the demand for our products and solutions. If we are unable
to respond to these changes in a cost-effective and timely manner, our products and solutions may become less marketable and less competitive
or obsolete, and our business, operating results and financial condition could be adversely affected.
To
support our business growth, we continue to invest heavily in our research and development efforts, the expenses of which may negatively
impact our cash flow, and may not generate the results we expect to achieve.
Our
technological capabilities are critical to our success, and we have been continuously investing heavily in our research and development
efforts. Our R&D expenses incurred were US$4.2 million, US$5.4 million and US$24.0 million, respectively, for the years ended December
31, 2020, 2021 and 2022, accounting for 29.2%, 32.2% and 70.7% of our operating expenses for each of the corresponding periods. The industry
in which we operate is subject to rapid technological changes and is evolving quickly in terms of technological innovation. We need to
invest significant resources, including financial and human resources, in research and development to lead technological advances in
order to make our products and solutions innovative and competitive in the market. As a result, we expect that our research and development
expenses will continue to increase.
Furthermore,
development activities are inherently uncertain, and we might encounter practical difficulties in commercializing our development results.
Our significant expenditures on research and development may not generate corresponding benefits. Given the fast pace with which the
technology has been and will continue to be developed, we may not be able to timely upgrade our technologies in an efficient and cost-effective
manner, or at all. New technologies in our industry could render our platforms, our products and solutions that we are developing or
expect to develop in the future obsolete, not commercially viable or unattractive, thereby limiting our ability to recover related development
costs, which could result in a decline in our revenues, profitability and market share.
If
our platforms experience material errors, defects or security issues, we may lose our customers, fail to honor our obligations in respect
of our contract liabilities, and incur significant remedial costs.
Despite
repeated testing, our products and solutions by their nature may contain technical errors, defects or security issues that are difficult
to detect and rectify, particularly when first introduced or when new versions or upgrades are implemented. Due to the complexity of
our products and solutions, we may not be able to fix these errors, defects and security issues in a timely manner or at all. We may
incur significant expenses rectifying any material error or defect and compensating our customers who are affected by such error or defect.
12
Given
that many of our customers use our products and solutions in critical parts of their businesses, any error, defect or service interruption
on our platforms could result in significant losses for our customers. Our customers may seek significant compensation from us for any
losses they incur as result of such errors or cease using our products and solutions altogether. Such claims, even if unsuccessful, could
be costly, time-consuming and distracting to management, result in a diversion of significant resources, and have an adverse effect on
our business, operating results and financial condition. We cannot assure you that the disclaimers limiting our exposure to claims, which
we typically include in the agreements with our customers, will be enforceable or give us adequate protections against liabilities. Moreover,
our customers may share information about their poor experiences in the community, resulting in negative publicity about us. Such negative
publicity could damage our reputation and hurt our future sales.
Our
brand is integral to our success. If we fail to effectively maintain, promote and enhance our brand, our business and competitive advantage
may be harmed.
We
believe that maintaining, promoting and enhancing our Xiao-i (Chinese: 小i机器人) brand is critical to maintaining
and expanding our business. Maintaining and enhancing our brand depend largely on our ability to continue to provide high quality, well-designed,
useful, reliable, and innovative products and solutions, which we cannot assure you we will do successfully.
We
believe the importance of brand recognition will increase as competition in our market increases. In addition to our ability to provide
reliable and useful AI solutions at competitive prices, the successful promotion of our brand will also depend on the effectiveness of
our marketing efforts. We primarily market our products and solutions through our sales and marketing force, and a number of free traffic
sources including developers' word-of-mouth referrals. Our efforts to market our brand have incurred significant costs and expenses
and we intend to continue such efforts. We cannot assure you, however, that our selling and marketing expenses will lead to increasing
revenue, and even if they did, such increases in revenue might not be sufficient to offset the expenses incurred.
Security
breaches and attacks against our systems and network, and any failure to otherwise protect personal, confidential and proprietary information,
could damage our reputation and negatively impact our business, as well as materially and adversely affect our financial condition and
results of operations.
We
have implemented various cybersecurity measures, but such measures may not detect, prevent or control all attempts to compromise our
systems, including distributed denial-of-service attacks, viruses, Trojan horses, malicious software, break-ins, phishing attacks, third-party
manipulation, security breaches, employee misconduct or negligence or other attacks, risks, data leakage and similar disruptions that
may cause service interruptions or jeopardize the security of data stored in and transmitted by our systems or that we otherwise maintain.
Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion
or modification of user information, or a denial-of-service or other interruption to our business operations. As techniques used to obtain
unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service
providers, there can be no assurance that we will be able to anticipate, or implement adequate measures to protect against these attacks.
If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liabilities, our
reputation and business would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction.
We
partially rely on third-party service providers to conduct our business and any interruption or delay in such third parties or our own
failure may impair our customers' experience.
We
partially rely on third-party service providers with respect to our software and smart city business. For example, we rent an Internet
Data Center (IDC) server, which is a complete equipment (including high-speed Internet access bandwidth, high-performance local area
network, safe and reliable computer room environment, etc.), professional management, and perfect application service platform, to arrange
the software system required by customers. On the basis of this platform, IDC service providers provide customers with Internet basic
platform services (server hosting, virtual host, mail cache, virtual mail, etc.) and various value-added services (site rental services,
domain name system services, load balancing systems, database systems, data backup services, etc.). Customers need to be able to access
our platforms at any time, without interruption or degradation of performance, and we provide some customers with service-level commitments
with respect to uptime. Any limitation on the capacity of our data centers or cloud infrastructure could impede our ability to onboard
new customers or expand the usage of our existing customers, host our products or serve our customers, which could adversely affect our
business, financial condition and results of operations. In addition, any incident affecting our data centers or cloud infrastructure
that may be caused by cyberattacks, natural disasters, fire, flood, severe storm, earthquake, power loss, outbreaks of contagious diseases,
telecommunications failures, terrorist or other attacks, or other events beyond our control could negatively affect our platform. A prolonged
service disruption affecting our data centers or technology infrastructure for any of the foregoing reasons would negatively impact our
ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us
to lose customers or otherwise harm our business. We may also incur significant costs for using alternative providers or taking other
actions in preparation for, or in response to, events that damage the third-party hosting services we use.
13
Furthermore,
these third-party service providers may not continue to be available to us on commercially reasonable terms, or at all. If we lose our
right to use any of these service providers, it could lead to significant increase in our expenses or otherwise result in a delay or
disruption in our solutions until equivalent technology is developed by us, or obtained from another third party, and integrated into
our solutions. If performance of the third parties that we work with proves unsatisfactory, or if any of them violates its contractual
obligations to us, we may need to replace such third party and/or take other remedial action, which could result in additional costs
and materially and adversely affect our offerings to customers. Moreover, the financial condition of our third-party service providers
may deteriorate over the course of our contract term, which may also impact the ability of such third party to continue providing their
services to us.
Our
products and solutions rely on the stable performance of servers, and any disruption to our servers due to internal and external factors
could diminish demand for our products and solutions, harm our business, our reputation and results of operations and subject us to liability.
We
rely in part upon the stable performance of servers for provision of our products and solutions. Those servers may incur disruptions
due to internal and external factors, such as inappropriate maintenance, defects in the servers, cyberattacks, occurrence of catastrophic
events or human errors. Such disruptions could result in negative publicity, loss of or delay in market acceptance of our products and
solutions, loss of competitive position, lower customer retention or claims by customers for losses sustained by them. In such an event,
we may need to expend additional resources to help with recovering. In addition, we may not carry insurance to compensate us for any
losses that may result from claims arising from disruption in third-party servers. As a result, our reputation and our brand could be
harmed, and our business, results of operations and financial condition may be adversely affected.
Our
and our business partners' business operations have been adversely affected by the COVID-19 outbreak, and may in the future continue
to be affected by the COVID-19 outbreak.
Beginning
in 2020, normal economic activity received a severe shock when many company offices, retail stores and production facilities across China
were forced to temporarily close as a result of the COVID-19 outbreak. The population in most of the major cities was locked down to
a greater or lesser extent at various times and opportunities for discretionary consumption were extremely limited. People are forced
to stay at home, and travel and social activities are restricted.
We
took a series of measures to protect our employees, closing our offices, facilitating remote working arrangements for our employees,
and canceling business meetings and travels. The operations of some of our business partners and service providers were also constrained
and impacted. This has led to delays in the purchase decisions and sales and implementation cycles of our products and solutions for
existing or potential customers. Meanwhile it reduces our efficiency in product development, sales, marketing, and customer service work.
China
began to modify its zero-COVID policy at the end of 2022, which seems to have prompted a considerable degree of uncertainties about the
economic and market outlook. Thus, we have to be prepared for the possibility for a wide range of possible outcomes, some of which could
be highly unfavorable to our business. There is still uncertainty as to the future impact of the virus. The extent to which the pandemic
impacts our results of operations going forward will depend on future developments which are highly uncertain and unpredictable, including
the frequency, duration and extent of outbreaks of COVID-19, the appearance of new variants with different characteristics, the success
or failure of efforts to contain or treat cases, and future actions we or the authorities may take in response to these developments.
14
If
the adoption of our products and solutions by our customers are slower than we expected, our business, results of operations and financial
condition may be adversely affected.
Our
business has relied on the adoption of our products and solutions by a broad array of customers. Our ability to further increase our
customer base, and achieve broader market acceptance of our products and solutions will depend, in part, on our ability to effectively
organize, focus and train our sales and marketing personnel. Our ability to achieve significant revenue growth in the future will depend,
in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals. Our recent hires and planned
hires may not become as productive and efficient as we expect and we may be unable to hire or retain sufficient numbers of qualified
individuals in the future in the markets where we do business.
As
we seek to increase the adoption of our products and solutions by our customers, we may incur higher costs and longer sales cycles. The
decision to adopt our products and solutions may require the review and approval of multiple departments including product, human resources,
financial and legal departments. In addition, while customers may quickly deploy our products and solutions on a limited basis before
they will commit to deploying our products and solutions at scale, they often require extensive education about our products and solutions
and significant customer support time, engage in protracted pricing negotiations and seek to secure readily available development resources.
We
may fail to conduct our sales and marketing activities in a cost-effective manner and we are subject to limitations in promoting our
products and solutions.
Due
to the technical nature of AI solutions, we mainly rely on our sales and marketing forces to conduct marketing activities and drive sales
of our products and solutions. If we fail to conduct our sales and marketing activities in a cost-effective way, we may incur considerable
marketing expenses, which could adversely affect our business and operating results. Additionally, our brand promotion and marketing
activities may not be well received by customers and potential customers, and may not result in the levels of sales that we anticipate.
Meanwhile, marketing approaches and tools in the market for AI solutions in China are evolving, which may further require us to enhance
our marketing approaches and experiment with new marketing methods to keep pace with industry developments and customer preferences.
Failure to introduce new marketing approaches in an efficient and effective manner could reduce our market share and materially and adversely
affect our financial condition, results of operations and profitability.
If
we fail to provide high quality customer services, our brand, business, and results of operations may be harmed.
We
believe our focus on customer services and support is critical to attracting new customers, retaining existing customers and growing
our business. We have invested in training our customer support team and improving the quality of our customer services. However, our
customer services team may not be able to maintain a high standard for themselves going forward for reasons such as budgetary constraints
and employee losses, which could adversely affect our reputation and ability to retain and bring in customers. As a result, our brand,
business, and results of operations may be harmed.
We
had a concentration of major customers during the years ended December 31, 2020, 2021 and 2022 (the "Track Record Period")
and if our existing major customers cease to engage our services, we may be unable to find new customers with similar attributable revenue
within a reasonable time or at all.
For
the years ended December 31, 2020, 2021 and 2022, the percentage of our revenue attributable to our largest customer amounted to 17.7%,
41.2% and 20.4%, respectively, while the percentage of our revenue attributable our five largest customers for the years ended December
31, 2021 and 2022 amounted to 42.8%, 67.1% and 58.4%, respectively.
We
cannot assure you that there will not be any disputes between our major customers and us, or that we will be able to maintain business
relationships with our existing customers. As a substantial amount of revenues were generated from a relatively small number of major
customers during the Track Record Period, in the event that these existing major customers cease to engage our services and we are unable
to find new customers with similar attributable revenue within a reasonable period of time or at all, our business and profitability
may be adversely affected. In addition, if any of such customers default or delay on their payment or settlement of our trade and other
receivables, our liquidity, financial condition and results of operations may be adversely affected.
15
The
intensifying competition, change in sector trend and landscape and government policies may have a direct impact on the industries where
our clients operate their businesses, and negatively affect the stability of our clients, which may subsequently have negative impact
on our business.
A
significant portion of our revenues were derived from customers engaged in a few industries in China, some of which are emerging and
highly competitive, such as the contact center industry. Any change in the competitive landscape, market trend or user behaviors in such
sectors may have a negative impact on our customers, thus harm their ability to make payments and maintain and increase the usage of
our products and solutions. In addition, some of these industries in China are highly regulated by the PRC government and numerous regulatory
authorities of the central PRC government are empowered to issue and implement regulations governing various aspects of these industries.
As the laws and regulations are evolving and some of them are relatively new, changes to the current laws and regulations may harm our
business and results of operation. In addition, interpretation and enforcement of such laws and regulations involve significant uncertainty.
As a result, in certain circumstances, it may be difficult to determine what actions or omissions may be deemed to be in violations of
applicable laws and regulations. If these laws and regulations or the uncertainty associated with their interpretation negatively impact
the industries where our customers operate, our business may be adversely affected as well.
Our
reliance on a limited number of suppliers for certain essential services could adversely affect our ability to manage our business effectively
and subsequently harm our business.
We
rely on a limited number of suppliers for certain essential services to operate our network and provide products and solutions to our
customers. Due to the limited number of relevant suppliers available in China, we rely on a limited number of suppliers for cloud, internet
data center services and hardware. Our purchase from top-three suppliers in aggregate accounted for 62.5%, 79.2% and 66.8% of total purchase
for the years ended December 31, 2020, 2021 and 2022, respectively. We may experience shortages in components or delays in delivery as
a result of natural disasters, increased demand in the industry or our suppliers' lacking sufficient rights to supply the servers
or other products or services.
Our
reliance on these suppliers exposes us to risks, including reduced control over costs and constraints based on the then current availability,
terms, and pricing of these services. We generally do not have any long-term contracts guaranteeing supply with these suppliers. If our
supply of certain services is disrupted or delayed, there can be no assurance that additional supplies or services can serve as adequate
replacements or that supplies will be available on terms that are favorable to us, if at all. Moreover, even if we can identify adequate
replacements on substantially similar terms, our business could be adversely affected until those efforts were completed. Any disruption
or delay in the supply of our hardware may cause delay or other constraints on our operations that could damage our customer relationships.
We
may fail to obtain or maintain all required licenses, permits and approvals to operate our business.
Our
business and operations have been subject to extensive regulations. We are required to obtain and maintain applicable licenses, permits
and approvals from different regulatory authorities in order to conduct our existing or future business in connection with smart city
services. As we have been continually expanding into new business operations in the area of architectural design AI services, and the
interpretation and application of existing PRC laws and regulations and possible new laws and regulations relating to the telecommunication
services have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses
and activities of telecommunication services in China, including our business, we cannot assure you that we have obtained all the approvals,
permits or licenses required for conducting our business in China or areas where we operate, or will be able to maintain our existing
approvals, permits or licenses or obtain new ones. The government authorities may require us to obtain additional licenses, permits or
approvals so that we can continue to operate our existing or future businesses or otherwise prohibit our operation of the types of businesses
to which the new requirements apply. In addition, new regulations or new interpretations of existing regulations may increase our costs
of doing business and prevent us from efficiently delivering services and expose us to potential penalties and fines. Lastly, our existing
licenses may expire without proper renewal or be revoked due to violations of relevant licensure maintenance requirements. If any of
our entities is deemed by governmental authorities to be operating without appropriate permits and licenses or outside of their authorized
scopes of business or otherwise fail to comply with relevant laws and regulations, we may be subject to penalties and our business, financial
condition, and results of operation may be materially and adversely affected.
16
We
may fail to obtain, maintain and protect our intellectual property rights and proprietary information or prevent third parties from any
unauthorized use of our technologies.
Our
trade secrets, trademarks, copyrights, patents, and other intellectual property rights are critical to our success. We rely on, and expect
to continue to rely on, confidentiality agreements and non-compete agreements with our employees and third parties to protect our intellectual
properties. However, events beyond our control may pose threats to our intellectual property rights and the integrity of our products
and brand. Effective protection of our trademarks, copyrights, domain names, patent rights, and other intellectual property rights is
expensive and challenging. While we have taken measures to protect our intellectual property rights, including implementing a set of
comprehensive internal policies to establish robust management over our intellectual property rights, and deploying a special team to
guide, manage, supervise and monitor our daily work regarding intellectual property rights, we cannot assure you that such efforts are
adequate to guard against any potential infringement and misappropriation. In addition, our intellectual property rights may be declared
invalid or unenforceable by the courts. We cannot assure you that any of our intellectual property rights applications will ultimately
proceed to registration or will result in registration with adequate scope for our business. Some of our pending applications or registrations
may be successfully challenged or invalidated by others. If our intellectual property rights applications are not successful, we may
have to use different intellectual property rights for our affected products or services, or seek to enter into arrangements with any
third parties who may have prior registrations, applications or rights, which might not be available on commercially reasonable terms,
if at all. If we fail to protect or enforce our intellectual property rights, our competitors may copy or reverse-engineer our products
and services without authorization and compete with us. As a result, our customers and partners may devalue our services, and our ability
to compete effectively may be impaired, which could have a material adverse effect on our business, financial condition and results of
operations.
Similarly,
to protect our unpatented proprietary information and technology, such as trade secrets, we rely on our agreements with employees and
third parties that contain restrictions on the use and disclosure of such information or technology. For example, our employees and third
parties are required to keep confidential of any unpatented proprietary information and technology during the contract term and after
the termination of the employment agreement. In addition, the agreements with our employees and third parties explicitly provide for
all rights and obligations regarding the ownership and protection of intellectual property rights. These agreements may be inadequate
or may be breached, either of which could potentially result in unauthorized use or disclosure of our trade secrets and other proprietary
information to third parties, including our competitors. As a result, we may lose our competitive advantages derived from such intellectual
property. Significant impairments on our intellectual property rights may result in a material and adverse effect on our business.
We
may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs
of business.
We
compete in markets where there are a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary
rights, as well as disputes regarding infringement of these rights. Our competitors and other third parties may, whether rightly or falsely,
bring legal claims against us for infringing on their intellectual property rights. The intellectual property laws in China, which cover
the validity, enforceability and scope of protection of intellectual property rights, are evolving, and litigation is becoming a more
popular means to resolve commercial disputes. We are exposed to a higher litigation risk. Any intellectual property lawsuits against
us, whether successful or not, may harm our brand and reputation.
Defending
intellectual property claims is costly and can impose a significant burden on our management and resources. Any intellectual property
litigation to which we become a party may require us to do one or more of the following:
●
cease
                                            selling, licensing, or using products or features that incorporate the intellectual property
                                            rights that we allegedly infringe, misappropriate, or violate;
●
make
                                            substantial payments for legal fees, settlement payments, or other costs or damages, including
                                            indemnification of third parties;
17
●
obtain
                                            a license or enter into a royalty agreement, either of which may not be available on reasonable
                                            terms or at all, in order to obtain the right to sell or use the relevant intellectual property;
                                            or
●
redesign
                                            the allegedly infringing products to avoid infringement, misappropriation, or violation,
                                            which could be costly, time-consuming, or impossible.
Further,
there is no guarantee that we can obtain favorable judgment in all legal cases, in which case we may need to pay damages or be forced
to cease using certain technologies or content that are critical to our products and solutions. Any resulting liabilities or expenses
or any changes to our products or solutions that we have to make to limit future liabilities may have a material adverse effect on our
business, results of operations, and prospects.
We
and our management may from time to time be subject to claims, disputes, lawsuits and other legal and administrative proceedings.
We are currently not party to any material legal or
administrative proceedings except for the ones described in Item 8. See "Item 8.A. Consolidated Statements and Other Financial Information—Litigation."
However, in light of the nature of our business, we and our management are susceptible to potential claims or disputes. We and our management
have been, and may from time to time in the future be, subject to or involved in various claims, disputes, lawsuits and other legal and
administrative proceedings. Lawsuits and litigations may cause us to incur defense costs, utilize a significant portion of our resources
and divert management's attention from our day-to-day operations, any of which could harm our business. Claims arising out of actual
or alleged violations of law, breach of contract or torts could be asserted against us by customers, business partners, suppliers, competitors,
employees or governmental entities in investigations and legal proceedings. In particular, according to the PRC Social Insurance Law and
the Administrative Measures on Housing Fund, employers are required, together with their employees or separately, to pay the social insurance
premiums and housing funds for their employees. Employers that fail to make adequate social insurance and housing fund contributions may
be subject to fines and legal sanctions. A few of our PRC operating entities engaged third-party human resources agencies to pay social
insurance premium and housing funds for some of their employees. This is because such employees worked outside of the cities where the
operating entities are registered and third-party human resources agencies were engaged to pay social insurance premium and housing provident
funds for such employees in cities where they worked. If the relevant PRC authorities determine that this third-party agency arrangement
does not satisfy the requirements under the relevant PRC laws and regulations, that we shall make supplemental contributions, that we
are not in compliance with labor laws and regulations, or that we are subject to fines or other legal sanctions, such as order of timely
rectification, and our business, financial condition and results of operation may be adversely affected.
Changes
in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our products
and solutions and have a negative impact on our business.
The
future success of our business depends upon the continued use of the internet as a primary medium for commerce, communication and business
solutions. The PRC government has in the past adopted, and may in the future adopt, laws or regulations affecting the use of the internet
as a commercial medium. Changes in these laws or regulations could require us to modify our products in order to comply with these changes.
In addition, government agencies may begin to impose taxes, fees or other charges for accessing the internet or e-commerce. These laws
and changes could limit the growth of internet-related commerce or communications generally and reduce the demand for internet-based
services such as ours.
In
addition, use of the internet as a business tool could be adversely affected. The performance of the internet and its acceptance as a
business tool has been adversely affected by "viruses," "worms" and similar malicious programs and the internet
has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the internet
is adversely affected by the above issues, our business, financial condition, and results of operations could suffer.
Complying
with evolving privacy and other data related laws and requirements may be expensive and force us to make adverse changes to our business,
and failure to comply with such laws and requirements could result in substantial harm to our business and results of operations.
18
Laws
and regulations governing data privacy and protection, the use of the internet as a commercial medium, the use of data in artificial
intelligence and machine learning, and data sovereignty requirements are rapidly evolving, extensive, complex, and include inconsistencies
and uncertainties. These and other similar legal and regulatory developments could contribute to legal and economic uncertainty, affect
how we design, market, sell, and operate our platform, how our customers process and share data, how we process and use data, and how
we transfer personal data from one jurisdiction to another, which could negatively impact demand for our platform. We may incur substantial
costs to comply with such laws and regulations, to meet the demands of our customers relating to their own compliance with applicable
laws and regulations, and to establish and maintain internal compliance policies.
We
have established privacy policies and other documentation regarding our collection, processing, use, and disclosure of personal information
or other confidential information. Although we endeavor to comply with our policies, we may at times fail to do so or may be perceived
to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees or vendors
fail to comply with our policies. Such failures could subject us to claims and proceedings, which could be costly and time-consuming.
Our business, financial condition and results of operations could be adversely affected.
We
are dependent on the continuous services of our senior management and other key employees. If we fail to attract, retain and motivate
qualified personnel, our business could be materially and adversely affected.
Our
future performance depends on the continued services and contributions of our senior management to oversee and execute our business plans
and to identify and pursue new opportunities and innovations. Any loss of service of our senior management or other key employees can
significantly delay or prevent us from achieving our strategic business objectives, and adversely affect our business, financial condition
and operating results. From time to time, there may be changes in our senior management team, resulting from the hiring or departure
of executives, which could also disrupt our business. Hiring suitable replacements and integrating them into our existing teams also
requires significant amount of time, training and resources, and may impact our existing corporate culture.
Future
strategic acquisitions and investments may fail and may result in material and adverse impact on our financial condition and results
of operations.
We
may, in the future, acquire businesses or platforms that we believe can improve our products and solutions, enhance our technological
capacities, and expand our customer coverage. Our ability to implement our acquisition strategy will depend on our ability to identify
suitable targets, our ability to reach agreements with them on commercially reasonable terms, and within a desired timeframe, and the
availability of financing to complete acquisitions, as well as our ability to obtain any required shareholder or government approvals.
Our strategic acquisitions and investments could subject us to uncertainties and risks, including high acquisition and financing costs,
potential ongoing financial obligations and unforeseen or hidden liabilities, failure to achieve our intended objectives, benefits or
revenue-enhancing opportunities, uncertainty of entering into markets in which we have limited or no experience, costs associated with
and difficulties in integrating acquired businesses, and diversion of our resources and management attention. Our failure to address
these uncertainties and risks may have a material adverse effect on our business, financial condition, and results of operations. Even
if we are able to successfully acquire or invest in suitable businesses, we cannot assure you that we will achieve our expected returns
on such acquisitions or investments through successful integration. As of the date of this annual report, we had not identified or pursued
any acquisition or investment targets. If we fail to achieve our expected returns on such acquisitions or investments in the future,
our business, financial conditions, results of operations and prospects may be materially and adversely affected.
Acquisitions
also pose the risk that we may be exposed to successor liability relating to the actions by an acquired company and its management before
and after the acquisition. The due diligence that we conduct in connection with an acquisition or investment may not be sufficient to
discover unknown liabilities, and any contractual guarantees or indemnities that we receive from the sellers of the acquired companies
or investment target companies or their shareholders may not be sufficient to protect us from, or compensate us for, actual liabilities.
A material liability associated with an acquisition or investment could adversely affect our reputation and reduce the benefits of the
acquisition or investment. In addition, if the management team or key employees of an acquired company fail to perform as expected, this
may affect the business performance of such acquired company and, in turn, have a material adverse effect on our business, financial
conditions, and results of operations.
19
We
may, in the future, grow and expand our international operations, which may expose us to significant risks.
We
may, in the future, further expand our operations and customer base worldwide. We may adapt to and develop strategies to address international
markets but there is no guarantee that such efforts will have the desired effect. As a result, we may be required to devote significant
management attention and financial resources worldwide. In connection with such expansion, we may face difficulties including costs associated
with varying seasonality patterns, potential adverse movement of currency exchange rates, longer payment cycle difficulties in collecting
accounts receivable in some countries, tariffs and trade barriers, a variety of regulatory or contractual limitations on our ability
to operate, adverse tax events, reduced protection of intellectual property rights in some countries, political risks and a geographically
and culturally diverse workforce and customer base. Failure to overcome any of these difficulties could harm our business.
In
some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country. We cannot
assure you that we are able to fully comply with the legal requirements of each foreign jurisdiction and successfully adapt our business
models to local market conditions. Due to the complexity involved in our international business expansion, we cannot assure you that
we are or will be in compliance with all local laws.
We
may be unable to obtain any additional capital required in a timely manner or on acceptable terms, or at all. Moreover, our future capital
needs may require us to sell additional equity or debt securities that may dilute our shareholders' shareholdings or subject us
to covenants that may restrict our operations or our ability to pay dividends.
To
grow our business and remain competitive, we may require additional capital from time to time for our daily operations. Our ability to
obtain additional capital is subject to a variety of uncertainties, including:
●
our
                                            market position and competitiveness in the industries in which we operate;
●
our
                                            future profitability, overall financial condition, results of operations and cash flows;
●
general
                                            market conditions for capital-raising activities by our competitors in China; and
●
economic,
                                            political and other conditions in China and internationally.
We
may be unable to obtain additional capital in a timely manner or on acceptable terms, or at all. In addition, our future capital or other
business needs could require us to sell additional equity or debt securities, or to obtain a credit facility. The sale of additional
equity or equity-linked securities could dilute our shareholders' shareholdings. Any incurrence of indebtedness will also lead
to increased debt service obligations, and could result in operating and financing covenants that may restrict our operations or our
ability to pay dividends to our shareholders.
We
have not independently verified the accuracy or completeness of data, estimates, and projections in this annual report that we obtained
from third-party sources, and such information involves assumptions and liabilities.
Certain
facts, forecasts, and other statistics contained in this annual report relating to the industry in which we operate have been derived
from various public data sources and industry reports of third-party industry consultants. In deriving the market size of these industries,
these industry consultants may have adopted different assumptions and estimates for certain metrics. While we generally believe such
reports to be reliable, we have not independently verified the accuracy or completeness of such information. Such reports may not be
prepared on a comparable basis or may not be consistent with other sources.
Industry
data and projections involve a number of assumptions and limitations. Our industry data and market share data should be interpreted in
light of the industries in which we operate. Any discrepancy in the interpretation of such data could lead to different measurements
and projections, and actual results could differ from the projections.
20
We
have identified two material weaknesses in our internal control over financial reporting. If our remediation of the material weaknesses
is not effective, or if we experience additional material weaknesses in the future or otherwise fail to maintain proper and effective
internal control over financial reporting, our ability to produce accurate and timely consolidated financial statements could be impaired,
investors may lose confidence in our financial reporting and the trading price of the ADSs may decline.
Pursuant
to Section 404 of Sarbanes-Oxley, our management will be required to report upon the effectiveness of our internal control over financial
reporting beginning with the annual report for our fiscal year ending December 31, 2025. When we lose our status as an "emerging
growth company" and reach an accelerated filer threshold, our independent registered public accounting firm will be required to
attest to the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for
management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible
remediation. To comply with the requirements of being a reporting company under the Exchange Act, we will need to upgrade our information
technology systems, implement additional financial and management controls, reporting systems and procedures and hire additional accounting
and finance staff. If we or, if required, our auditor is unable to conclude that our internal control over financial reporting is effective,
investors may lose confidence in our financial reporting and the trading price of the ADSs may decline.
In connection with the audit of our consolidated
financial statements, as of and for the years ended December 31,2020, 2021 and 2022, we identified two material weaknesses in our internal
control over the financial statement closing process. 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 consolidated
financial statements will not be prevented or detected on a timely basis. The material weakness that have been identified relates to (i)
our lack of sufficient and competent financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and reporting
requirements set forth by the SEC to address complex U.S. GAAP technical accounting issues, and to prepare and review consolidated financial
statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements and (ii) our lack of internal file management
procedures and effective recognition procedures to recognize revenue and costs timely.
We are working to remediate these material weaknesses
and are taking steps to strengthen our internal control. Specifically, we are working to develop and implement a staffing plan for hiring
additional accounting and finance personnel in 2023, hire additional qualified resources with appropriate knowledge and expertise to handle
complex accounting issues and effectively prepare financial statements and conduct regular and continuous U.S. GAAP accounting and financial
reporting training programs for our financial reporting and accounting personnel. In order to maintain and improve the effectiveness of
our disclosure controls and procedures and internal controls over financial reporting, we will need to expend significant resources and
provide significant management oversight. We plan to adopt measures to improve our internal file management procedures and an effective
recognition procedure by (i) establishing internal document management policies and systems, (ii) continuing our efforts to implement
necessary review and controls at relevant levels and all important documents and contracts will be submitted to the office of our chief
administrative officers for retention and review, and (iii) establishing standard procedures to recognize revenue and costs based on the
contracts service periods.
Implementing
any appropriate changes to our internal controls may require specific compliance training of our directors and employees, entail substantial
costs in order to modify our existing accounting systems, take a significant period of time to complete and divert management's
attention from other business concerns. These changes may not, however, be effective in maintaining the adequacy of our internal control.
We
cannot assure you that there will not be additional material weaknesses or any significant deficiencies in our internal control over
financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability
to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control
over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness
or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, investors may
lose confidence in the accuracy and completeness of our financial reports, the market price of the ADSs could decline, and we could be
subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in
our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies,
could also restrict our future access to the capital markets.
21
We
face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our business operations.
Our
business could be adversely affected by the effects of epidemics. In recent years, there have been breakouts of epidemics in and outside
China. Our business operations could be disrupted if any of our employees is suspected of having H1N1 flu, COVID-19, avian flu or another
epidemic, since it could require our employees to be quarantined and/or our offices to be disinfected. In addition, our results of operations
could be adversely affected to the extent that the outbreak harms the Chinese or global economy or our business environment in particular.
We are also vulnerable to natural disasters and other calamities, which may give rise to server interruptions, breakdowns, system failures,
technology platform failures or internet failures, and may adversely affect our ability to provide advertising services through our products.
See "
Risk Factors — Risks Relating to Our Business and Industry — Our and our business partners' business
operations have been adversely affected by the COVID-19 outbreak, and may in the future continue to be affected by the COVID-19 outbreak.
"
Economic
substance legislation of the Cayman Islands may adversely impact us or 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 activities which attract profits without
real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Act of the Cayman Islands
(the "Substance Act") came into force in the Cayman Islands introducing certain economic substance requirements for in-scope
Cayman Islands entities which are engaged in certain "relevant activities," which in the case of exempted companies incorporated
before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. As we are a Cayman Islands company,
compliance obligations include filing annual notifications for the Company, which need to state whether we are carrying out any relevant
activities and if so, whether we have satisfied economic substance tests to the extent required under the Substance Act. As it is a new
regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. We may need to allocate
additional resources to keep updated with these developments, and may have to make changes to our operations in order to comply with
all requirements under the Substance Act. Failure to satisfy these requirements may subject us to penalties under the Substance Act.
It
is unclear what ramifications, if any, the addition of the Cayman Islands to the "FATF grey list" will have for us.
In
February 2021, the Cayman Islands was added to the Financial Action Task Force ("FATF") list of jurisdictions whose anti-money
laundering practices are under increased monitoring, commonly referred to as the "FATF grey list." When the FATF places a
jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies
within agreed timeframes and is subject to increased monitoring during that timeframe. It is unclear how long this designation will remain
in place and what ramifications, if any, the designation will have for the Company.
It
is unclear how long the designation of the Cayman Islands to the EU AML High-Risk Third Countries List will remain in place and what
ramifications, if any, the designation will have for us.
On
March 13, 2022, the European Commission ("EC") updated its list of 'high-risk third countries' ("EU
AML List") identified as having strategic deficiencies in their anti-money laundering/counter-terrorist financing regimes. The
EC has noted it is committed to greater alignment with the FATF listing process and the addition of the Cayman Islands to the EU AML
List is a direct result of the inclusion of the Cayman Islands on the FATF grey list in February 2021. It is unclear how long this designation
will remain in place and what ramifications, if any, the designation will have for us.
22
Risks
Relating to Our Corporate Structure
In
the following discussion of risks relating to our corporate structure, "we," "us," or "our" refer
to Xiao-I.
If
the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC
regulations on foreign investment in internet and other related businesses, or if these regulations or their interpretation change in
the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations and our ADSs may decline
in value dramatically or even become worthless.
Foreign
ownership of internet-based businesses, such as provider of internet data centers services, are subject to restrictions under current
PRC laws and regulations. Neither we nor our subsidiaries own any equity interest in Shanghai Xiao-i. Instead, we control and receive
the economic benefits of Shanghai Xiao-i's business operation through the VIE Agreements. We, through our WFOE, have the full and
exclusive right to manage and direct all cash flow and assets of the VIE and to direct and administrate the financial affairs and daily
operation of Shanghai Xiao-i. Shanghai Xiao-i pays service fees to WFOE in an amount determined by WFOE in WFOE's sole discretion.
If Shanghai Xiao-i is unable to pay the service fees due to the actual managing situation, with the written consent of WFOE, the unpaid
part of the service fees in the previous fiscal year can be deferred to the end of the next year and settled together. During the validity
of the VIE Agreements, we will bear all the economic benefits and risks arising from the business of Shanghai Xiao-i and its subsidiaries.
WFOE will provide financial support to Shanghai Xiao-i or its subsidiaries in the event of a loss or serious operational difficulties.
The VIE structure is used to provide investors with exposure to foreign investment in China-base companies where Chinese law prohibits
direct foreign investments in certain industries. The VIE Agreements allow Xiao-I to (i) exercise control over the VIE, (ii) receive
all of the economic benefits of the VIE and the VIE's subsidiaries (excluding non-controlling interests) and bears all the economic
risks arising from the business of the VIE and the VIE's subsidiaries (excluding non-controlling interests), (iii) provide financial
support to the VIE or the VIE's subsidiaries, and (iv) have an exclusive option to purchase all or part of the equity interests
and assets in the VIE when and to the extent permitted by PRC law.
As
a result of these contractual arrangements, we are regarded as the primary beneficiary of the VIE for accounting purposes and hence consolidate
financial results of the VIE and its subsidiaries into our consolidated financial statements under U.S. GAAP. For the avoidance of any
doubt, any references to control or benefits that accrue to us because of Shanghai Xiao-i refer only to the conditions satisfied for
consolidation of Shanghai Xiao-i under U.S. GAAP and it is not an entity in which we own any equity.
If
(i) the applicable PRC authorities invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) any
VIE Agreements are terminated with the consent of Zhizhen Technology or (iii) the VIE or its shareholders fail to perform its/his/her
obligations under these contractual arrangements, our business operations in China would be materially and adversely affected, and the
value of your ADSs would substantially decrease. Further, if we fail to renew these contractual arrangements upon their expiration, we
would not be able to continue our business operations unless the then current PRC law allows us to directly operate businesses in China.
In
addition, if any VIE or all or part of its 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. If any of the variable interest entities undergoes a voluntary or involuntary liquidation proceeding, its shareholders or
unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business,
which could materially and adversely affect our business and our ability to generate revenues.
All
of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC.
The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties
in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these
contractual arrangements, we may not be able to exert effective control over the PRC operating entities and we may be precluded from
operating our business, which would have a material adverse effect on our financial condition and results of operations. Additionally,
our ADSs may decline in value dramatically or even become worthless should we become unable to assert our contractual rights over the
assets of the VIE that conducts all or substantially our operations.
23
These
contractual arrangements may not be as effective as equity ownership in providing us with control over the VIE. For example, the VIE
and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations
in an acceptable manner or taking other actions that are detrimental to our interests. If we had equity ownership of 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, under the current contractual
arrangements, we rely on the performance by the VIE and its shareholders of its obligations under the contracts to exercise control over
the VIE. The shareholders of the VIE may not act in the best interests of our company or may not perform their obligations under these
contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the contractual
arrangements with the VIE.
If
the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial
costs and expend additional resources to enforce such arrangements. For example, if the shareholders of the VIE refuse to transfer their
equity interest in the VIE to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if
they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.
In addition, if any third parties claim any interest in such shareholders' equity interests in the VIE, our ability to exercise
shareholders' rights or foreclose the share pledge according to the contractual arrangements may be impaired. If these or other
disputes between the shareholders of the VIE and third parties were to impair our control over the VIE, our ability to consolidate the
financial results of the VIE would be affected, which would in turn result in a material adverse effect on our business, operations and
financial condition. As a result, our ADSs may decline in value dramatically or even become worthless.
While
our opinion is that (i) the ownership structures of our WFOE and the VIE in China, currently are not in violation of any explicit provisions
of PRC laws and regulations currently in effect; and (ii) the agreements under the contractual arrangements between our WFOE, the VIE
and its shareholders governed by PRC law are valid, binding and enforceable against each party thereto in accordance with their terms,
there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules.
Thus, the PRC regulatory authorities may take a view contrary to our opinion. It is uncertain whether any new PRC laws or regulations
relating to variable interest entity structure will be adopted or if adopted, what they would provide. If the ownership structures, contractual
arrangements and business of our company, our PRC subsidiary, the VIE or subsidiaries of the VIE are found to be in violation of any
existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals to operate our business,
the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including:
●
revoking
                                            the business licenses and/or operating licenses of such entities;
●
imposing
                                            fines on us;
●
confiscating
                                            any of our income that they deem to be obtained through illegal operations;
●
discontinuing
                                            or placing restrictions or onerous conditions on our operations;
●
placing
                                            restrictions on our right to collect revenues;
●
shutting
                                            down our servers or blocking our app/websites;
●
requiring
                                            us to restructure our ownership structure or operations;
●
restricting
                                            or prohibiting our use our available funds or the proceeds from any future financings;
●
activities
                                            to finance the business and operations of the VIE and its subsidiaries; or
●
taking
                                            other regulatory or enforcement actions that could be harmful to our business.
Any
of these events could cause significant disruption to our business operations and severely damage our reputation, which would in turn
have a material adverse effect on our financial condition and results of operations. If occurrences of any of these events results in
our inability to direct the activities of the VIE and its subsidiaries in China that most significantly impact its economic performance,
and/or our failure to receive the economic benefits and residual returns from the VIE and its subsidiaries, and we are not able to restructure
our ownership structure and operations in a satisfactory manner, we may not be able to consolidate the financial results of the VIE or
its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.
24
The
contractual arrangements with the VIE and its shareholders may not be as effective as equity ownership in providing operational control.
We
have to rely on the contractual arrangements with the VIE and its shareholders to operate our business in China. These contractual arrangements,
however, may not be as effective as equity ownership in providing us with control over the VIE. For example, the VIE and its shareholders
could breach their contractual arrangements with us by, among other things, failing to conduct the operations of the VIE in an acceptable
manner or taking other actions that are detrimental to our interests. And any economic losses as a result would be absorbed by us as
we bear all economic risks arising from the businesses of the VIE under the contractual arrangements.
If
we had equity ownership of the VIE in China, 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, under the current contractual arrangements, we rely on the performance by the VIE and its shareholders of
their obligations under the contracts to exercise control over the VIE. The shareholders of the VIE may not act in the best interests
of our company or may not perform their obligations under these contracts. If any dispute relating to these contracts remains unresolved,
we will have to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal
proceedings and therefore will be subject to uncertainties in the PRC legal system.
Any
failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material
and adverse effect on our business.
If
the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we could be limited in our
ability to enforce the contractual arrangements that give us operational control over our business operations in China and may have to
incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under
PRC law, including seeking specific performance or injunctive relief, and contractual remedies, which we cannot assure you will be sufficient
or effective under PRC law. For example, if the shareholders of the VIE were to refuse to transfer their equity interests in the VIE
to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act
in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition,
if there are any disputes or governmental proceedings involving any interest in such shareholders' equity interests in the VIE,
our ability to exercise shareholders' rights or foreclose the share pledges according to the contractual arrangements may be impaired.
If these disputes or proceedings were to impair our control over the VIE, we may not be able to maintain operational control over our
business operations in the PRC and thus would not be able to continue to consolidate the VIE's financial results, which would in
turn result in a material adverse effect on our business, operations and financial condition.
All
the agreements under the contractual arrangements with the VIE are governed by PRC laws and provide for the resolution of disputes through
arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved
in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the
United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements.
Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a consolidated
variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate
outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties
cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing
parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration
awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event
that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of
enforcing these contractual arrangements, we may not be able to exert operational control over the consolidated variable interest entity,
and our ability to conduct our business may be negatively affected. As a result, our ADSs may decline in value dramatically or even become
worthless should we become unable to assert our contractual rights over the assets of the VIE that conducts all or substantially our
operations.
25
The
contractual arrangements with the VIE are governed by PRC law. Accordingly, these contracts would be interpreted in accordance with PRC
law, and any disputes would be resolved in accordance with PRC legal procedures, which may not protect you as much as those of other
jurisdictions, such as the United States.
All
the agreements under the contractual arrangements with the VIE are governed by PRC law and provide for the resolution of disputes through
arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved
in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the
United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements.
Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a consolidated
variable interest entity should be interpreted or enforced under PRC law. There remain significant uncertainties regarding the ultimate
outcome of such arbitration should legal action become necessary. In addition, under PRC law, rulings by arbitrators are final, parties
cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed
time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings,
which would require additional expenses and delay. In the event we are unable to enforce these contractual arrangements, or if we suffer
significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert operational
control over the VIE, and our ability to conduct our business may be negatively affected.
Contractual
arrangements we have entered into with the VIE and its shareholders may be subject to scrutiny by the PRC tax authorities. A finding
that we owe additional taxes could significantly reduce our consolidated net income and the value of your investment.
Pursuant
to applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the
PRC tax authorities. We may be subject to adverse tax consequences if the PRC tax authorities determine that the contractual arrangements
among our PRC subsidiary, the VIE and its shareholders are not on an arm's length basis and therefore constitute favorable transfer
pricing. As a result, the PRC tax authorities could require that the VIE adjust its taxable income upward for PRC tax purposes. Such
an adjustment could adversely affect us by increasing our consolidated affiliated entities' tax expenses without reducing the tax
expenses of our PRC subsidiary, subjecting the VIE to late payment fees and other penalties for under-payment of taxes, and resulting
in our PRC subsidiary's loss of its preferential tax treatment. Our consolidated results of operations may be adversely affected
if the VIE's tax liabilities increase or if it is subject to late payment fees or other penalties.
We
are a holding company, and will rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of our subsidiaries
to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent
company expenses or pay dividends to holders of our ADSs.
We
are a holding company and conduct substantially all of our business through the VIE and its subsidiaries. We may rely on dividends to
be paid by the VIE to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions
to our shareholders, to service any debt we may incur and to pay our operating expenses. If the VIE incurs debt on its own behalf in
the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.
Under
PRC laws and regulations, our WFOE, which is a wholly foreign-owned enterprise in China, may pay dividends only out of its accumulated
profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is
required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund,
until the aggregate amount of such fund reaches 50% of its registered capital.
Our
WFOE generates primarily all of its revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction
on currency exchange may limit the ability of our WFOE to use its Renminbi revenues to pay dividends to us. The PRC government may continue
to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by State Administration
of Foreign Exchange (the "SAFE") for cross-border transactions falling under both the current account and the capital account.
Any limitation on the ability of our WFOE to pay dividends or make other kinds of payments to us could materially and adversely limit
our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and
conduct our business.
26
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. Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially
and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or
otherwise fund and conduct our business.
If
the chops of our PRC subsidiary, the VIE, is not kept safely, is stolen or are used by unauthorized persons or for unauthorized purposes,
the corporate governance of these entities could be severely and adversely compromised.
In
China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature.
Each legally registered company in China is required to maintain a company chop, which must be registered with the local Public Security
Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The
chops of our PRC subsidiary, the VIE and its subsidiaries generally held securely by personnel designated or approved by us in accordance
with our internal control procedures. To the extent those chops are not kept safe, are stolen or are used by unauthorized persons or
for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate
entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite
power and authority to do so.
We
may lose the ability to use and enjoy assets held by the VIE that are critical to the operation of our business if the VIE declares bankruptcy
or become subject to a dissolution or liquidation proceeding.
The
VIE holds certain assets that may be critical to the operation of our business, including permits, domain names and most of our intellectual
property rights. If the shareholders of the VIE breach the contractual arrangements and voluntarily liquidate the VIE or its subsidiaries,
or if the VIE or its subsidiaries declare bankruptcy and all or part of their assets become subject to liens or rights of third-party
creditors or are otherwise disposed of without our consent, we may be unable to continue some or all of our business activities, which
could materially and adversely affect our business, financial condition and results of operations. In addition, if the VIE or its subsidiaries
undergo an involuntary liquidation proceeding, third-party creditors may claim rights to some or all of their assets, thereby hindering
our ability to operate our business, which could materially or adversely affect our business, financial condition and results of operations.
Substantial
uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it
may impact the viability of our current corporate structure and business operations.
The
National People's Congress approved the Foreign Investment Law (the "FIL") on March 15, 2019 and the State Council
approved the Regulation on Implementing the Foreign Investment Law (the "Implementation Regulations") on December 12, 2019,
effective from January 1, 2020, which replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign
Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise
Law, together with their implementation rules and ancillary regulations. The Supreme People's Court of China issued a judicial
interpretation on the Foreign Investment Law on December 26, 2019, effective from January 1, 2020, to ensure fair and efficient implementation
of the Foreign Investment Law. According to this judicial interpretation, courts in China shall not, among other things, support contracted
parties to claim foreign investment contracts in sectors not on the Special Administrative Measures for Access to Foreign Investment
(Negative List) (2021) (the "Negative List (2021)"), as void because the contracts have not been approved or registered by
administrative authorities. The Foreign Investment Law grants national treatment to foreign invested enterprises, except for those operating
in "restricted" or "prohibited" industries in the "negative list", where if a foreign invested enterprise
proposes to conduct business in an industry subject to foreign investment "restrictions" in the "negative list,"
the foreign invested enterprise must go through a MOFCOM pre-approval process. The internet content service, internet audio-visual program
services and online culture activities that we conduct through the VIE, is subject to foreign investment restrictions set forth in the
Negative List (2021). The Foreign Investment Law and Implementation Regulations embody an expected PRC regulatory trend to rationalize
its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate
legal requirements for both foreign and domestic investments.
27
However,
since these rules are relatively new, uncertainties still exist in relation to their interpretation. For instance, under the Foreign
Investment Law, "foreign investment" refers to the investment activities directly or indirectly conducted by foreign individuals,
enterprises or other entities in China. Though it does not explicitly classify contractual arrangements as a form of foreign investment,
there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment
activities under the definition in the future. In addition, the definition contains a catch-all provision which includes investments
made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council.
Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the State Council to provide
for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether the contractual arrangements
with the VIE will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations.
Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council 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, corporate governance and business operations.
Some
of our shareholders are not in compliance with the PRC's regulations relating to offshore investment activities by PRC residents,
and as a result, currently WFOE is unable to open a new capital account with banks within China, and may be restricted from remitting
funds or handling other foreign exchange businesses within China unless and until we remediate the non-compliance.
In
July 2014, the State Administration of Foreign Exchange promulgated the Circular on Issues Concerning Foreign Exchange Administration
over the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents via Special Purpose Vehicles ("Circular
37"). According to Circular 37, prior registration with the local SAFE branch is required for Chinese residents to contribute domestic
assets or interests to offshore companies, known as SPVs. Circular 37 further requires amendment to a PRC resident's registration
in the event of any significant changes with respect to the SPV, such as an increase or decrease in the capital contributed by PRC individuals,
share transfer or exchange, merger, division, or other material event. Further, foreign investment enterprises established by way of
round-tripping shall complete the relevant foreign exchange registration formalities pursuant to the prevailing foreign exchange control
provisions for direct investments by foreign investors, and disclose the relevant information such as actual controlling party of the
shareholders truthfully.
Currently,
most of our shareholders have completed Circular 37 Registration and are in compliance. Some of our beneficial owners, who are PRC residents,
have not completed the Circular 37 Registration. All our significant shareholders, directors and officers have completed Circular 37
Registration. We have asked our shareholders who are Chinese residents to make the necessary applications and filings as required by
Circular 37. We attempt to comply and attempt to ensure that our shareholders who are subject to these rules comply, with the relevant
requirements. We cannot, however, provide any assurances that all of our and future shareholders who are Chinese residents will comply
with our request to make or obtain any applicable registration or comply with other requirements required by Circular 37 or other related
rules. The Chinese resident shareholders' failure to comply with Circular 37 registration may result in restrictions being imposed
on part of foreign exchange activities of the offshore special purpose vehicles, including restrictions on its ability to receive registered
capital as well as additional capital from Chinese resident shareholders who fail to complete Circular 37 registration; and repatriation
of profits and dividends derived from special purpose vehicles to China, by the Chinese resident shareholders who fail to complete Circular
37 registration, are also illegal. In addition, the failure of the Chinese resident shareholders to complete Circular 37 registration
may subject each of the shareholders to fines less than RMB50,000. We cannot assure you that each of our Chinese resident shareholders
will in the future complete the registration process as required by Circular 37. In addition, seven of our shareholders did not register
according to the registration procedures stipulated in Circular 37 Registration of the SAFE when they conducted their other external
investment activities unrelated to us. As a result, WFOE is unable to open a new capital account with banks within China, and may be
restricted from remitting funds or handling other foreign exchange businesses within China. Currently, we are unable to use most of the
IPO proceeds (for product development and company operations because we are unable to transfer the funds from Xiao-I Corporation to WFOE
and then to the VIE due to WFOE's inability to open a new capital account as discussed above. We are trying to assist these shareholders
with remedying their non-compliance with Circular 37, but we are not sure when we will be able to accomplish it.
28
Risks
Relating to Doing Business in China
In
the following discussion of risks relating to doing business in China "we," "us," or "our" refer
to the PRC operating entities.
China's
economic, political and social conditions, as well as changes in any government policies, laws and regulations may be quick with little
advance notice and, could have a material adverse effect on our business and the value of Xiao-I's ADSs.
Our
principal offices are based in China. Accordingly, our operating results, financial condition and prospects are influenced by economic,
political and legal developments in China. Economic reforms begun in the late 1970s have resulted in significant economic growth. However,
any economic reform policies or measures in China may from time to time be modified or revised. China's economy differs from the
economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the
past 30 years, growth has been uneven across different regions and among different economic sectors. In addition, the rate of growth
has been slowing since 2012, and the impact of COVID-19 on the Chinese and global economies in 2021 and 2022 is likely to be severe.
The
PRC government exercises significant control over China's economic growth through strategically allocating resources, controlling
the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries
or companies. Although the Chinese economy has grown significantly in the past decade, that growth may not continue, as evidenced by
the slowing of the growth of the Chinese economy in recent years. 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 reduction in demand for our services and
adversely affect our competitive position.
Uncertainties
in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.
The
PRC legal system is based on written statutes and court decisions have limited precedential value. The PRC legal system evolves rapidly,
and the interpretations of many laws, regulations and rules may contain inconsistencies and enforcement of these laws, regulations and
rules involves uncertainties.
From
time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC judicial
and administrative authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be
more difficult to predict the outcome of a judicial or administrative proceeding than in more developed legal systems. Furthermore, the
PRC legal system is based, in part, on government policies and internal rules, some of which are not published in a timely manner but
which may have retroactive effect. As a result, we may not always be aware of any potential violation of these policies and rules. Such
unpredictability towards our contractual, property (including intellectual property) and procedural rights could adversely affect our
business and impede our ability to continue our operations.
29
Content
posted or displayed on our platform may be found objectionable by PRC regulatory authorities and may subject us to penalties and other
severe consequences.
The
PRC government has adopted regulations governing internet and wireless access and the distribution of information over the internet and
wireless telecommunication networks. Under these regulations, internet content providers and internet publishers are prohibited from
posting or displaying over the internet or wireless networks content that, among other things, violates PRC laws and regulations, impairs
the public interest, or is obscene, superstitious, fraudulent or defamatory. Furthermore, internet content providers are also prohibited
from displaying content that may be deemed by relevant government authorities as "socially destabilizing" or leaking "state
secrets" of the PRC. Failure to comply with these requirements may result in the revocation of licenses to provide internet content
or other licenses, the closure of the concerned platforms and reputational harm. The operator may also be held liable for any censored
information displayed on or linked to their platform.
We
operate a number of portfolio products in China. We have implemented procedures to monitor the content displayed on our products in order
to comply with relevant laws and regulations. However, it may not be possible to determine in all cases the types of content that could
result in our liability as a distributor of such content and, if any of the content posted or displayed on our products is deemed by
the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject
to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially
and adversely affect our business, financial condition and results of operations.
We
may also be subject to potential liability for any unlawful actions by our users on our products. It may be difficult to determine the
type of content or actions that may result in liability to us and, if we are found to be liable, we may be prevented from operating our
business in China. Moreover, the costs of compliance with these regulations may continue to increase as a result of more content being
made available by an increasing number of users of our platform, which may adversely affect our results of operations. Although we have
adopted internal procedures to monitor content and to remove offending content once we become aware of any potential or alleged violation,
we may not be able to identify all the content that may violate relevant laws and regulations or third-party intellectual property rights.
Even if we manage to identify and remove offensive content, we may still be held liable. As of the date of this annual report, we have
not received government sanctions in connection with content posted on our platform. However, we cannot assure you that our business
and operations will be immune from government actions or sanctions in the future. To the extent that PRC regulatory authorities find
any content displayed on our platform objectionable, they may require us to limit or eliminate the dissemination of such content on our
platform in the form of take-down orders or otherwise. In addition, these laws and regulations are subject to interpretation by the relevant
authorities, and it may not be possible to determine in all cases the types of content that could result in our liability as a platform
operator.
Advertisements
shown on our platform may subject us to penalties and other administrative actions.
Under
PRC advertising laws and regulations, we are obligated to monitor the advertising content shown on our platform to ensure that such content
is true and accurate and in full compliance with applicable laws and regulations. Advertisements shall not hinder public order, violate
social morality or contain illegal contents, including but not limited to obscenity, pornography, gambling, superstition, terror and
violence contents. Otherwise, the administration of market regulation may (1) order to stop publishing of the advertisement and; (2)
confiscate the advertising fees; (3) impose a penalty ranging from RMB200,000 to RMB1,000,000; or (4) in serious cases, cancel the business
license and cancel the registration certificate for publishing advertisements. In addition, where a special government review is required
for specific types of advertisements prior to internet posting, such as advertisements relating to pharmaceuticals, medical instruments,
agrochemicals and veterinary pharmaceuticals, we are obligated to confirm that such review has been performed and approval has been obtained.
Violation of these laws and regulations may subject us to penalties, including fines, confiscation of our advertising income, orders
to cease dissemination of the advertisements and orders to publish an announcement correcting the misleading information. In circumstances
involving serious violations by us, PRC governmental authorities may force us to terminate our advertising operations or revoke our licenses.
30
While
we have made significant efforts to ensure that the advertisements shown on our platform are in full compliance with applicable PRC laws
and regulations, we cannot assure you that all the content contained in such advertisements or offers is true and accurate as required
by the advertising laws and regulations or otherwise in full compliance with applicable PRC laws and regulations, especially given the
uncertainty in the interpretation of these PRC laws and regulations. If we are found to be in violation of applicable PRC advertising
laws and regulations, we may be subject to penalties and our reputation may be harmed, which may negatively affect our business, financial
condition, and results of operations and prospects. Although the advertisements displayed on our platform may not directly contain sensitive
or illegal contents, including but not limited to gambling and pyramid selling, the advertisers may use inducing words to indirectly
attract advertisement viewers to participate in gambling, pyramid selling, or other illegal activities. If we receive a complaint that
any superficially compliant advertisement is linked to one or more webpages that feature non-compliant advertising content, we will remove
the related advertisement. Although our agreements with the advertising agencies provide that the advertisements provided by the advertisers
shall comply with the requirements of relevant laws and regulations, we cannot control or supervise advertising contents and the linked
webpages all the time. Therefore, we cannot guarantee you that all of the advertisements displayed on our platform will comply with relevant
laws and regulations.
In
April 2015, the SCNPC promulgated the PRC Advertising Law, effective on September 1, 2015 and amended on October 26, 2018. According
to the Advertising Law, advertisements shall not have any false or misleading content, or defraud or mislead consumers. Furthermore,
an advertisement will be deemed as a "false advertisement" if any of the following situations exist: (1) the advertised product
or service does not exist; (2) there is any inconsistency that has a material impact on the decision to purchase in what is included
in the advertisement with the actual circumstances with respect to the product's performance, function, place of production, usage,
quality, specification, ingredient, price, producer, term of validity, sales condition and honors received, among others, or the service's
content, provider, form, quality, price, sales condition, and honors received, among others, or any commitments, among others, made on
the product or service; (3) using fabricated, forged or unverifiable scientific research results, statistical data, investigation results,
excerpts, quotations or other information as supporting material; (4) effect or results of using the good or receiving the service are
fabricated; or (5) other circumstances where consumers are defrauded or misled by any false or misleading content.
The
laws and regulations of advertising are relatively new and evolving and there is substantial uncertainty as to the interpretation of
"false advertisement" by the State Administration for Market Regulation (formerly known as the State Administration for Industry
and Commerce), or the SAMR.
The
newly enacted HFCCA and the AHFCCA passed by the U.S. Senate, all call for additional and more stringent criteria to be applied
to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not
inspected by the PCAOB. These developments could add uncertainties to our offering and listing on the Nasdaq Global Market, and
Nasdaq may determine to delist our securities if in the future the PCAOB determines that it cannot inspect or fully investigate our auditor.
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 "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 December 18, 2020, the HFCAA was signed by President Donald Trump
and became law. This legislation requires certain issuers of securities to establish that they are not owned or controlled by a foreign
government. Specifically, an issuer must make this certification if the PCAOB is unable to audit specified reports because the issuer
has retained a foreign public accounting firm not subject to inspection by the PCAOB. Furthermore, if the PCAOB is unable to inspect
the issuer's public accounting firm for three consecutive years beginning in 2021, the issuer's securities are banned
from trade on a national exchange or through other methods.
On
June 22, 2021, the U.S. Senate passed the AHFCAA, which, if passed by the U.S. House of Representatives and signed into
law by the President, would decrease the number of non-inspection years for foreign companies to comply with PCAOB audits from three
to two years, thus reducing the time period before their securities may be prohibited from trading or delisted.
31
On
November 5, 2021, the SEC approved the PCAOB's Rule 6100, Board Determinations Under the HFCAA. Rule 6100 provides
a framework for the PCAOB to use to determine whether it is unable to inspect or investigate registered public accounting firms located
in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On
December 2, 2021, The SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The
rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting
firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate.
On
December 16, 2021, the PCAOB issued the Determination Report which found that the Board is unable to inspect or investigate completely
PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, a Special Administrative Region
of the People's Republic of China (the "PRC"), because of positions taken by PRC authorities in those jurisdictions
(the "Determination"). Furthermore, the Determination Report identified the specific registered public accounting firms which
are subject to these determinations, i.e., PCAOB Identified Firms. The Board made these determinations pursuant to PCAOB Rule 6100,
which provides a framework for how the PCAOB fulfills its responsibilities under the HFCAA.
The
lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the
auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB
to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms' audit
procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could
cause existing and potential investors to lose confidence in audit procedures and reported financial information and the quality of financial
statements of China-based companies.
Xiao-I's
current auditor, Marcum Asia CPAs LLP ("Marcum Asia"), the independent registered public accounting firm that issues the
audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States
and a firm registered with the PCAOB, is subject to laws in the U.S. pursuant to which the PCAOB conducts regular inspections to
assess its compliance with the applicable professional standards. Marcum Asia, whose audit report is included in this annual report,
is headquartered in New York, New York, and, as of the date of this annual report, was not included in the list of PCAOB Identified
Firms in the Determination Report.
On
August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the "Protocol") with the China Securities
Regulatory Commission (the "CSRC") and the Ministry of Finance ("MOF") of the People's Republic of China,
governing inspections and investigations of audit firms based in mainland China and Hong Kong. The Protocol remains unpublished and is
subject to further explanation and implementation. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the
PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and the unfettered ability to transfer
information to the SEC.
On
December 15, 2022, the PCAOB board announced that it has completed the inspections, determined that it had complete access to inspect
or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and voted to vacate the Determination
Report. On December 29, 2022, the CAA was signed into law by President Biden. The CAA contained, among other things, an identical
provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under
the HFCA Act from three years to two. Xiao-I's ability to retain an auditor subject to the PCAOB inspection and investigation,
including but not limited to inspection of the audit working papers related to Xiao-I, may depend on the relevant positions of U.S. and
Chinese regulators. Marcum Asia's audit working papers related to Xiao-I are located in China. With respect to audits of companies
with operations in China, such as the Company, there are uncertainties about the ability of Xiao-I's auditor to fully cooperate
with a request by the PCAOB for audit working papers in China without the approval of Chinese authorities. As such, as of the date of
this annual report, Xiao-I's auditor is not subject to the Determinations announced by the PCAOB. However, Xiao-I cannot assure
you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to it after considering the effectiveness
of its auditor's audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources,
geographic reach or experience as related to the audit of our financial statements. Furthermore, there is a risk that Xiao-I's
auditor cannot be inspected by the PCAOB because of a position taken by an authority in a foreign jurisdiction in the future, and that
the PCAOB may re-evaluate its determination as a result of any obstruction with the implementation of the Statement of Protocol.
Such lack of inspection or re-evaluation could cause trading in Xiao-I's securities to be prohibited on a national exchange
or in the over-the-counter trading market under the HFCAA, and, as a result, Nasdaq may determine to delist Xiao-I's securities,
which may cause the value of Xiao-I's securities to decline or become worthless.
32
It
may be difficult for overseas regulators to conduct investigation or collect evidence within China.
Shareholder
claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality
in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations
or litigations initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities
regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the
securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism.
Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator
is allowed to directly conduct investigation or evidence collection activities within the PRC territory. While detailed interpretation
of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly
conduct investigation or evidence collection activities within China may further increase the difficulties you face in protecting your
interests.
The
Chinese government exerts substantial influence over the manner in which we must conduct our business activities and may intervene or
influence our operations at any time, which could result in a material change in our operations and the value of Xiao-I's ADSs.
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 harmed by changes in its laws and regulations, including those
relating to securities regulation, data protection, cybersecurity and mergers and acquisitions and other matters. The central or local
governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.
Government
actions in the future could significantly affect economic conditions in China or particular regions thereof, and could require us to
materially change our operating activities or divest ourselves of any interests we hold in Chinese assets. Our business may be subject
to various government and regulatory interference in the provinces in which we operate. We may incur increased costs necessary to comply
with existing and newly adopted laws and regulations or penalties for any failure to comply. Our operations could be adversely affected,
directly or indirectly, by existing or future laws and regulations relating to our business or industry.
Given
recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted
overseas and/or foreign investment in China-based issuers, any such action 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 become worthless.
Recently,
the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued
the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the Opinions, which was made available to
the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and
the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction
of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed companies. As of
the date of this report, we have not received any inquiry, notice, warning, or sanctions from PRC government authorities in connection
with the Opinions.
On
June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes
data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification
and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will
cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered
with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure
for data activities that may affect national security and imposes export restrictions on certain data an information.
33
In
early July 2021, regulatory authorities in China launched cybersecurity investigations with regard to several China-based companies that
are listed in the United States. The Chinese cybersecurity regulator announced on July 2 that it had begun an investigation of Didi Global
Inc. (NYSE: DIDI) and two days later ordered that the company's app be removed from smartphone app stores. On July 5, 2021, the
Chinese cybersecurity regulator launched the same investigation on two other Internet platforms, China's Full Truck Alliance of
Full Truck Alliance Co. Ltd. (NYSE: YMM) and Boss of KANZHUN LIMITED (Nasdaq: BZ). On July 24, 2021, the General Office of the Central
Committee of the Communist Party of China Central Committee and the General Office of the State Council jointly released the Guidelines
for Further Easing the Burden of Excessive Homework and Off-campus Tutoring for Students at the Stage of Compulsory Education, pursuant
to which foreign investment in such firms via mergers and acquisitions, franchise development, and variable interest entities are banned
from this sector.
On
November 14, 2021, the CAC released the Regulations on the Network Data Security Management (Draft for Comments), or the Data Security
Management Regulations Draft, to solicit public opinion and comments. Pursuant to the Data Security Management Regulations Draft, data
processor holding more than one million users/users' individual information shall be subject to cybersecurity review before listing
abroad. Data processing activities refers to activities such as the collection, retention, use, processing, transmission, provision,
disclosure, or deletion of data. According to the latest amended Cybersecurity Review Measures, which was promulgated on December 28,
2021 and became effective on February 15, 2022, and replaced the Cybersecurity Review Measures promulgated on April 13, 2020, online
platform operator holding more than one million users/users' individual information shall be subject to cybersecurity review before
listing abroad. Since the Cybersecurity Review Measures is new, the implementation and interpretation thereof is not yet clear. Shanghai
Xiao-i has applied for a cybersecurity review organized by the Center, which is authorized by the Cybersecurity Review Office of the
CAC to accept public consultation and cybersecurity review submissions, pursuant to the Cybersecurity Review Measures, which became effective
on February 15, 2022.
On
August 17, 2021, the State Council promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure,
or the Regulations, which took effect on September 1, 2021. The Regulations supplement and specify the provisions on the security of
critical information infrastructure as stated in the Cybersecurity Review Measures. The Regulations provide, among others, that protection
department of certain industry or sector shall notify the operator of the critical information infrastructure in time after the identification
of certain critical information infrastructure.
On
August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC (the "Personal Information Protection
Law"), which took effect in November 2021. As the first systematic and comprehensive law specifically for the protection of personal
information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual's consent shall
be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal
information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual's
rights, and (iii) where personal information operators reject an individual's request to exercise his or her rights, the individual
may file a lawsuit with a People's Court. Given that the above mentioned newly promulgated laws, regulations and policies were
recently promulgated or issued, and have not yet taken effect (as applicable), their interpretation, application and enforcement are
subject to substantial uncertainties.
The
custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities,
or misappropriate or misuse these assets.
Under
the PRC law, legal documents for corporate transactions, including agreements and contracts are executed using the chop or seal of the
signing entity or with the signature of a legal representative whose designation is registered and filed with relevant PRC market regulation
administrative authorities.
In
order to secure the use of our chops and seals, we have established internal control procedures and rules for using these chops and seals.
In any event that the chops and seals are intended to be used, the responsible personnel will submit a formal application, which will
be verified and approved by authorized employees in accordance with our internal control procedures and rules. In addition, in order
to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to authorized employees.
Although we monitor such authorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence.
There is a risk that our employees could abuse their authority, for example, by entering into a contract not approved by us or seeking
to gain control of one of our subsidiaries or our affiliated entities or their subsidiaries. If any employee obtains, misuses or misappropriates
our chops and seals or other controlling non-tangible assets for whatever reason, we could experience disruption to our normal business
operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management
from our operations, and we may not be able to recover our loss due to such misuse or misappropriation if the third party relies on the
apparent authority of such employees and acts in good faith.
34
In
the following discussion of risks relating to doing business in China "we," "us," or "our" refer
to Xiao-I.
The
approval, filing or other requirements of the CSRC or other PRC government authorities may be required under PRC laws.
The
CSRC promulgated Overseas Listing Trial Measures and five relevant guidelines on February 17, 2023, which became effective on March 31,
2023. According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets,
either in direct or indirect means, are required to complete the filing procedure with the CSRC and report relevant information. The
Overseas Listing Trial Measures provide that if the issuer meets both of the following criteria, the overseas securities offering and
listing conducted by such issuer will be deemed as an indirect overseas offering subject to the filing procedure set forth under the
Overseas Listing Trial Measures: (i) 50% or more of the issuer's operating revenue, total profit, total assets or net assets as
documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and
(ii) the issuer's business activities are substantially conducted in mainland China, or its principal place(s) of business are
located in mainland China, or the senior managers in charge of its business operations and management are mostly Chinese citizens or
domiciled in Mainland China. Where an issuer submits an application for an initial public offering to competent overseas regulators,
such issuer must file with the CSRC within three business days after such application is submitted. Officials from the CSRC clarified
at a press conference held for these new regulations that the domestic companies that have already been listed overseas on or before
the effective date of the Overseas Listing Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers (the "Existing
Issuers"). Existing Issuers are required to file with the CSRC only when subsequent corporate actions are involved. Domestic companies
that have obtained approval from overseas regulatory authorities or securities exchanges (for example, a contemplated offering and/or
listing in United States received the final approval for the listing on the Nasdaq) for their indirect overseas offering and listing
prior to the effective date of the Overseas Listing Trial Measures (i.e. March 31, 2023) but have not yet completed their indirect
overseas issuance and listing, are granted a six-month transition period from March 31, 2023. Those who complete their overseas
offering and listing within such six-month period are deemed as Existing Issuers and are not required to file with the CSRC for their
overseas offering and listing. Within such six-month transition period, however, if such domestic companies need to reapply for offering
and listing procedures to the overseas regulatory authority or securities exchanges, or if they fail to complete their indirect overseas
issuance and listing, such domestic companies shall complete the filling procedures with the CSRC.
Under
the PRC Enterprise Income Tax Law, we may be classified as a PRC "resident enterprise," which could result in unfavorable
tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.
Under
the PRC Enterprise Income Tax Law, or the EIT Law, which became effective in January 2008 and most recently amended in December 2018,
an enterprise established outside the PRC with "
de facto
management bodies" within the PRC is considered a "resident
enterprise" for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its
worldwide income. In 2009, the State Administration of Taxation, or the SAT, issued the Notice Regarding the Determination of Chinese-Controlled
Overseas Incorporated Enterprises as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies, 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. Further to SAT Circular 82, in 2011, the SAT issued the Administrative Measures for
Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial), or SAT Bulletin 45, amended in 2018,
to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 clarified certain issues in the areas of resident
status determination, post-determination administration and competent tax authorities' procedures.
35
According
to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered as
a PRC tax resident enterprise by virtue of having its "
de facto
management body" in China and will be subject to PRC
enterprise income tax on its worldwide income only if all of the following conditions are met: (1) the senior management and core management
departments in charge of its daily operations function have their presence mainly in the PRC; (2) its financial and human resources decisions
are subject to determination or approval by persons or bodies in the PRC; (3) its major assets, accounting books, company seals, and
minutes and files of its board and shareholders' meetings are located or kept in the PRC; and (4) more than half of the enterprise's
directors or senior management with voting rights habitually reside in the PRC. SAT Bulletin 45 specifies that when provided with a copy
of Chinese tax resident determination certificate from a resident Chinese controlled offshore incorporated enterprise, the payer should
not withhold 10% income tax when paying the Chinese-sourced dividends, interest, royalties, etc. to the Chinese controlled offshore incorporated
enterprise.
Although
SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups
and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT's general
position on how the term "
de facto
management body" could be applied in determining the tax resident status of offshore
enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.
In
addition, the SAT issued the Announcement of the State Administration of Taxation on Issues concerning the Determination of Resident
Enterprises Based on the Standards of Actual Management Institutions in January 2014 to provide more guidance on the implementation of
SAT Circular 82. This bulletin further provides that, among other things, an entity that is classified as a "resident enterprise"
in accordance with the circular shall file the application for classifying its status of residential enterprise with the local tax authorities
where its main domestic investors are registered. From the year in which the entity is determined to be a "resident enterprise,"
any dividend, profit and other equity investment gain shall be taxed in accordance with the enterprise income tax law and its implementing
rules.
Although
our offshore holding entity is not controlled by PRC enterprises or a PRC enterprise group and our revenues are primarily generated from
business operations conducted outside of China, we cannot rule out the possibility that the PRC tax authorities determine that we or
any of our non-PRC subsidiaries is a PRC resident enterprise for PRC enterprise income tax purposes, which could subject our company
or any of our non-PRC subsidiaries to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income.
In addition, we may also be subject to PRC enterprise income tax reporting obligations.
If
the PRC tax authorities determine that our company is a PRC resident enterprise for PRC enterprise income tax purposes, gains realized
on the sale or other disposition of the ADSs may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in
the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be
from PRC sources. Any such tax may reduce the returns on your investment in the ADSs.
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 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 China, will be subject to a withholding tax rate of 10.0%. Pursuant to a special arrangement
between Hong Kong and China, such rate may be reduced to 5.0% if a Hong Kong resident enterprise owns more than 25.0% of the equity interest
in the PRC company. Our current PRC subsidiary is wholly owned by Xiao-i Technology. Accordingly, Xiao-i Technology may qualify for a
5.0% tax rate in respect of distributions from its PRC subsidiary. Under the Notice of the State Administration of Taxation on Issues
regarding the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the taxpayer needs to satisfy
certain conditions to 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 SAT promulgated
the Notice on How to Understand and Recognize the "Beneficial Owner" in Tax Treaties in 2009, most recently amended on February
3, 2018 and effective from April 1, 2018, which sets forth several non-rebuttable presumptions to be a "beneficial owner",
and certain detailed factors in determining the "beneficial owner" status, 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 annual report, we have not commenced the application process
for a Hong Kong tax resident certificate from the relevant Hong Kong tax authority, and there is no assurance that we will be granted
such a Hong Kong tax resident certificate.
36
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. Xiao-i Technology 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 Xiao-i Technology.
We
face uncertainty with respect to indirect transfer of equity interests in PRC resident enterprises by their non-PRC holding companies.
We face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transfer
and exchange of shares in our company by non-resident investors.
We
face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transfer
and exchange of shares in our company by non-resident investors.
In
February 2015, the SAT issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises,
or Bulletin 7. Pursuant to Bulletin 7, an "indirect transfer" of PRC assets, including a transfer of equity interests in
an unlisted non-PRC holding company of a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated
as a direct transfer of the underlying PRC assets, if such arrangement does not have a reasonable commercial purpose and was established
for the purpose of avoiding payment of PRC enterprise income 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. Bulletin 7 also introduced
safe harbors for internal group restructurings and the purchase and sale of equity securities through a public securities market. On
October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Nonresident
Enterprise Income Tax at Source, or Bulletin 37, which came into effect on December 1, 2017. The Bulletin 37 further clarifies the practice
and procedure of the withholding of nonresident enterprise income tax.
We
face uncertainties on the reporting and consequences of future private equity financing transactions, share exchanges or other transactions
involving the transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue
such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC
subsidiary to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject
to filing obligations or being taxed under Bulletin 7 and Bulletin 37, and may be required to expend valuable resources to comply with
them or to establish that we and our non-resident enterprises should not be taxed under these regulations, which may have a material
adverse effect on our financial condition and results of operations.
China's
M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors,
which could make it more difficult for us to pursue growth through acquisitions in China.
The
Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, and other recently adopted
regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and
acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that MOFCOM be notified
in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (1) any important
industry is concerned, (2) such transaction involves factors that impact or may impact national economic security, or (3) such transaction
will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly
Law promulgated by the SCNPC in August 2007 and effective in August 2008 requires that transactions which are deemed concentrations and
involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (1) the total global turnover of all operators
participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of more than RMB400 million
within China, or (2) the total turnover within China of all the operators participating in the concentration exceeded RMB2 billion, and
at least two of these operators each had a turnover of more than RMB400 million within China) must be cleared by MOFCOM before they can
be completed. In addition, in February 2011, the General Office of the State Council promulgated a Notice on Establishing the Security
Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the Circular 6, which officially established
a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, in August 2011, MOFCOM promulgated
the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors,
or the MOFCOM Security Review Regulations, to implement the Circular 6. Under Circular 6, a security review is required for mergers and
acquisitions by foreign investors having "national defense and security" concerns and mergers and acquisitions by which foreign
investors may acquire the "
de facto
control" of domestic enterprises with "national security" concerns.
Under the MOFCOM Security Review Regulations, MOFCOM will focus on the substance and actual impact of the transaction when deciding whether
a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition is subject to
security review, it will submit it to the Inter-Ministerial Panel, an authority established under the Circular 6 led by the National
Development and Reform Commission, or NDRC, and MOFCOM under the leadership of the State Council, to carry out security review. The regulations
prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases,
loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating
that the merging or acquisition of a company engaged in the internet information services, online games, online audio-visual program
services and related businesses requires security review, and there is no requirement that acquisitions completed prior to the promulgation
of the Security Review Circular are subject to MOFCOM review.
37
In
the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations
and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining
approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether
our business would be deemed to be in an industry that raises "national defense and security" or "national security"
concerns. However, MOFCOM or other government agencies may publish explanations in the future determining that our business is in an
industry subject to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual
control arrangements with target entities, may be closely scrutinized or prohibited.
PRC
regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary's ability to increase its
registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.
In
July 2014, the SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident's Investment and Financing and Roundtrip
Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the Relevant Issues Concerning Foreign Exchange Control
on Domestic Residents' Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, or Circular 75.
Circular 37 requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control
of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must
update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information
(including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers
or exchanges of shares, or mergers or divisions. According to the Notice on Further Simplifying and Improving Policies for the Foreign
Exchange Administration of Direct Investment released on February 13, 2015 by the SAFE, as amended in 2019, local banks will examine
and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment
registration, under SAFE Circular 37 from June 1, 2015.
If our shareholders who
are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiary may be prohibited from
distributing its profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in
our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above
could result in liability under PRC laws for evasion of applicable foreign exchange restrictions. See "Item 3. Key Information—D.
Risk Factors —Risks Related to Our Corporate Structure— Some of our shareholders are not in compliance with the PRC's
regulations relating to offshore investment activities by PRC residents, and as a result, currently WFOE is unable to open a new capital
account with banks within China, and may be restricted from remitting funds or handling other foreign exchange businesses within China
unless and until we remediate the non-compliance," and "Item 3. Key Information—D. 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 our available funds to make loans to our PRC subsidiary and consolidated
affiliated entities, or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our
liquidity and our ability to fund and expand the business of our PRC subsidiary and consolidated affiliated entities."
Failure
to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject
the PRC plan participants or us to fines and other legal or administrative sanctions.
Pursuant
to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies due to their position
as director, senior management or employees of the PRC subsidiaries of the overseas companies may submit applications to SAFE or its
local branches for the foreign exchange registration with respect to offshore special purpose companies. Our directors, executive officers
and other employees who are PRC residents and who have been granted options may follow SAFE Circular 37 to apply for the foreign exchange
registration before our company becomes an overseas listed company. In February 2012, SAFE promulgated the Notices on Issues Concerning
the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies,
or the Stock Option Rules. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock
incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other
procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary
of such overseas publicly listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration
and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas
entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks
or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive
plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material
changes. The PRC operating entities and their PRC employees who have been granted stock options are subject to these regulations. The
VIE has completed such SAFE registrations for its PRC stock option holder employees in March 2019. However, we cannot assure you
that the VIE will be able to complete the relevant registration for new employees who participate in such stock incentive plan in the
future in a timely manner or at all. Failure of the VIE's PRC stock option holders to complete their SAFE registrations may subject
these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary,
limit our PRC subsidiary's ability to distribute dividends to us, or otherwise materially adversely affect our business.
38
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 our available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional
capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand
the business of our PRC subsidiary and consolidated affiliated entities.
We
are an offshore holding company conducting our operations in China through our PRC subsidiary and consolidated affiliated entities. We
may make loans to our PRC subsidiary and consolidated affiliated entities, or we may make additional capital contributions to our PRC
subsidiary, or we may establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, or we may acquire
offshore entities with business operations in China in an offshore transaction.
Most
of these ways are subject to PRC regulations and approvals. For example, loans by us to our wholly owned PRC subsidiary to finance its
activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE. If we decide to finance our wholly
owned PRC subsidiary by means of capital contributions, these capital contributions are subject to the requirement of making necessary
filings with the MOFCOM and registration with other governmental authorities in China. Due to the restrictions imposed on loans in foreign
currencies extended to any PRC domestic companies, we are not likely to make such loans to our consolidated affiliated entities, which
are PRC domestic company. Further, we are not likely to finance the activities of our consolidated affiliated entities by means of capital
contributions due to regulatory restrictions relating to foreign investment in PRC domestic enterprises engaged in internet information
services, online games, online audio-visual program services and related businesses.
The
SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement
of Capital of Foreign-invested Enterprises, or SAFE Circular 19, effective in June 2015. According to SAFE Circular 19, the flow and
use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such
that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of
banks loans that have been transferred to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated
registered capital of a foreign-invested enterprise to be used for equity investments within the PRC, it also reiterates the principle
that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used
for purposes beyond its business scope. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and
Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective in June 2016, which
reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign
currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such
capital to issue loans to non-associated enterprises. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer
any foreign currency we hold, including the net proceeds from our initial public offering, to our PRC subsidiary, which may adversely
affect our liquidity and our ability to fund and expand our business in the PRC. On October 23, 2019, SAFE issued Notice of the State
Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or the Circular 28. Circular
28 allows non-investment foreign-invested enterprises to use their capital funds to make equity investments in China, provided that such
investments do not violate the Negative List and the target investment projects are genuine and in compliance with PRC laws. Since Circular
28 was issued only recently, its interpretation and implementation in practice are still subject to substantial uncertainties.
In
light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,
and the fact that the PRC government may at its discretion restrict access to foreign currencies for current account transactions in
the future, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government
approvals on a timely basis, if at all, with respect to future loans to PRC subsidiaries or future capital contributions by us to our
PRC subsidiary. As a result, uncertainties exist as to our ability to provide prompt financial support to our subsidiaries when needed.
If we fail to complete such registrations or obtain such approvals, our ability to use our available funds to capitalize or otherwise
fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund
and expand our business of our PRC subsidiary and consolidated affiliated entities.
Fluctuation
in the value of the RMB may have a material adverse effect on the value of your investment.
The
conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People's Bank of China. The
Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar
and other currencies is affected by changes in China's political and economic conditions and by China's foreign exchange
policies, among other things. We cannot assure you that 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 the PRC or U.S. government policy may impact the exchange
rate between Renminbi and the U.S. dollar in the future.
39
Any significant depreciation of the RMB may materially
adversely affect the value of, and any dividends payable on, our Ordinary Shares in U.S. Dollars. To the extent that we need to convert
U.S. Dollars we received from our initial public 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 would receive from the conversion. Conversely, if we decide to convert our RMB into
U.S. Dollars for the purpose of paying dividends to the holders of our ADSs or for other business purposes, appreciation of the U.S. Dollar
against the RMB would have an adverse effect on the U.S. Dollar amount available to us.
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 adverse effect
on your investment.
If
additional remedial measures are imposed on major PRC-based accounting firms, including our independent registered public accounting
firm, our financial statements could be determined not to be in compliance with the SEC requirements.
Beginning
in 2011, the Chinese affiliates of the "big four" accounting firms (including our independent registered public accounting
firm) were affected by a conflict between the U.S. and Chinese law. Specifically, for certain U.S. listed companies operating and audited
in the PRC, the SEC and the PCAOB sought to obtain access to the audit work papers and related documents of the Chinese affiliates of
the "big four" accounting firms. The accounting firms were, however, advised and directed that, under Chinese law, they could
not respond directly to the requests of the SEC and the PCAOB and that such requests, and similar requests by foreign regulators for
access to such papers in the PRC, had to be channelled through the CSRC.
In
late 2012, this impasse led the SEC to commence administrative proceedings under Rule 102(e) of its Rules of Practice and also under
the Sarbanes-Oxley Act of 2002 against the "big four" accounting firms (including our independent registered public accounting
firm). A first instance trial of these proceedings in July 2013 in the SEC's internal administrative court resulted in an adverse
judgment against the firms. The administrative law judge proposed penalties on the firms, including a temporary suspension of their right
to practice before the SEC. Implementation of the latter penalty was postponed pending review by the SEC Commissioners. On February 6,
2015, before a review by the SEC Commissioners had taken place, the firms reached a settlement with the SEC. Under the settlement, the
SEC accepts that future requests by the SEC for the production of documents will normally be made to the CSRC. The firms will receive
matching Section 106 requests, and are required to abide by a detailed set of procedures with respect to such requests, which in substance
require them to facilitate production via the CSRC. If the firms fail to follow these procedures and meet certain other specified criteria,
the SEC retains the authority to impose a variety of additional remedial measures, including, as appropriate, an automatic six-month
bar on a firm's ability to perform certain audit work, commencement of new proceedings against a firm or, in extreme cases, the
resumption of the current administrative proceeding against all four firms.
In
the event that the SEC restarts administrative proceedings, depending upon the final outcome, listed companies in the U.S. with major
PRC operations may find it difficult or impossible to retain auditors in respect of their operations in the PRC, which could result in
their financial statements being determined to not be in compliance with the requirements of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, including possible delisting. Moreover, any negative news about any such future proceedings against the
firms may cause investor uncertainty regarding PRC-based, U.S.-listed companies and the market price of their shares may be adversely
affected.
If
our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable
to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements
could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to
the delisting of our ADSs from Nasdaq or deregistration from the SEC, or both, which would substantially reduce or effectively terminate
the trading of our shares in the U.S.
We
face uncertainties with respect to the enactment, interpretation and implementation of draft Anti-Monopoly Guidelines for the Internet
Platform Economy Sector.
In
early November 2020, the State Administration for Market Regulation further published a draft Anti-Monopoly Guidelines for the Internet
Platform Economy Sector that aims at specifying some of the circumstances under which an activity of Internet platform may be identified
as monopolistic act as well as setting out merger controlling filing procedures involving variable interest entities. These draft guidelines
are now open for public comment and are pending finalization and enactment, and we cannot assure you that there will not be any material
changes in the final form of these draft guidelines. Due to the uncertainties associated with the evolving legislative activities and
varied local implementation practices of anti-monopoly and competition laws and regulations in the PRC, it may be costly to adjust some
of our business practice in order to comply with these laws, regulations, rules, guidelines and implementations, and any incompliance
or associated inquiries, investigations and other governmental actions may divert significant management time and attention and our financial
resources, bring negative publicity, subject us to liabilities or administrative penalties, and/or materially and adversely affect our
financial conditions, operations and business prospects.
40
Risks
Relating to Doing Business in Hong Kong
In
the following discussion of risks relating to doing business in Hong Kong "we," "us," or "our" refer
to the PRC operating entities.
We
may be subject to uncertainty about any changes in the economic, political and legal environment in Hong Kong, and it is possible that
most of the legal and operational risks associated with operating in the PRC may also apply to operations in Hong Kong in the future.
We
generated approximately 11.7%, 2.3% and 0.9% of our revenues from Hong Kong in fiscal year 2020,2021 and 2022, respectively. Hong Kong
is a special administrative region of the PRC and the basic policies of the PRC regarding Hong Kong are reflected in the Basic Law, namely,
Hong Kong's constitutional document, which provides Hong Kong with a high degree of autonomy and executive, legislative and independent
judicial powers, including that of final adjudication under the principle of "one country, two systems". We cannot assure
you that there will not be any changes in the economic, political and legal environment in Hong Kong. We may be subject to uncertainty
about any future actions of the PRC government and is possible that most of the legal and operational risks associated with operating
in the PRC may also apply to our operations in Hong Kong in the future. The PRC government may intervene or influence our current and
future operations in Hong Kong at any time and exert more influence over the manner in which we must conduct our business activities.
Such government actions, if and when they occur, could result in a material change in our operations in Hong Kong.
Our
operations in Hong Kong are governed by the laws and regulations in Hong Kong. If there is significant change to current political arrangements
between mainland China and Hong Kong, the PRC government may intervene or influence our Hong Kong operations, which could result in a
material change in our operations in Hong Kong.
In
Hong Kong, the collection of personal data, their use and disclosure, retention and granting of access to and correction of personal
data is governed by the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong). See "Regulations in Hong Kong
— Personal data law in Hong Kong" for further details. The competition law in Hong Kong is primarily governed by the Competition
Ordinance (Chapter 619 of the Laws of Hong Kong), which prohibits three principal types of anti-competitive conducts, namely (a) anti-competitive
agreements or practices; (b) abuse of market power; and (c) merger control of arrangements that could substantially reduce the level
of competition in telecommunication industry. The Merger Rule in the Competition Ordinance prohibits undertakings from directly or indirectly
carrying out a merger that has, or is likely to have, the effect of substantially reduce the level of competition in Hong Kong. This
rule is only applicable to telecommunication carrier licensees. There is no general merger control regime in Hong Kong. See "Regulations
in Hong Kong — Competition law in Hong Kong" for further details.
As
of the date of this annual report, our business operations in Hong Kong, which are relatively insignificant as compared to our business
as a whole, are only required to comply with the Hong Kong laws and regulations. The PRC government has recently initiated a series of
regulatory actions and statements to regulate business operations in mainland China with little advance notice. We do not expect such
statements by the PRC government would have any specific impact on our business operations in Hong Kong. If there is any change in political
arrangements between mainland China and Hong Kong, it would affect the business environment in Hong Kong generally.
You
may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions
in Hong Kong against Xiao-I or its management named in the annual report based on Hong Kong laws.
Currently,
all of Xiao-I's operations are conducted outside the United States, and all of its assets are located outside the United States.
You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing
actions in Hong Kong against Xiao-I or its management named in the annual report, as judgments entered in the United States can be enforced
in Hong Kong only at common law. If you want to enforce a judgment of the United States in Hong Kong, it must be a final judgment conclusive
upon the merits of the claim, for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties, or similar charges,
the proceedings in which the judgment was obtained were not contrary to natural justice, and the enforcement of the judgment is not contrary
to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also come from a "competent" court as determined
by the private international law rules applied by the Hong Kong courts.
41
Risks
Relating to the ADSs
In
the following discussion of risks relating to the ADSs "we," "us," or "our" refer to Xiao-I.
Because
we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment.
We
currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our
business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment
in the ADSs as a source for any future dividend income.
A
large, active trading market for the ADSs may not develop and you may not be able to resell your ADSs at or above the public offering
price.
We
cannot assure you that a liquid public market for the ADSs will develop. If a large, active public market for the ADSs does not develop,
the market price and liquidity of the ADSs may be materially adversely affected.
The
trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors.
The
trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. Such volatility may
be unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors
to assess the rapidly changing value of our ADSs. This may happen because of broad market and industry factors, including the performance
and fluctuation of the market prices of other companies with operations located mainly in China that have listed their securities in
the United States. In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors
specific to our own operations, including the following:
●
variations
                                            in our net revenue, earnings and cash flows;
●
announcements
                                            of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;
●
announcements
                                            of new offerings and expansions by us or our competitors;
●
changes
                                            in financial estimates by securities analysts;
●
detrimental
                                            adverse publicity about us, our shareholders, affiliates, directors, officers or employees,
                                            our business model, our services or our industry;
●
announcements
                                            of new regulations, rules or policies relevant for our business;
●
additions
                                            or departures of key personnel;
●
release
                                            of lock-up or other transfer restrictions on our outstanding equity securities or sales of
                                            additional equity securities; and
●
potential
                                            litigation or regulatory investigations.
Any
of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade. In addition, if the trading
volumes of our ADSs are low, persons buying or selling in relatively small quantities may easily influence prices of our ADSs. This low
volume of trades could also cause the price of our ADSs to fluctuate greatly, with large percentage changes in price occurring in any
trading day session. Holders of our ADSs may also not be able to readily liquidate their investment or may be forced to sell at depressed
prices due to low volume trading.
42
As
a result of this volatility, investors may experience losses on their investment in our ADSs. A decline in the market price of our ADSs
also could adversely affect our ability to issue additional ADSs or other securities and our ability to obtain additional financing in
the future. No assurance can be given that an active market in our ADSs will develop or be sustained. If an active market does not develop,
holders of our ADSs may be unable to readily sell the securities they hold or may not be able to sell their securities at all.
In
the past, shareholders of public companies have often brought securities class action suits against those companies following periods
of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount
of our management's attention and other resources from our business and require us to incur significant expenses to defend the
suit, which could harm our results of operations.
Any
such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future.
In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could materially adversely
affect our financial condition and results of operations.
The
sale or availability for sale of substantial amounts of ADSs could adversely affect their market price.
Future
sales of substantial amounts of the ADSs in the public market, or the perception that these sales could occur, could adversely affect
the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. Shares
held by our existing shareholders may be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701
under the Securities Act and the applicable lockup agreements.
We
cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other holders or the availability
of these securities for future sale will have on the market price of the ADSs.
Holders
of ADSs have fewer rights than shareholders and must act through the depositary to exercise their rights.
Holders
of ADSs do not have the same rights as our registered shareholders. As a holder of the ADSs, you will not have any direct right to attend
general meetings of our shareholders or to cast any votes at such meetings. As an ADS holder, you will only be able to exercise the voting
rights carried by the underlying Ordinary Shares which are represented by your ADSs indirectly by giving voting instructions to the depositary
in accordance with the provisions of the deposit agreement. Upon receipt of your voting instructions, the depositary will try, as far
as is practicable, to vote the Ordinary Shares underlying your ADSs in accordance with your instructions. If we ask for your instructions,
then upon receipt of your voting instructions, the depositary will try to vote the underlying Ordinary Shares in accordance with these
instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions
you give, but it is not required to do so. You will not be able to directly exercise your right to vote with respect to the underlying
Ordinary Shares unless you withdraw the shares, and become the registered holder of such shares prior to the record date for the general
meeting. When a general meeting is convened, you may not receive sufficient advance notice of the meeting to withdraw the Ordinary Shares
underlying your ADSs and become the registered holder of such shares to allow you to attend the general meeting and to vote directly
with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our memorandum
and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting,
our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register
of members or the setting of such a record date may prevent you from withdrawing the Ordinary Shares underlying your ADSs and becoming
the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote
directly. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting
materials to you. We have agreed to give the depositary notice of shareholder meetings sufficiently in advance of such meetings. Nevertheless,
we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying
Ordinary Shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting
instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right
to direct how the Ordinary Shares underlying your ADSs are voted and you may have no legal remedy if the shares underlying your ADSs
are not voted as you requested. In addition, in your capacity as an ADS holder, you will not be able to call a shareholders' meeting.
43
Except
in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote the Ordinary Shares underlying your
ADSs if you do not vote at shareholders' meetings, which could adversely affect your interests.
Under
the deposit agreement for the ADSs, if you do not vote, the depositary will deem that you have instructed the depositary to give us a
discretionary proxy to vote the Ordinary Shares underlying your ADSs at shareholders' meetings unless we have timely provided the
depositary with notice of meeting and related voting materials and
●
we
                                            have instructed the depositary that we do not wish a discretionary proxy to be given;
●
we
                                            have informed the depositary that there is substantial opposition as to a matter to be voted
                                            on at the meeting;
●
a
                                            matter to be voted on at the meeting would have a material adverse impact on shareholders;
                                            or
●
the
                                            voting at the meeting is to be conducted via a show of hands unless voting by poll is required
                                            by the applicable listing rules or our articles of association.
The
effect of this discretionary proxy is that you cannot prevent our Ordinary Shares underlying your ADSs from being voted, except under
the circumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders
of our Ordinary Shares will not be subject to this discretionary proxy.
You
may not receive distributions on the ADSs or any value for them if such distribution is illegal or impractical or if any required government
approval cannot be obtained in order to make such distribution available to you.
Although
we do not have any present plan to pay any dividends, the depositary of the ADSs has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on Ordinary Shares or other deposited securities underlying the ADSs, after deducting its
fees and expenses and any applicable taxes and governmental charges. You will receive these distributions in proportion to the number
of Ordinary Shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to
make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if
it consists of securities whose offering would require registration under the Securities Act but are not so properly registered or distributed
under an applicable exemption from registration. The depositary may also determine that it is not reasonably practicable to distribute
certain property. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under
the U.S. securities laws any offering of ADSs, Ordinary Shares, rights or other securities received through such distributions. We also
have no obligation to take any other action to permit the distribution of ADSs, Ordinary Shares, rights or anything else to holders of
ADSs. This means that you may not receive distributions we make on our Ordinary Shares or any value for them if it is illegal or impractical
for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs.
Your
right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.
We
may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights
available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities
Act or an exemption from the registration requirements is available. Also, under the deposit agreement, the depositary will not make
rights available to you unless either both the rights and any related securities are registered under the Securities Act, or the distribution
of them to ADS holders is exempted from registration under the Securities Act. We are under no obligation to file a registration statement
with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover,
we may not be able to establish an exemption from registration under the Securities Act. If the depositary does not distribute the rights,
it may, under the deposit agreement, either sell them, if possible, or allow them to lapse. Accordingly, you may be unable to participate
in our rights offerings and may experience dilution in your holdings.
44
You
may be subject to limitations on transfers of your ADSs.
Your
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to
time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer
or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary
deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the
deposit agreement, or for any other reason.
Your
rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.
Under
the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the deposit agreement
or the transactions contemplated thereby or by virtue of owning the ADSs, including without limitation claims under the Securities Act
of 1933, may only be instituted in the United States District Court for the Southern District of New York (or, if the Southern District
of New York lacks subject matter jurisdiction over a particular dispute, in the state courts of New York County, New York), and you,
as a holder of the ADSs, will have irrevocably waived any objection which you may have to the laying of venue of any such proceeding,
and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding. See "Description of American
Depositary Shares" for more information.
ADS
holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable
outcomes to the plaintiff(s) in any such action.
The
deposit agreement governing the ADSs representing our Ordinary Shares provides that the federal or state courts in the City of New York
have exclusive jurisdiction to hear and determine claims arising under the deposit agreement and in that regard, to the fullest extent
permitted by law, ADS holders, including purchasers of ADSs in secondary transactions, waive the right to a jury trial of any claim they
may have against us or the depositary arising out of or relating to our Ordinary Shares, the ADSs or the deposit agreement, including
any claim under the U.S. federal securities laws.
If
we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based
on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability
of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally
adjudicated by the United States Supreme Court. In determining whether to enforce a contractual pre-dispute jury trial waiver provision,
courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe
that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York,
which govern the deposit agreement. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable
that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.
If
you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under
the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not
be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or
the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge
or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different
outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.
Nevertheless,
if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit
agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder
or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws
and the rules and regulations promulgated thereunder.
45
The
deposit agreement may be amended or terminated without your consent.
We
and the depositary may amend or terminate the deposit agreement without your consent. Such amendment or termination may be done in favor
of our company. Holders of the ADSs, subject to the terms of the deposit agreement, will receive notice in the event of an amendment
that prejudices a substantial existing right or a termination. If you continue to hold your ADSs after an amendment to the deposit agreement,
you agree to be bound by the deposit agreement as amended. The deposit agreement may be terminated at any time upon a prior written notice.
Upon the termination of the deposit agreement, our company will be discharged from all obligations under the deposit agreement, except
for our obligations to the depositary thereunder. See "Description of American Depositary Shares" for more information.
Holders
or beneficial owners of the ADSs have limited recourse if we or the depositary fail to meet our respective obligations under the deposit
agreement.
The
deposit agreement expressly limits the obligations and liability of us and the depositary. For example, the depositary is not liable
if any of us or our respective controlling persons or agents are prevented or forbidden from, or subjected to any civil or criminal penalty
or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the deposit agreement and any
American Depositary Receipt ("ADR"), by reason of any provision of any present or future law or regulation of the United
States or any state thereof, the Cayman Islands or any other country, or of any other governmental authority or regulatory authority
or stock exchange, or on account of the possible criminal or civil penalties or restraint, or by reason of any provision, present or
future, of our memorandum and articles of association or any provision of or governing any deposited securities, or by reason of any
act of God or war or other circumstances beyond its control (including, without limitation, nationalization, expropriation, currency
restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions, explosions and computer failure). See "Description
of American Depositary Shares" for more information. In addition, the depositary and any of its agents also disclaim any liability
for (i) any failure to carry out any instructions to vote, the manner in which any vote is cast or the effect of any vote or failure
to determine that any distribution or action may be lawful or reasonably practicable or for allowing any rights to lapse in accordance
with the provisions of the deposit agreement, (ii) the failure or timeliness of any notice from us, the content of any information submitted
to it by us for distribution to you or for any inaccuracy of any translation thereof, (iii) any investment risk associated with the acquisition
of an interest in the deposited securities, the validity or worth of the deposited securities or the credit-worthiness of any third party,
(iv) any tax consequences that may result from ownership of ADSs, Ordinary Shares or deposited securities, or (v) any acts or omissions
made by a successor depositary whether in connection with a previous act or omission of the depositary or in connection with any matter
arising wholly after the removal or resignation of the depositary, provided that in connection with the issue out of which such potential
liability arises the depositary performed its obligations without gross negligence or willful misconduct while it acted as depositary.
These provisions of the deposit agreement will limit the ability of holders or beneficial owners of the ADSs to obtain recourse if we
or the depositary fail to meet our respective obligations under the deposit agreement.
Techniques
employed by short sellers may drive down the market price of the ADSs.
Short
selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention
of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value
of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects
to pay less in that purchase than it received in the sale.
As
it is in the short seller's interest for the price of the security to decline, many short sellers publish, or arrange for the publication
of, negative opinions regarding the relevant issuer and its prospects to create negative market momentum and generate profits for themselves
after selling a security short. These short attacks have, in the past, led to selling of shares in the market.
Public
companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative
publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting
irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations
of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the
interim, are subject to shareholder lawsuits and/or SEC enforcement actions. It is not clear what effect such negative publicity could
have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue,
we could have to expend significant resources to investigate such allegations and/or defend ourselves.
46
While
we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the
relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation
could be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately
proven to be groundless, allegations against us could severely impact our business, and any investment in the ADSs could be greatly reduced
or even rendered worthless.
If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market
price for the ADSs and trading volume could decline.
The
trading market for the ADSs will depend in part on the research and reports that securities or industry analysts publish about us or
our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers
us downgrades the ADSs or publishes inaccurate or unfavorable research about our business, the market price for the ADSs would likely
decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility
in the financial markets, which, in turn, could cause the market price or trading volume for the ADSs to decline.
Our
failure to meet the continued listing requirements of Nasdaq could result in a delisting of the ADSs.
If,
after listing, we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the
minimum closing bid price requirement, Nasdaq may take steps to delist the ADSs. Such a delisting would likely have a negative effect
on the price of the ADSs and would impair your ability to sell or purchase the ADSs when you wish to do so. In the event of a delisting,
we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow the ADSs to become
listed again, stabilize the market price or improve the liquidity of the ADSs, prevent the ADSs from dropping below the Nasdaq minimum
bid price requirement or prevent future non-compliance with Nasdaq's listing requirements.
Because
we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to
protect your rights through the U.S. Federal courts may be limited.
We
have been advised by Conyers, Dill and Pearman, our Cayman Islands legal counsel, that the courts of the Cayman Islands are unlikely
(i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the
federal securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities
against us predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as
the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is no statutory enforcement in
the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign
money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a
competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain
conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a
liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the
same matter, impeachable on the grounds of fraud or obtained in a manner, or be of a kind the enforcement of which is, contrary to natural
justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public
policy). A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.
United
States civil liabilities and certain judgments obtained against us by our shareholders may not be enforceable.
We
are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, all
of our directors and officers (except H. David Sherman) are nationals and residents of countries other than the United States. A substantial
portion of the assets of our officers and directors is located outside of the United States. As a result, it may be difficult to effect
service of process within the United States upon our officers and directors (except H. David Sherman). It may also be difficult to enforce
in U.S. courts judgments obtained in liability provisions of the U.S. federal securities laws against us and our officers and directors
who are not resident in the United States and the substantial majority of whose assets are located outside of the United States.
47
Further,
it is unclear if original actions predicated on civil liabilities based solely upon U.S. federal securities laws are enforceable in courts
outside the United States, including in the Cayman Islands. Courts of the Cayman Islands may not, in an original action in the Cayman
Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United
States or any state of the United States on the grounds that such provisions are penal in nature. Although there is no statutory enforcement
in the Cayman Islands of judgments obtained in the United States, courts of the Cayman Islands would recognize a final and conclusive
judgment in the federal or state courts of the United States based on agreements to which we are a party and under which a sum of money
is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of
a fine or other penalty) or, in certain circumstances, an in personam judgment for non-monetary relief, and would give a judgment based
thereon provided that (i) such courts had proper jurisdiction over the parties subject to such judgment; (ii) such courts did not contravene
the rules of natural justice of the Cayman Islands; (iii) such judgment was not obtained by fraud; (iv) the enforcement of the judgment
would not be contrary to the public policy of the Cayman Islands; (v) no new admissible evidence relevant to the action is submitted
prior to the rendering of the judgment by the courts of the Cayman Islands; and (vi) there is due compliance with the correct procedures
under the laws of the Cayman Islands.
Further,
there is uncertainty as to whether the courts of China would:
●
recognize
                                            or enforce judgments of United States courts obtained against us or our directors or officers
                                            predicated upon the civil liability provisions of the securities laws of the United States
                                            or any state in the United States; or
●
entertain
                                            original actions brought in each respective jurisdiction against us or our directors or officers
                                            predicated upon the securities laws of the United States or any state in the United States.
While
the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law, PRC courts may recognize and
enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law and other applicable laws and regulations
based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions.
China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal
recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not
enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of
PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would
enforce a judgment rendered by a court in the United States or in the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders
may originate actions based on PRC law against a company in China for disputes if they can establish sufficient nexus to the PRC for
a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest
in the case, and there must be a concrete claim, a factual basis and a cause for the suit. It will be, however, difficult for U.S. shareholders
to originate actions against us in the PRC in accordance with PRC laws because we are incorporated under the laws of the Cayman Islands
and it will be difficult for U.S. shareholders, by virtue only of holding ADSs or Ordinary Shares, to establish a connection to the PRC
for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law.
Further,
there is uncertainty as to whether the courts of Hong Kong would (i) recognize or enforce judgments of United States courts obtained
against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or
any state in the United States or (ii) entertain original actions brought in Hong Kong against us or our directors or officers predicated
upon the securities laws of the United States or any state in the United States.
48
In
addition, foreign judgments of United States courts will not be directly enforced in Hong Kong as there are currently no treaties or
other arrangements providing for reciprocal enforcement of foreign judgments between Hong Kong and the United States. However, the common
law permits an action to be brought upon a foreign judgment. That is to say, a foreign judgment itself may form the basis of a cause
of action since the judgment may be regarded as creating a debt between the parties to it. In a common law action for enforcement of
a foreign judgment in Hong Kong, the enforcement is subject to various conditions, including but not limited to, that the foreign judgment
is a final judgment conclusive upon the merits of the claim, the judgment is for a liquidated amount in civil matter and not in respect
of taxes, fines, penalties, or similar charges, the proceedings in which the judgment was obtained were not contrary to natural justice,
and the enforcement of the judgment is not contrary to public policy of Hong Kong. Such a judgment must be for a fixed sum and must also
come from a "competent" court as determined by the private international law rules applied by the Hong Kong courts. The defenses
that are available to a defendant in a common law action brought on the basis of a foreign judgment include lack of jurisdiction, breach
of natural justice, fraud, and contrary to public policy. However, a separate legal action for debt must be commenced in Hong Kong in
order to recover such debt from the judgment debtor. As a result, subject to the conditions with regard to enforcement of judgments of
United States courts being met, including but not limited to the above, a foreign judgment of the United States of civil liabilities
predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the United
States could be enforceable in Hong Kong.
The
ability of U.S. authorities to bring actions for violations of U.S. securities law and regulations against us, our directors and executive
officers named in this annual report (except H. David Sherman) may be limited. Therefore, you may not be afforded the same protection
as provided to investors in U.S. domestic companies.
The
SEC, the U.S. Department of Justice, or the DOJ, and other U.S. authorities often have substantial difficulties in bringing and enforcing
actions against non-U.S. companies such as us, and non-U.S. persons, such as our directors and executive officers in the PRC. Due to
jurisdictional limitations, matters of comity and various other factors, the SEC, the DOJ and other U.S. authorities may be limited in
their ability to pursue bad actors, including in instances of fraud, in emerging markets such as the PRC. We conduct our operations mainly
in the PRC and our assets are mainly located in the PRC. There are significant legal and other obstacles for U.S. authorities to obtain
information needed for investigations or litigation against us or our directors, executive officers (except H. David Sherman) or other
gatekeepers in case we or any of these individuals engage in fraud or other wrongdoing. In addition, local authorities in the PRC may
be constrained in their ability to assist U.S. authorities and overseas investors in connection with legal proceedings. As a result,
if we, our directors, executive officers or other gatekeepers commit any securities law violation, fraud or other financial misconduct,
the U.S. authorities may not be able to conduct effective investigations or bring and enforce actions against us, our directors, executive
officers (except H. David Sherman) or other gatekeepers. Therefore, you may not be able to enjoy the same protection provided by various
U.S. authorities as it is provided to investors in U.S. domestic companies.
You
may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC,
based on United States or other foreign laws, against us, our directors and executive officers named in this annual report (except H.
David Sherman). Therefore, you may not be able to enjoy the protection of such laws in an effective manner.
We
are a company incorporated under the laws of the Cayman Islands, we conduct our operations mainly in the PRC, and our assets are mainly
located in the PRC. As a result, it may not be possible to effect service of process within the United States or elsewhere outside the
PRC upon us, our directors and executive officers (except H. David Sherman), including with respect to matters arising under U.S. federal
securities laws or applicable state securities laws. Even if you obtain a judgment against us, our directors and executive officers named
in this annual report (except H. David Sherman) in a U.S. court or other court outside the PRC, you may not be able to enforce such judgment
against us or them in the PRC. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of
courts in the United States, the United Kingdom, Japan or most other western countries. Therefore, recognition and enforcement in the
PRC of judgments of a court in any of these jurisdictions may be difficult or impossible. In addition, you may not be able to bring original
actions in the PRC based on the U.S. or other foreign laws against us, our directors and executive officers named in this annual report
(except H. David Sherman). As a result, shareholder claims that are common in the United States, including class actions based on securities
law and fraud claims, are difficult or impossible to pursue as a matter of law and practicality in the PRC.
49
For
example, in the PRC, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or
litigation outside the PRC or otherwise with respect to foreign entities. Although the local authorities in the PRC 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, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within
the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization
or individual may provide the documents and materials relating to securities business activities to overseas parties. While detailed
interpretation of or implementation rules under Article 177 of the PRC Securities Law is not yet available, the inability for an overseas
securities regulator to directly conduct investigation or evidence collection activities within the PRC may further increase difficulties
faced by investors in protecting your interests. Therefore, you may not be able to effectively enjoy the protection offered by the U.S.
laws and regulations that are intended to protect public investors.
As
a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance
matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection
to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.
As
a Cayman Islands exempted company listed on Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq
rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance
practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards.
We have chosen, and may from time to time choose, to follow home country exemptions with respect to certain corporate matters.
Our
articles of association contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our
shareholders' opportunity to sell their shares, including Ordinary Shares represented by the ADSs, at a premium, as a result, it
could materially adversely affect the rights of holders of our ADSs.
We
have adopted a set of amended and restated articles of association that contains provisions to limit the ability of others to acquire
control of our company. These provisions could deprive our shareholders of an opportunity to sell their shares at a premium over prevailing
market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction.
Our
board of directors has the authority to issue preferred shares in one or more series and to fix their designations, powers, preferences,
privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend
rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the
rights associated with our Ordinary Shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated
to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides
to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our Ordinary Shares and ADSs
may be materially adversely affected.
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. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take
advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption
of certain accounting standards until those standards would otherwise apply to private companies. We elect to use this extended period.
transition period, as a result, our financial statements may not be comparable to companies that comply with public company effective
dates.
50
We
are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to U.S. domestic public companies.
Because
we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations
in the United States that are applicable to U.S. domestic issuers, including:
●
the
                                            rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form
                                            10-Q or current reports on Form 8-K;
●
the
                                            sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations
                                            in respect of a security registered under the Exchange Act;
●
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
●
the
                                            selective disclosure rules by issuers of material nonpublic information under Regulation
                                            FD.
We
will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish
our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating
to financial results and material events will also be furnished to the SEC on Form 6-K.
However,
the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to
be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be
made available to you were you investing in a U.S. domestic issuer.
We
will incur increased costs as a result of being a public company, particularly after we cease to qualify as an "emerging growth
company."
As
a public company, we expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The
Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate
governance practices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs
and to make some corporate activities more time-consuming and costly.
As
a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal
controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more
expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage
or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with
our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors
or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we
cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
In
addition, after we are no longer an "emerging growth company," we expect to incur significant expenses and devote substantial
management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules
and regulations of the SEC.
51
There
can be no assurance we will not be a passive foreign investment company ("PFIC"), for any taxable year, which could result
in adverse U.S. federal income tax consequences to U.S. investors in our ADSs or Ordinary Shares.
A
non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year in
which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average value of its assets (generally
determined on a quarterly basis) consists of assets that produce passive income or are held for the production of passive income. For
purposes of these calculations, we will be treated as earning our proportionate share of the income and owning our proportionate share
of the assets of any other corporation in which we own, directly or indirectly, 25% (by value) of the stock. Although the law in this
regard is not entirely clear, we treat the VIE and its subsidiaries as being owned by us for U.S. federal income tax purposes because
we control their management decisions and are entitled to all of the economic benefits associated with them (excluding non-controlling
interests). As a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined,
however, that we are not the owner of the VIE and its subsidiaries for U.S. federal income tax purposes, we may be treated as a PFIC
for the current taxable year and any subsequent taxable year.
Assuming
that we are the owner of the VIE and its subsidiaries for U.S. federal income tax purposes, and based upon the manner in which we currently
operate our business through the VIE, the expected composition of our income and assets and the value of our assets, we do not presently
expect to be a PFIC for the current taxable year or the foreseeable future. However, this is a factual determination that must be made
annually after the close of each taxable year, and the application of the PFIC rules is subject to uncertainty in several respects. The
value of our assets for purposes of the PFIC determination generally will be determined by reference to the market price of our Ordinary
Shares and ADSs, which could fluctuate significantly. In addition, our PFIC status will depend on the manner we operate our business.
Furthermore, it is not entirely clear how the contractual arrangements between us, the VIE and its nominal shareholders will be treated
for purposes of the PFIC rules, and we may be or become a PFIC if the VIE is not treated as owned by us. Because of these uncertainties,
there can be no assurance that we will not be a PFIC for the current taxable year or future taxable years.
If
we were a PFIC for any taxable year during which a U.S. holder (as defined in "Taxation — United States Federal Income Tax
Considerations —
General
") owns our ADSs or Ordinary Shares, certain adverse U.S. federal income tax consequences
could apply to such U.S. holder. See "Taxation — United States Federal Income Tax Considerations —
Passive Foreign
Investment Considerations; Passive Foreign Investment Rules.
"
We
are not required to disclose compensation of Directors and Officers under Cayman Islands law.
Under
Cayman Islands law, the Company is not required to disclose compensation paid to our senior management on an individual basis and the
Company has not otherwise publicly disclosed this information elsewhere. The executive officers, directors and management of the Company
receive fixed and variable compensation. They also receive benefits in line with market practice. The fixed component of their compensation
is set on market terms and adjusted annually. The variable component consists of cash bonuses and awards of shares (or the cash equivalent).
Cash bonuses are paid to executive officers and members of management based on previously agreed targets for the business. Shares (or
the cash equivalent) are awarded under share options.
Item
4.  Information on the Company.
A.
History and Development of the Company.
In
the following discussion of corporate history, "we," "us," or "our" refer to Xiao-I.
Xiao-I
Corporation
We
were incorporated in the Cayman Islands on August 13, 2018, with limited liability under the Companies Act. Upon incorporation, the authorized
share capital of our company was US$50,000 divided into 1,000,000,000 shares, par value of US$0.00005 each, comprising of 1,000,000,000
Ordinary Shares of a par value of US$0.00005 each.
On
August 30, 2018, we established our wholly-owned subsidiary AI Plus Holding Limited ("AI Plus"), under the law of British
Virgin Islands, as our intermediate holding company, which then established its wholly-owned subsidiary, Xiao-i Technology Limited ("Xiao-i
Technology") under the law of Hong Kong, which in turn established a wholly-owned PRC subsidiary, Zhizhen Artificial Technology
(Shanghai) Company Limited ("Zhizhen Technology") or the WFOE, on March 29, 2019. Subsequently, we, through our WFOE,
entered into a series of contractual arrangements with Shanghai Xiao-i and its shareholders whereby we were established as the primary
beneficiary of Shanghai Xiao-i for accounting purposes. We have recognized the net assets of Shanghai Xiao-i at historical cost with
no change in basis in the consolidated financial statements upon the completion of this reorganization.
52
As
of the date of this annual report, Al Plus, Xiao-i Technology and Zhizhen Technology do not have any substantive business operations.
As a result of our indirect ownership in Zhizhen Technology and the variable interest entity contractual arrangements, we are regarded
as the primary beneficiary of the VIE for accounting purposes. We treat the PRC operating entities as our consolidated affiliated entities
under U.S. GAAP, and have consolidated the financial results of these entities in our consolidated financial statements in accordance
with U.S. GAAP.
B.
Business Overview.
In
the following discussion of business, "we," "us," or "our" refer to Shanghai Xiao-i and its subsidiaries.
Overview
Xiao-I
is a holding company incorporated in Cayman Islands. As a holding company with no material operation of its own, it conducts substantially
all our operations in China through a variable interest entity, or the VIE, Shanghai Xiao-i Robot Technology Co., Ltd., ("Shanghai
Xiao-i") and its subsidiaries.
Shanghai
Yingsi Software Technology Co., Ltd. ("Incesoft") was founded in 2001. Incesoft established the Xiaoi robot brand (Chinese:
小i机器人) and developed AI technology used to support its consumer-to-consumer business model. In 2009, Incesoft
transformed its business model from consumer-to-consumer to business-to-business. At the same time, founders of Incesoft founded Shanghai
Xiao-i, the VIE, which acquired the Xiaoi robot brand and Incesoft's core AI technology. Following the acquisition, Incesoft was
dissolved by de-registering with local company registrar in accordance with PRC law in 2012. Since 2009, Shanghai Xiao-i has become a
leading artificial intelligence ("AI") company by building on its wide technology commercialization, brand recognition and
culture of innovation in China.
Milestone
Accomplishments over 20 Years History
Since
our founding in 2001, we have developed a portfolio of cognitive intelligence technologies for businesses based on our natural language
processing and AI implementation. Leveraging our cutting-edge technologies, dedicated services, and long-standing customer base, we have
become a leading customer service solution company in China according to Frost & Sullivan. We focus on the development and promotion
of cognitive intelligence technology and products with natural language processing as the core, and we use cognitive intelligence products
and services to enable and promote industrial digitization and intelligent upgrading and transformation.
53
We
are a leading cognitive intelligence enterprise in China, integrating parts of perceptive intelligence like natural language processing
and computer vision. We offer a wide range of business services in AI, covering natural language processing, computer vision, machine
learning and cloud computing. We have multi-field data resources and multiple industry standards, a cutting-edge talent team training
system and strong experience in resource integration. We primarily provide smart city, software business and architectural design AI
services to our customers.
We
have comprehensive business lines covering fundamental tech platform, conversation bot, cloud services, industry solutions and robotics
solutions.
Our
CIAI platform products and services are marketed and sold primarily to customers in the following industries: (1) Contact Center, (2)
Finance, (3) Urban Public Service, (4) Construction, (5) Metaverse, (6) Manufacturing and (7) Smart Healthcare.
54
Product
and Technology Overview
Overall
Architecture of Xiao-i Products and Technologies
The
overall architecture of our products and technologies are divided into three layers: (1) infrastructure, (2) aggregation empowerment
platform and (3) domain application.
Infrastructure
Layer
Our
infrastructure layer provides the informational support for our products and technologies. Typically built with third-party products
and technologies, we integrate the information into the infrastructure layer. Additional properties include:
●
Compatibility
                                            with cloud native and private or third-party cloud platforms;
●
Ubiquitous
                                            perception layer connection enabling integration with the Internet of Things, the Internet,
                                            5G, and dedicated networks; and
●
Multidimensional
                                            data collection and integration, including spatiotemporal, channels, and community.
55
Aggregation
Empowerment Platform Layer
AI
Core Technology Platform — Cognitive Intelligence Artificial Intelligence (CIAI)
Using
proprietary intellectual property technologies, we have independently developed CIAI, our core technology platform. To date, we have
developed and commercialized six core technologies based on CIAI: (1) natural language processing, (2) speech processing, (3) computer
vision, (4) machine learning, (5) affective computing and (6) data intelligence and hyperautomation.
●
Natural
                                            Language Processing
●
CIAI's
                                            multilingual, natural language processing capability extracts and analyzes information, mines
                                            text, constructs knowledge, and performs knowledge representation and reasoning based on
                                            words, phrases, sentences, and text, providing solutions to the human-computer interaction
                                            needs of diverse enterprises and professional users.
●
Speech
                                            Processing
●
The
                                            hybrid architecture of Time-Delay Neural Network + Deep Feedforward Sequential Memory Network
                                            + attention, in combination with our vast corpus accumulation of more than ten years, has
                                            enabled us to train our intelligent voice technology for end-to-end application across various
                                            scenarios in numerous fields. Based on these technologies, we have built a variety of intelligent
                                            voice solutions under the Aviation Industry Computer-Based Training Committee framework,
                                            including intelligent Interactive Voice Response navigation, intelligent outbound call, intelligent
                                            agent assistance, intelligent voice quality inspection, and intelligent coaching.
●
Computer
                                            Vision
●
We
                                            offer various computer vision capabilities, including face recognition and analysis, multi-target
                                            tracking, human posture and action recognition, and scene analysis capabilities such as semantic
                                            and instance segmentation. In terms of Optical Character Recognition ("OCR"),
                                            we have general OCR and customized OCR for all types of cards, invoice, receipts, tickets,
                                            and more. In terms of construction drawing analysis, we apply various capabilities including
                                            pattern recognition and computer vision to comprehensively analyze and process CAD drawings,
                                            bringing to life standard review capability for construction drawings. Relating to engineering,
                                            we provide rapid engineering customization through its internally-developed deep learning
                                            framework. We also offer model distillation and pruning solutions to meet clients'
                                            model compression requirements. This high performance framework is adaptable to various environments.
56
●
Machine
                                            Learning
●
Machine
                                            learning methods offered by us include everything from traditional machine learning to the
                                            latest deep learning, reinforcement learning, active learning, transfer learning, and generative
                                            adversarial networks ("GAN"). These methods are applied across multiple fields
                                            such as natural language processing, speech recognition, vision recognition and analysis,
                                            and in business scenarios such as precision marketing, personalized recommendation, and risk
                                            assessment in combination with massive data and distribution processing algorithms to form
                                            an efficient human-computer collaborative learning system.
●
Affective
                                            Computing
●
Deep
                                            learning technology is used to recognize, understand, process, and simulate human emotions,
                                            so as to realize multi-dimensional and multimodal affective computing capabilities such as
                                            text, voice and vision. We have built affective computing, analysis, and interactive processing
                                            capabilities that process real-time perception, intelligent planning, automatic simulation,
                                            and this technology has been widely used in various practical business scenarios.
●
Data
                                            Intelligence and Hyperautomation
●
Large-scale
                                            machine learning technology mines, analyzes, and processes massive amounts of data, the assets
                                            of which are comprehensively integrated to extract information contained therein. Business
                                            processes are automatically and quickly identified, reviewed, and executed in combination
                                            with innovative technologies such as process automation and low code. The results enable
                                            enterprises to delegate simple tasks with high repeatability, as well as complex tasks, to
●
AI
                                            and data enhancement, thereby improving the quality and efficiency of business operations.
                                            Applications include data monitoring, data analysis, user profiling, business process automation,
                                            financing business automation, financial business automation, supply chain business automation,
                                            IT operation, and maintenance and integration automation.
Our
Product Platforms
We
have commercialized our six core technologies to create the following product platforms: (1) Conversational AI, (2) Knowledge Fusion,
(3) Intelligence Voice, (4) Hyperautomation, (5) Data Intelligence, (6) Cloud, (7) Intelligent Construction Support, (8) Vision Analysis,
(9) Intelligent Hardware Support, and (10) Metaverse.
●
Conversational
                                            AI Platform
●
Our
                                            conversational AI platform makes full use of deep learning, data enhancement, and active
                                            learning technologies, employing flexible and diverse dialog management and context processing
                                            mechanisms, and driven by a powerful learning system, the results of which achieve in-depth
                                            scenario dialog processing, intent recognition, and complex logic reasoning in combination
                                            with structured knowledge and semantic analysis capabilities. Additionally, the platform
                                            realizes the business value of conversational AI in a variety of application scenarios, including
                                            intelligent customer service, smart marketing, intelligent hardware, intelligent assistant,
                                            agent assistance, and intelligent human-computer training.
57
●
Knowledge
                                            Fusion Platform
●
The
                                            knowledge fusion platform integrates various types of knowledge such as Q&A, documents,
                                            multimedia, information forms, business processes, knowledge graphs, and multimodal to assist
                                            enterprises in improving knowledge management capabilities, building intelligent service
                                            cores, supporting intelligent knowledge management, retrieval, recommendation, application
                                            assistance, cognitive reasoning, and other capabilities. It helps enterprise-level intelligent
                                            applications, improves work efficiency, optimizes user experience, and reduces enterprise
                                            operating costs.
●
Intelligent
                                            Voice Platform
●
Our
                                            intelligent voice platform ("IVP") uses natural language processing ("NLP"),
                                            automatic speech recognition, voiceprint recognition, and text-to-speech technologies with
                                            human-computer interaction as its core, in combination with various business scenarios, to
                                            comprehensively create or enhance business capabilities such as intelligent speech solutions,
                                            thereby realizing the macro processes of intelligent IVP, intelligent outbound calls, speech
                                            analysis, agent assistance, and human-computer interaction.
●
Hyperautomation
                                            Platform
●
The
                                            hyperautomation platform innovatively uses low code technology in combination with agents
                                            to realize and expand vast capabilities of the traditional low code platform and Robotic
                                            Process Automation. It integrates technologies such as OCR, NLP, and visualized data mining
                                            and analysis, enables users to realize business and process automation, combines capabilities
                                            of knowledge base and imitation learning, and enables realization of business and process
                                            intelligence with intelligent planning capabilities.
●
Data
                                            Intelligence Platform
●
The
                                            data intelligence platform comprehensively integrates data assets, manages the entire life
                                            cycle of data, realizes the entire cycles of data integration, processing, transformation,
                                            analysis, and mining through What You See Is What You Get with the support of component-based
                                            data visualization technology. It also helps clients extract valuable information contained
                                            in data, and provides assistance in business and process automation, business prediction,
                                            decision support, among others, and improves the efficiency of data-driven business intelligence
                                            and business intelligence services.
●
Cloud
                                            Platform
●
The
                                            cloud platform is a comprehensive platform that integrates our various core technical capabilities,
                                            such as NLP capability, speech recognition capability, image recognition capability, data
                                            analysis capability, etc. The platform can provide fast and simple access to different technical
                                            capabilities for various customers and can also provide independent technical capabilities
                                            for customers of different types and even industries. Enterprises can flexibly configure
                                            according to the technical capabilities of the platform. The platform has features such as
                                            rich capabilities, simple and easy to use, flexible structure, and strong scalability. Whether
                                            it is improving customer service level, increasing service types and content, or expanding
                                            technical capabilities, the platform can easily expand and support.
●
Intelligent
                                            Construction Support Platform
●
Our
                                            intelligent construction support platform offers many capabilities such as parsing, reconstruction,
                                            visualization, and multi-dimensional analysis of construction drawings. Combined with a variety
                                            of construction application scenarios, the platform can realize intelligent construction
                                            drawings review, design assistance, online collaborative design, among other applications.
                                            It enables the construction industry to reduce the cost of drawing review, improve per-capita
                                            energy efficiency, empowers the construction industry value chain, and facilitates the transformation
                                            and upgrading of intelligence and automation.
58
●
Vision
                                            Analysis Platform
●
The
                                            vision analysis platform uses a variety of computer vision-related technologies to apply
                                            OCR, detection, video, and image analysis, helps clients extract and mine valuable information
                                            contained in images, and realizes business automation, industrial defect detection, monitoring
                                            analysis, and other innovative applications encountered in specific business scenarios.
●
Intelligent
                                            Hardware Support Platform
●
The
                                            intelligent hardware support platform provides the framework of signal collection, processing,
                                            analysis, prediction, and more. This framework can be combined with various sensors to quickly
                                            process signal, select and adapt appropriate machine learning algorithms for business modeling
                                            according to the intelligent requirements of various types of hardware, make full use of
                                            various machine learning capabilities to make the equipment be more intelligent.
●
Metaverse
                                            Platform
●
We
                                            developed the first virtual digital human in 2016 and released it for the first time at the
                                            Guiyang Digital Expo in 2017. We continue to innovate and develop more advanced and smarter
                                            digital human products. Digital human with multimodal emotional interaction capabilities
                                            can be widely used in various business scenarios including film and television production,
                                            media, games, financial services, culture, tourism, education, healthcare, and retail.
Domain
Application Layer
For
more than 20 years, we have applied our aggregation platform to form a number of mature application fields designed to address the business
needs of various fields, including (1) AI + Contact Center, (2) AI + Finance, (3) AI + Urban Public Service, (4) AI + Construction, (5)
AI + Metaverse, (6) AI + Manufacturing and (7) AI + Smart Healthcare.
Our
technologies are based, in significant part, upon our proprietary intellectual property portfolio. As of December 1, 2022, we have applied
for 554 patents, 281 of which have been granted and we have obtained 225 registered trademarks and 130 computer software copyrights.
In June 2020, the company passed the national intellectual property management system certification and obtained the certificate. This
certificate represents that the company's intellectual property management system conforms to the GB/T 29490-2013 standard. We
continue to develop and improve our intellectual property portfolio through our deep R&D department. As of March 31, 2023, we
have 214 R&D personnel, accounting for about 60.8% of our personnel, including 143 with bachelor's degrees, 17 with master's
degrees and 7 with doctorates.
Our
primary services are software services provided by our cloud platform. Software services refer to the sales of software products corresponding
to the Company's obtained patents or software copyrights to customers for meeting the needs of different customers in different
industries for artificial intelligence:
(1)
Contact
Center
: We leverage contact center AI solutions to improve customer experience and operational efficiency. We offer AI-based platforms,
software tools and services that leverage voice-based assistants to facilitate strong interactions and engagement in different industries,
including both small and medium enterprises and large enterprises.
(2)
Architectural
                                            Design AI services
We provide professional architectural drawing review solutions. By
                                            using computer vision, natural language processing technology and our unique map, image morphology
                                            processing, pattern recognition, image segmentation, image target detection, path planning,
                                            OCR and many other independent research and development technologies, combined with the rich
                                            professional experience in architectural design, we have launched AI products for blueprint
                                            review to achieve automation and intelligence, enabling the architecture industry to reduce
                                            the cost of reviewing blueprints, improving the efficiency, and cross-institution collaborative
                                            drawing review.
59
(3)
Smart
                                            City
We use natural language processing, data intelligence and other technologies to
                                            build a cognitive brain for smart city public services, and continuously improves the level
                                            of urban intelligence from social service efficiency and public experience. We provide solutions
                                            such as smart city service hotline, smart public service and smart legal services.
We
generate revenue primarily from (i) sale of cloud platform products, (ii) technology development service, (iii) sale of software products,
and (iv) M&S service. For the years ended December 31, 2020, 2021 and 2022, the total revenue was US$13.86 million, US$32.52 million,
and US$48.18 million, respectively.
1.
Our
                                            cloud platform products consist of standardized software products uploaded to our cloud platform.
                                            The revenue from sales of cloud platform products increased from nil for the year ended December
                                            31, 2020 to US$5.55 million for the year ended December 31, 2021. The revenue from sales
                                            of cloud platform products increased by 363.7% from US$5.55 million for the year ended December
                                            31, 2021 to US$25.74 million for the year ended December 31, 2022 primarily due to the promotion
                                            of our AI super automation platform in 2022.
2.
Our
                                            technology development service provided to customers comprises customized technology development
                                            services for specific needs. The revenue from technology development service increased by
                                            44.4% from US$6.40 million for the year ended December 31, 2020 to US$9.25 million for the
                                            year ended December 31, 2021, primarily due to one major contract to provide specific software
                                            upgrades for drawing review platform. The revenue from technology development service increased
                                            by 77.6% from US$9.25 million for the year ended December 31, 2021 to US$16.42 million for
                                            the year ended December 31, 2022. Our revenue generated from technology development services
                                            was primarily due from three major contracts, including one to provide specific software
                                            upgrades for drawing review platform, and two for developing and delivering the intelligent
                                            education products.
3.
Our
                                            software products sold to customers comprising customized software products for specific
                                            needs. The revenue from sales of software products increased by 191.8% from US$5.10 million
                                            for the year ended December 31, 2020 to US$14.88 million for the year ended December 31,
                                            2021, primarily due to one major contract signed in 2021, providing smart graphic review
                                            software products amounted to US$11.88 million. The revenue from sales of software products
                                            decreased by 76.2% from US$14.88 million for the year ended December 31, 2021 to US$3.55
                                            million for the year ended December 31, 2022. The significant amount in 2021 was primarily
                                            due to the major contract of smart graphic review software products sales signed in 2021
                                            amounted to US$11.88 million and the revenue was fully recognized in 2021.
4.
We
                                            provide M&S services for software products contracts which consist of future software
                                            updates, upgrades, and enhancements as well as technical product support services, and the
                                            provision of updates and upgrades on a when-and-if-available basis. The revenue from sales
                                            of M&S service increased by 43.1% from US$1.94 million for the year ended December 31,
                                            2020 to US$2.77 million for the year ended December 31, 2021, primarily due to more residence
                                            service provided to customers in 2021. The revenue from sales of M&S service decreased
                                            by 12.4% from US$2.77 million for the year ended December 31, 2021 to US$2.43 million for
                                            the year ended December 31, 2022, primarily due to the decrease of sale of software products,
                                            and the accompanying M&S services also decreased.
We
sell our products and services to end customers through our sales ecosystem. Sales to customers in Mainland China accounted for approximately
88.3%, 97.7% and 99.1% of their total revenue in the fiscal years 2020, 2021 and 2022, respectively. Sales to customers in Hong Kong,
Macao, Taiwan and other countries accounted for approximately 11.7%, 2.3% and 0.9% of their total revenue in the fiscal years 2020, 2021
and 2022, respectively.
60
Our
Competitive Advantages
We
believe we have the following competitive advantages and they distinguish us from our competitors:
Our
Pioneer Position in AI Technology and Focus on R&D
●
We
                                            believe that we pioneered the industry's first cognitive intelligence and narrow artificial
                                            intelligence technology and have built on our culture of innovation.
●
Since
                                            its establishment in 2001, Xiao-i has focused on developing cognitive intelligence technologies
                                            based on its natural language processing and "AI" implementation in businesses,
                                            enjoying a privileged reputation in the "AI" industry. As a leading AI technology
                                            and industrialization service platform in China, through years of operation, Xiao-I has established
                                            cooperation with many leading companies amongst various industry verticals according to Frost
                                            & Sullivan. Our industry leadership is built on our pioneering research to commercialize
                                            AI technology.
●
Our
                                            first-mover advantage in natural language processing has made us a pioneer in formulating
                                            AI industry standards and creating more than 500 patents granted or pending. To protect its
                                            technology, in June 2012, Shanghai Xiao-i sued Apple Computer Trading (Shanghai) Co., Ltd.,
                                            a subsidiary of Apple, Inc. for patent infringement and received the Supreme People's
                                            Court Supreme Court Administrative Judgment, a final judgement confirming the validity of
                                            our patent in June 2020, but did not make a ruling on whether Apple infringed our patent.
                                            Specifically, according to the Patent Administration (Patent) Retrial Administrative Judgment
                                            issued by the Supreme People's Court of China ((2017) ZGFXZ No. 34), in the retrial
                                            case of Shanghai Xiao-i and Apple Computer Trading (Shanghai) Co., Ltd. and the China National
                                            Intellectual Property Administration, the Supreme People's Court determined that the
                                            invention patent named "A Chatbot System (Patent No.: 200410053749.9)" held by
                                            Shanghai Xiao-i is a valid patent. On August 3, 2020, after obtaining the final judgment
                                            confirming the validity of its patent, Shanghai Xiao-i filed another infringement lawsuit
                                            against Apple Computer Trading (Shanghai) Co., Ltd., Apple, Inc., and Apple Computer Trading
                                            (Shanghai) Co., Ltd. (together, "Apple"), demanding Apple to stop the infringement
                                            and compensate for the losses. As of the date of this annual report, the case is still pending.
●
We
                                            are a pioneer in AI + with over 20 years of development and innovation with 4 R&D centers,
                                            280+ engineers, 50+ external experts, and 10+ university partners.
Advantages
of Our Products and Services
●
We
                                            develop and commercialize Metaverse-related offerings, including Virtual Humans and AR/VR.
●
We
                                            help our clients with their digital transformation using our cognitive intelligence and AI
                                            technologies.
●
We
                                            enable our customers to reap economies of scale by providing one-stop shop service from our
                                            extensive network of service hubs in their vicinity.
●
Our
                                            deep-rooted attention to quality assurance in our product and service offerings puts us ahead
                                            of our competitors.
●
We
                                            have a proven monetization model based on product differentiation, revenue source diversification,
                                            and customer loyalty.
●
Our
                                            products and services meet the needs of different customers and we maintain frequent client
                                            engagement for continuous business development and customer loyalty cultivation.
●
While
                                            our customer contracts vary, they generally represent multi-year engagements, giving us visibility
                                            into future revenue. We have master similar commercial arrangements in place with many of
                                            our customers, retaining customers over the long term.
61
Our
Robust Ecosystem of Partnerships
●
We
                                            have various regional sales teams including Shanghai, Beijing and Hong Kong.
●
We
                                            maintain good relationships with suppliers that have a good record of performance.
●
Our
                                            products cover large and medium-sized contact centers, financial institutions, communication
                                            operators, government services, industrial manufacturing, healthcare, and other customer
                                            groups.
●
We
                                            build strong and long-standing customer relationships with large enterprises in China. Our
                                            client list includes nearly all the industry giants in the banking and telecom industries
                                            in China.
Our
Visionary and Seasoned Management
●
Our
                                            CEO Mr. Hui Yuan is a recognized AI industry Key Opinion Leader and domain expert.
●
Our
                                            team has deep technical expertise and proven track record of constant innovation.
●
We
                                            have proven ability to attract and retain highly qualified talent.
Challenges
and Opportunities
Unique
challenges and opportunities are presented for us to achieve continued growth in sales in each of the customer industries in which we
operate.
Challenges,
generally we found:
●
In
                                            the contact center industry, high labor costs and the requirement for continuous improvement
                                            create constant margin challenges. The low gross profit can also cause a decline in service
                                            quality, which limits the innovation ability of the industry.
●
In
                                            the financial industry, banks lack AI technology capabilities and independent wholly-owned
                                            technology subsidiaries.
●
In
                                            the architecture industry, the degree of digitization is low, the architectural knowledge
                                            system is unstructured and the digital drawing review is a mere formality. A lot of manpower,
                                            material and financial resources are wasted.
●
In
                                            Metaverse, there are great differences in technical paths and the product form and the industry
                                            is far from mature. Many concepts have not reached an industry consensus.
●
In
                                            the manufacturing industry, many companies lack information technology talent and coordination
                                            and integration ability across departments, fields and enterprises.
●
In
                                            the healthcare industry, the level of information technology talent in urban and rural areas
                                            is unevenly distributed. Between urban and rural areas, the number of health technicians
                                            in cities is almost twice that in rural areas.
●
In
                                            city public services, the traditional urban public service supply model cannot meet new requirements
                                            of modern residents for the convenience, speed, efficiency and real-time urban government
                                            public services.
●
As
                                            an AI solution company, we also face many other challenges. For example: (i) the AI industry
                                            is highly competitive, Baidu, Alibaba and Tencent are all in this field, (ii) urban public
                                            services cover a wide range of areas which makes it difficult to fully and deeply understand
                                            customers' businesses and their needs and (iii) the company's investment may
                                            be insufficient.
62
Opportunities
●
These
                                            challenges have created tremendous and growing market opportunities for artificial intelligence
                                            solution services in China. We believe we are well-positioned to capture the growing market
                                            opportunities due to the infrastructure we have created. Our CIAI platform products and services
                                            are marketed and sold primarily to customers in the following industries: (1) Contact Center,
                                            (2) Finance, (3) Urban Public Service, (4) Construction, (5) Metaverse, (6) Manufacturing
                                            and (7) Smart Healthcare.
●
The
                                            following diagram shows the estimated market size of the artificial intelligence market in
                                            2026 in China, according to Frost & Sullivan:
63
Our
Solutions
We
provide our AI solutions and services to the following industries:
In
the contact center industry, we provide internet service intelligent solutions, hotline intelligent solutions and artificial intelligence
solutions. Based on the scale and characteristics of customers, we have launched an enterprise-level model for large enterprises and
an intelligent cloud contact center service model for small and medium-sized enterprises.
In
the financial industry, we provide intelligent customer service with a 24-hour uninterrupted intelligent question-and-answer function.
Leveraging our natural language understanding and speech recognition technology, our solutions can address the real-time online question-and-answer
needs of different types of financial institutions and different types of customers.
For
marketing professionals, we provide intelligent marketing services, continuously analyzing user data and cluster user characteristics
to form user portraits.
We
also cooperate with large, medium, and small domestic insurance companies to provide intelligent insurance consulting services and provide
independent service functions such as business consulting and business queries for insurance users.
In
the architecture industry, we provide professional architectural drawing review solutions. By using computer vision, natural language
processing technology and Xiao-i's unique map, image morphology processing, pattern recognition, image segmentation, image target
detection, path planning, OCR and many other independent research and development technologies, combined with the rich professional experience
in architectural design, we have launched AI products for blueprint review to achieve automation and intelligence, enabling the architecture
industry to reduce the cost of reviewing blueprints, improving the efficiency, and cross-institution collaborative drawing review.
In
Metaverse, Xiao-i Robot invented intelligent robots and virtual humans, which are widely applied in various business scenarios such as
exhibitions, customer services, property management, care and companionship, and transaction processing.
In
the manufacturing industry, we provide intelligent research and design, intelligent production process, intelligent logistics management,
intelligent marketing service and intelligent management.
In
the healthcare industry, we provide intelligent hospital services, with all-round services for patients before, during and after diagnosis.
We also provide smart clinic services with auxiliary decision-making and interdisciplinary diagnosis and treatment and intelligent scientific
research services. Based on the patient's condition, our robots generate a model to predict the clinical events, and automatically
query similar cases and diagnosis and treatment plans in the clinical case database for doctors' reference, providing real-time
support for the doctor's diagnosis process. We connect patients, doctors, experts and medical record managers via personal computers,
tablets, mobile phones, and other collaborative standard videos, breaking the distance barrier and enabling them to provide patient-centered
care through video anytime and anywhere.
In
city public services, we integrate urban service resources, providing urban residents with a multi-modal human-computer interaction interface
on all media channels, and comprehensively improve the intelligence level of urban services.
Our
Growth Strategy
We
intend to achieve our mission and further grow our business by pursuing the following strategies:
●
Continue
                                            to improve cognitive technology capability
. We have set up a technology research institute
                                            to conduct in-depth communication on technological innovation with experts and scholars from
                                            top universities, such as Duke University, Hong Kong University of science and technology
                                            and Columbia University. We have also carried out in-depth cooperation with well-known domestic
                                            universities to jointly develop the latest and cutting-edge technologies.
64
●
Further
                                            develop and create long-term sustainable commercialization opportunities through technology
                                            innovation, application combination innovation, and AI product diversificatio
n. For example,
                                            our commercialization in the field of intelligent drawing review has met the needs of the
                                            construction industry for drawing review through our artificial intelligence technology.
●
Further
                                            strengthen the leading position in the metaverse related product
s. We began to design
                                            and produce a virtual human in 2016. Our first mover advantage in the metaverse will help
                                            us continue to succeed in this field.
●
Expand
                                            our customer base and make full use of existing customers through market segmentation and
                                            personalization.
We will gradually expand our target customers from the previous major
                                            customers to small and medium-sized customers, to provide services for a wider range of customer
                                            groups.
●
Increase
                                            hardware product
s. As a company mainly engaged in software sales and services, we will
                                            increase integrated software and hardware products in the future.
●
Further
                                            expand our global footprint strategically
. The goal of the company is to become a global
                                            artificial intelligence enterprise. We are committed to internationalizing our products and
                                            services and providing high-quality products and services to customers around the world.
Our
Customers
We
provide our products and services to hundreds of enterprises across various industries, including contact center, financial sector, government
and healthcare. Our customers include 80% of the top 10 banks in China in terms of asset size, as well as 60% of the top 10 insurance
companies in China. Our customers also include many leading enterprises in aviation, automobile, logistics, computer, communication,
consumer and other industries and China's top 500 enterprises.
For
the year ended December 31, 2020, our total sales to our top 2 customers accounted for 17.7% and 12.8% of our revenues, respectively.
For the year ended December 31, 2021, our total sales to our top 2 customers accounted for 41.2% and 10.3% of our revenues, respectively.
For the year ended December 31, 2022, our total sales to our top 3 customers accounted for 20.4%, 11.1% and 10.3% of our revenues, respectively.
China
Construction Third Engineering Bureau Group Limited, a government owned enterprise ("China Construction") accounted for 41.2%
and 11.1% of our revenue for the year ended December 31, 2021 and 2022. Pursuant to the terms of the Intelligent Drawing Review Platform
License Agreement (the "License Agreement") between the VIE, as licensor, and China Construction, as licensee, the VIE agreed
to provide China Construction with an intelligent drawing review platform (the "Drawing Platform"). The Drawing Platform
was delivered, installed and commissioned in accordance with the License Agreement in 2021. The revenue recognized for license of the
Drawing Platform was US$11.88 million in 2021.
In
connection with the License Agreement, the VIE and China Construction entered into an Intelligent Drawing Platform Operation and Technical
Support Agreement (the "Support Agreement") pursuant to which the VIE has agreed to provide technical support and co-operation
of the Drawing Platform for a term of three years. During the term of the Support Agreement, China Construction, with the consent of
the VIE, may license the use of the Drawing Platform to third parties. In such event, the VIE shall be entitled to receive 30% of the
license fee paid to China Construction by any third party. The revenue recognized of technical services for the Drawing Platform was
US$1.51 million in 2021 and US$3.24 million in 2022, respectively.
Our
Suppliers
We
maintain good relationships with suppliers that have a good record of performance. Beijing Blanstar Technology Co., Ltd., a company established
and existing under the laws of the PRC ("Blanstar"), was the VIE's major service provider for the year ended December
31, 2021 and 2022 accounting for 73.8% and 34.6% of the Company's total purchases, respectively. Pursuant to the terms of the Cloud
Computing Technical Services Cooperation Agreement effective as of January 1, 2021 (the "Services Agreement") between the
VIE and Blanstar, Blanstar agreed to provide the VIE with cloud computing technical services consisting of various products and services
including computing, storage, network, security, management and cloud database to meet the different needs of the VIE's various
websites, applications and other products and services. Blanstar agreed to provide the VIE with response, technical support and maintenance
services 24 hours a day 7 days a week. Pursuant to the Services Agreement the VIE paid $3.8 million and $13.3 million to Blanstar for
the year ended December 31, 2021, and 2022, respectively. The Service Agreement expires December 31, 2022, subject to the right of the
parties to negotiate a renewal one month prior to the expiration date.
65
For
the twelve months ended December 31, 2020, we have three significant suppliers which represent 39.5%, 13.0% and 10.0% of our total purchase,
respectively. For the year ended December 31, 2021, we have one significant supplier which is Blanstar, representing 73.8% of our total
purchase. For the year ended December 31, 2022, we have three significant suppliers including Blanstar, representing 34.6%, 21.9% and
10.3% of our total purchase, respectively.
Marketing
and Sales
We
have built our Xiao-i (Chinese: 小i机器人) brand through a multitude sales channels, including:
●
industry
                                            trade shows,
●
academic
                                            seminars,
●
publicity
                                            of major milestones and achievements, and
●
collaboration
                                            with relevant academic, governmental and industrial parties.
With
these approaches, we have successfully built our brand and expanded customer markets. Our software business has experienced steady growth
during the past few years.
Distribution
Network
We
sell our products and services to end customers through our sales ecosystem, which consists of multiple regional sales teams and maintain
strong relationships with suppliers. Our products cover large and medium-sized contact centers, financial institutions, communication
operators, government services, industrial manufacturing, medical care and other customer groups. Since 2015, we have launched the partner
development plan, with more than 600 customers at present. Partners include finance, government, healthcare, energy, education, and manufacturing
customers from Beijing, Shanghai, Guangzhou and Shenzhen. Partners are divided into three levels: strategic level, commercial level and
ecological level. Cooperation above the commercial level has the application scenarios of integrating the solutions of both parties and
customers. We provide partners with a series of end-to-end support and services from sales support, event promotion, media publicity,
training and certification and follow-up guarantee.
Intellectual
Property
We
establish and protect our intellectual property rights through patent, copyright, trademark and trade secret laws, as well as non-competition,
confidentiality and other contractual clauses, to establish and protect our intellectual property rights.
As
of March 31, 2023, we have applied for 557 patents, 282 of which have been granted and have obtained 228 registered trademarks and 131
computer software copyrights. We have led and participated in the formulation of 1 international standard, 5 national standards and 2
association standards, led the world's first international standard for AI emotional computing, and published more than 20 class
A papers (Class A papers refer to papers in authoritative core journals, indexed by the internationally accepted SCIE, EI, ISTP, SSCI
and A&HCI retrieval system) every year. In June 2020, the company passed the national intellectual property management system certification
and obtained the certificate. This certificate represents that the company's intellectual property management system conforms to
the GB/T 29490-2013 standard. We applied in 2004, and in 2009 were authorized a patented technology numbered ZL200410053749.9 (a chatbot
system), which represented the world's leading level of intelligent voice at that time.
66
In
addition to the foregoing protections, we generally control access to and use of our proprietary and other confidential information through
the use of internal and external controls. For example, for external controls, we enter into confidentiality agreements or agree to confidentiality
clauses with our advertising customers and mobile device manufacturers and, for internal controls, we adopt and maintain relevant policies
governing the operation and maintenance of our IT systems and the management of user-generated data.
Our
Research and Development
We
believe a strong research and development capability is crucial to our continued success and ability to develop innovative solution offerings
to keep up with rapid development and advances in AI technologies. We closely attend to the needs of our customers and respond to their
feedback and requests through developing new solutions or adding advanced or optimized features in existing solutions.
As
of March 31, 2023, we have 214 R&D personnel, accounting for about 60.8% of our personnel, including 143 with bachelor's degrees,
17 with master's degrees and 7 with doctorates. A large number of our senior engineers have more than 10 years' experience
in the computer, Internet and AI industries, and we also use part-time experts from several universities and research institutes. We
have established joint laboratories with the Institute of Software of the Chinese Academy of Sciences, East China Normal University,
Hong Kong University of Science and Technology, and have established in-depth cooperative relations with Tsinghua University, Fudan University,
Shanghai Jiaotong University, Beijing University of Posts and Telecommunications and Peking University.
Competition
The
competition in the AI services industry is intense. We compete with various integrated AI services providers in chatbots and personal
assistants as conversational intermediates. We also compete with new companies entering into the AI service industry. The rapid nature
of new technologies emerging also enhances the competitive nature of our industry. Among the many other Chinese competitors, our products'
global competitors include Apple Siri, Microsoft Cortana and Amazon Echo. To gain market share, we have built good customer relationships
with major banks and government departments in China. In addition, we also seek customers from different industries to maintain a long-term
collaboration relationship.
67
C.
Organizational Structure.
The
following diagram illustrates the corporate legal structure of Xiao-I as of the date of this annual report.
The
following diagram illustrates the ownership of the VIE, Shanghai Xiao-i as of the date of this annual report.
Compliance
with Foreign Investment
All
limited liability companies formed and operating in the PRC are governed by the Company Law, which was amended and promulgated by the
SCNPC on October 26, 2018 and came into effect on the same day. Foreign invested enterprises must also comply with the Company Law, with
exceptions as specified in the relevant foreign investment laws. Under our corporate structure as of the date of this annual report,
100% of the equity interests of Zhizhen Technology are entirely and directly held by our company through Xiao-i Technology Limited. Therefore,
Zhizhen Technology, the WFOE of Xiao-i Technology Limited, should be regarded as a foreign-invested enterprise and comply with both the
Company Law and other applicable foreign investment laws.
68
D.
Property, Plants and Equipment.
Our
current principal executive offices are located in 7
th
floor, Building 398, No. 1555 West, Jinshajiang Rd, Shanghai, China.
We lease offices in other cities where we operate with an aggregate area of approximately 4,022.4 square meters as of December 1, 2022.
These following facilities currently accommodate our management headquarters, as well as most of our sales and marketing, research and
development, and general and administrative activities:
Location
Area
(Square
Meter)
Term
Use
Floor 2/3/5/6/7/8 and basement 06, No. 398, floor 3 and basement 09/10, No. 399, Lane 1555, Jinsha Jiangxi Road, Jiading District, Shanghai
2171.2
2020.7.13-2024.7.12
July 13, 2020 to
July 12, 2024
Office
B1/1/2/3, No. 383, Lane 1555, Jinsha Jiangxi Road, Jiangqiao Town, Jiading District, Shanghai
1148.76
April 18, 2019 to
April 17, 2023
Office
Room 905, building 1, No. 46, dongzhimenwai street, Dongcheng District, Beijing
163.45
January 1, 2022 to
December 31, 2023
Office
Unit 1845, No. 167, Linhe West Road, Tianhe District, Guangzhou
162.15
July 5, 2022 to
July 31, 2025
Office
Zhongtian, Changling North Road, guanshanhu District, Guiyang city No. 1, floor 8, unit 3, building 5, East Fifth tower, East District, financial and business district, zone B, convention and Exhibition City
378
March 15, 2022 to
March 14, 2024
Item
    4A.
Unresolved
    Staff Comments
.
Not
applicable.
Item
5.  Operating and Financial Review and Prospects.
In
the following management's discussion and analysis of financial condition and operating results, "we," "us,"
or "our" refer to the PRC operating entities except when financial information is presented on a consolidated basis in which
case "we", "us," or "our" refer to Xiao-I Corporation and its subsidiaries and the PRC operating
entities on a consolidated basis.
The
following discussion and analysis of our financial condition and results of operations is based upon and should be read in conjunction
with our financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking
statements. In evaluating our business, you should carefully consider the information provided under the caption "Item 3. Key Information—D.
Risk Factors" and elsewhere in this annual report. We caution you that our businesses and financial performance are subject to
substantial risks and uncertainties.
A.
Operating Results.
Overview
We
are a leading cognitive intelligence company with strong brand recognition and profound industrial knowledge in China. We primarily provide
cloud platform products, software business and architectural design AI services to our customers. Our software products mainly include
intelligent interactive platform, intelligent voice platform, knowledge fusion platform, computer vision series platform and other core
intelligent products.
69
The AI basic data service industry has plenty of opportunities
for growth in the future. Participating in artificial intelligence technology since the inception, we have rich experience in independent
research and development and industrial application of cognitive intelligence, multilingual natural language processing, deep semantic
interaction, speech recognition and machine learning. We have provided services to nearly 1,000 enterprises and governments. Our business
covers communications, finance, government affairs, legal, medical, manufacturing and other industries, and we expanded steady growth
in those industries for the next few years.
We generate the majority of our revenue from fees
charged to our customers based on (i) sale of cloud platform products, (ii) technology development service, (iii) sale of software
products, (iv) M&S service, and (v) sale of hardware products. We gradually decreased the business focus on the sales of software
products and in turn increased our revenue from sale of cloud platform products, which is based on Software as a Service ("SaaS")
and private cloud services. The sale of software products accounted 36.8%, 45.8% and 7.4% of total revenue for the years ended December
31, 2020, 2021 and 2022, respectively. For sale of cloud platform products, revenue accounted 0.0%, 17.1% and 53.4% of total revenue for
the years ended December 31, 2020, 2021 and 2022, respectively. In addition, revenue generated from technology development services accounted
for 46.2%, 28.4% and 34.1% for the years ended December 31, 2020, 2021 and 2022, respectively.
We have achieved significant growth in recent periods.
Our revenues were US$13.86 million, US$32.52 million and US$48.18 million for the years ended December 31, 2020,
2021 and 2022, respectively. The increase in revenue was mainly due to the significant growth of technology development services and sale
of cloud platform products. We made significant investment in research and development, especially focusing on integrating AI and industrial
internet, which ultimately contributed to the development of intelligent industrial platform in the manufacturing industry. The project
to develop an intelligent industrial platform in the manufacturing industry was initiated in 2022 and was expected to be completed in
early 2024. In addition, we are continuously devoted to the research and development in the field including contact center, architectural
design AI services and smart city to discover potential demand in the market. Our research and development expenses were US$4.24 million,
US$5.36 million and US$24.00 million for the years ended December 31, 2020, 2021 and 2022, respectively.
Major
Factors Affecting Our Results of Operations
Our
business and operating results are affected by the general factors affecting the global robotics industry, and in particular the global
software robotics industry, including technology development and breakthroughs in areas such as AI and cloud computing, increases in
per capita disposable income, as well as shortage of labor supply. Changes in any of these general factors could affect the demand for
our products and services and our results of operations.
While
our business is influenced by factors affecting our industry generally, we believe our results of operations are more directly affected
by the following specific factors:
Continued
Monetization of Robot Products and Services
Our
long-term growth will depend on our continued ability to expand our customer base and increase revenue from existing and new robot application
scenarios. We have formed products in different industries. Our CIAI platform products and services are marketed and sold primarily to
customers in the following industries: (1) Contact Center, (2) Finance, (3) Urban Public Service, (4) Construction,
(5) Metaverse, (6) Manufacturing and (7) Smart Healthcare. According to Frost & Sullivan, Shanghai Xiao-i has
been focusing on developing cognitive intelligence technologies based on its cutting-edge natural language processing and AI implementation
in businesses, enjoying a privileged reputation in AI industry. As a leading AI technology and industrialization service platform in
the world, through years of operation, Shanghai Xiao-I has established extensive cooperation with many leading companies amongst
various industry verticals. As a result, we are well positioned to capture significant monetization opportunities. Going forward, we
plan to expand our product and service offerings, including our Metaverse-related offering and intelligent drawing review software products,
which is expected to have a positive impact on our results of operations.
70
Sales
and Marketing
We
have built our Xiao-i (Chinese: 小i机器人) brand through a multitude of avenues, including:
●
industry
                                            trade shows;
●
academic
                                            seminars;
●
publicity
                                            of major milestones and achievements; and
●
collaboration
                                            with relevant partners.
With
these approaches, we have successfully built our brand and expanded customer markets. Our software business has experienced steady growth
during the past few years.
Competition
The
competition in the AI services industry is intense. We compete with various integrated AI services providers in chatbots and personal
assistants as conversational intermediates. Our products' main competitors include Apple Siri, Microsoft Cortana and Amazon Echo.
To gain market share, we have built good customer relationships with several major banks and government departments in China. In addition,
we also seek customers from different industries to maintain a long-term collaboration relationship.
Technology
Xiao-i robot has a strong human-computer cognitive
interaction ability, which is known as "representative of conversational AI enterprises" by Gartner. Our technical strength
and academic status have also been recognized on the international platform. We are a technology-driven company and our research and development
staffs are an important asset for us. To further strengthen our technological ability, we have set training courses and talent development
plans to nurture the staffs. With aligned interests, we promote our research and development ability to respond to the rapidly changing
market.
Intellectual
Property
Our
intellectual property includes trademarks related to our brands and services, copyrights in software, patents and other intellectual
property rights and licenses. We seek to protect our intellectual property assets and brand through a combination of monitoring and enforcement
of trademark, patent, copyright and trade secret protection laws in the PRC and other jurisdictions, as well as through confidentiality
agreements and procedures. For further details, see "Risk Factors — Risks Relating to Our Business and Industry —
We
may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs
of business
" of this annual report.
Regulations
on Intellectual Property Rights
China
has adopted legislation governing intellectual property rights, including trademarks, patents and copyrights. China is a signatory to
the major international conventions on intellectual property rights and became a member of the Agreement on Trade Related Aspects of
Intellectual Property Rights upon its accession to the World Trade Organization in December 2001.
In
China, holders of computer software copyrights enjoy protection under the Copyright Law. Various regulations relating to the protection
of software copyrights in China have been promulgated, including the Copyright Law, which was originally promulgated in 1990, the Regulation
for the Implementation of the Copyright Law, which originally came into effect in September 2002, and the Measures for the Registration
of Computer Software Copyright, which were issued by the National Copyright Administration in 2002. Under these regulations, computer
software that is independently developed and exists in a physical form is protected, and software copyright owners may license or transfer
their software copyrights to others. Registration of software copyrights, exclusive licensing and transfer contracts with the Copyright
Protection Center of China or its local branches is encouraged. Such registration is not mandatory under Chinese law, but can enhance
the protections available to the registered copyrights holders. The Computer Software Copyright Registration Procedures, issued by the
National Copyright Administration in 2002, apply to software copyright registration, license contract registration and transfer contract
registration. We have registered software copyrights in compliance with the above rules and to take advantage of the protections under
them.
71
Impact
of COVID-19 on Our Operations and Financial Performance
Beginning
in 2020, normal economic activity received a severe shock when many company offices, retail stores and production facilities across China
were forced to temporarily close as a result of the COVID-19 outbreak. The population in most of the major cities was locked down to
a greater or lesser extent at various times and opportunities for discretionary consumption were extremely limited. People are forced
to stay at home, and travel and social activities are restricted.
We
took a series of measures to protect our employees, closing our offices, facilitating remote working arrangements for our employees,
and canceling business meetings and travels. The operations of some of our business partners and service providers were also constrained
and impacted. This has led to delays in the purchase decisions and sales and implementation cycles of our products and solutions for
existing or potential customers. Meanwhile it reduces our efficiency in product development, sales, marketing, and customer service work.
China
began to modify its zero-COVID policy at the end of 2022, which seems to have prompted a considerable degree of uncertainties about the
economic and market outlook. Thus, we have to be prepared for the possibility for a wide range of possible outcomes, some of which could
be highly unfavorable to our business. There is still uncertainty as to the future impact of the virus. The extent to which the pandemic
impacts our results of operations going forward will depend on future developments which are highly uncertain and unpredictable, including
the frequency, duration and extent of outbreaks of COVID-19, the appearance of new variants with different characteristics, the success
or failure of efforts to contain or treat cases, and future actions we or the authorities may take in response to these developments.
Impact
of Foreign Exchange Fluctuation
As
we derive our revenue in RMB, foreign exchange rate fluctuations may adversely affect our business and performance. The exchange rates
between US$ and RMB are subject to continuous movements affected by international political and economic conditions and changes in the
PRC government's economic and monetary policies. Any appreciation of RMB, which is our reporting currency, against US$ will decrease
our profit margin. On the other hand, any depreciation of RMB against US$ will adversely affect our ability to pay for foreign currency
obligations.
RESULTS
OF OPERATIONS
The
following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amount
and as a percentage of our revenues for the periods presented. This information should be read together with our consolidated financial
statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative
of the results that may be expected for any future period.
For the Years Ended December 31,
2020
2021
2022
USD
%
USD
%
USD
%
Net revenue
13,856,734
100.0
%
32,524,013
100.0
%
48,184,958
100.0
%
Cost of revenues
(7,228,046
)
(52.2
)%
(10,885,731
)
(33.5
)%
(17,379,144
)
(36.1
)%
Gross profit
6,628,688
47.8
%
21,638,282
66.5
%
30,805,814
63.9
%
Selling expenses
(4,566,760
)
(33.0
)%
(4,620,113
)
(14.2
)%
(3,911,818
)
(8.1
)%
General and administrative expenses
(5,694,785
)
(41.1
)%
(6,657,251
)
(20.5
)%
(6,028,637
)
(12.5
)%
Research and development expenses
(4,236,723
)
(30.6
)%
(5,363,909
)
(16.5
)%
(24,001,138
)
(49.8
)%
Other income/(loss), net
577,684
4.2
%
(1,079,652
)
(3.3
)%
(2,208,880
)
(4.6
)%
(Loss)/Profit before tax
(7,291,896
)
(52.6
)%
3,917,357
12.0
%
(5,344,659
)
(11.1
)%
Income tax benefits/(expenses)
235,854
1.7
%
(552,355
)
(1.7
)%
(660,655
)
(1.4
)%
Net (loss)/income
(7,056,042
)
(50.9
)%
3,365,002
10.3
%
(6,005,314
)
(12.5
)%
72
KEY
COMPONENTS OF RESULTS OF OPERATIONS
Net
revenues
We
generate revenue primarily from the (i) sale of cloud platform products, (ii) technology development service, (iii) sale of software
products, (iv) M&S service, and (v) sale of hardware products. For the years ended December 31, 2020, 2021 and, 2022,
our total revenue was US$13.86 million, US$32.52 million and US$48.18 million, respectively.
The
following table sets forth the components of our net revenues by amounts and percentages of our total net revenues for the periods presented:
For the Years Ended December 31,
2020
2021
2022
USD
%
USD
%
USD
%
Sale of cloud platform products
-
-
5,550,959
17.1
%
25,742,135
53.4
%
Technology development service
6,404,394
46.2
%
9,246,992
28.4
%
16,419,889
34.1
%
Sale of software products
5,098,730
36.8
%
14,878,256
45.8
%
3,547,113
7.4
%
M&S service
1,937,887
14.0
%
2,772,795
8.5
%
2,429,526
5.0
%
Sale of hardware products
415,723
3.0
%
75,011
0.2
%
46,295
0.1
%
Total
13,856,734
100.0
%
32,524,013
100.0
%
48,184,958
100.0
%
Cost
of revenues
Our
cost of revenues primarily consists of the following components: (i) staff costs (salaries and employee benefits), (ii) cost
of materials, which primarily includes software and hardware purchased, (iii) cloud hosting service fees, and (iv) overhead
costs relating to consumables and office expenses used for production.
The
following table sets forth the components of our cost of revenues by amounts and percentages of net revenues for the periods presented:
For the Years Ended December 31,
2020
2021
2022
USD
%
USD
%
USD
%
Cost of materials
1,498,661
10.8
%
1,353,687
4.2
%
8,249,674
17.1
%
Staff costs
5,405,015
39.0
%
5,636,003
17.3
%
7,499,583
15.6
%
Cloud hosting services fees
-
-
3,671,322
11.3
%
1,313,492
2.7
%
Others
324,370
2.3
%
224,719
0.7
%
316,395
0.7
%
Total
7,228,046
52.1
%
10,885,731
33.5
%
17,379,144
36.1
%
73
Selling
expenses
Selling
expenses primarily consist of: (i) salaries and benefits for our sales and marketing personnel; (ii) advertising costs and
market promotion expenses; (iii) traveling expenses incurred by our sales and marketing personnel for business purposes; and (iv) others,
which primarily include entertainment expenses related to selling and marketing functions, office expenses and consulting expenses.
General
and administrative expenses
General
and administrative expenses primarily consist of: (i) salaries and benefits for our administrative personnel; (ii) rental expenses
relating to our leased properties used for administrative purposes and utilities which is primarily represented by water, electricity
charges for administrative purposes; (iii) professional fees, which primarily represented fees we paid for legal services, audit
services and consultation in the ordinary course of our business; (v) bad debt expenses, which primarily represented the bad debt
loss of accounts receivable and prepaid expenses and other current assets, and (vi) others, which primarily include depreciation
and amortization expenses, office expenses for office supplies and consumables, and other miscellaneous expenses for administrative purposes.
Research
and development expenses
Research
and development expenses primarily include: (i) salaries and benefits for research and development personnel; (ii) professional
services fees, which primarily represent fees paid for professional services in research and development activities; (iii) patent
registration related expenses and patent litigation expenses; (iv) amortization, which represents amortization expenses for our
intangible assets; and (v) others, which primarily include rental expenses, consumables, traveling expenses, utilities and miscellaneous
expenses.
Income
Tax Expenses
Cayman
Islands
Our
company was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Act and accordingly
is not subject to income tax from business carried in Cayman Islands.
Hong Kong
In
accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income
taxes within Hong Kong at the applicable tax rate on taxable income. In March 2018, the Hong Kong Government introduced
a two-tiered profit tax rate regime by enacting the Inland Revenue (Amendment) (No.3) Ordinance 2018 (the "Ordinance"). Under
the two-tiered profits tax rate regime, the first HK dollar 2 million of assessable profits of qualifying corporations is taxed
at 8.25% and the remaining assessable profits at 16.5%. The Ordinance is effective from the year of assessment 2018-2019. According
to the policy, if no election has been made, the whole of the taxpaying entity's assessable profits will be chargeable to Profits
Tax at the rate of 16.5% or 15%, as applicable. Because the preferential tax treatment is not elected by us, our subsidiaries registered
in Hong Kong are subject to income tax at a rate of 16.5%. Payments of dividends by the subsidiary to us are not subject to withholding
tax in Hong Kong.
PRC
Generally,
our PRC subsidiaries are subject to enterprise income tax on their taxable income in China at a statutory rate of 25%, except for our
certain PRC subsidiaries that are qualified as high and new technology enterprises under the PRC Enterprise Income Tax Law and are eligible
for a preferential enterprise income tax rate of 15%. The enterprise income tax is calculated based on the entity's global income
as determined under PRC tax laws and accounting standards.
74
In
accordance with the implementation rules of EIT Laws, a qualified "High and New Technology Enterprise" ("HNTE")
is eligible for a preferential tax rate of 15%. The HNTE certificate is effective for a period of three years. An entity could re-apply
for the HNTE certificate when the prior certificate expires. Our subsidiary, Shanghai Xiao-i, is eligible to enjoy a preferential tax
rate of 15% from 2020 to 2022 to the extent it has taxable income under the EIT Law.
Our
subsidiary, Guizhou Xiao-i was qualified as an eligible software enterprise before the income tax year-end final settlement in 2017.
As a result of this qualification, it is entitled to a tax holiday of a full exemption for the years ended December 31, 2017
and 2018, in which its taxable income is greater than zero, followed by a three-year 50% exemption. In 2022, the tax holiday has expired
and Guizhou Xiao-i applied qualification of HNTE, which allows Guizhou Xiao-i to enjoy a preferential tax rate of 15% from 2022 to 2024.
Comparison
of Years Ended December 31, 2021 and 2022
Net
revenues
Sale
of cloud platform products
Our
cloud platform products consist of standardized software products uploaded to our cloud platform. The revenue from sales of cloud platform
products increased by 363.7% from US$5.55 million for the year ended December 31, 2021 to US$25.74 million for the year
ended December 31, 2022 primarily due to the promotion of our AI super automation platform in 2022. The intelligent Robotic Process
Automation ("RPA") platform primarily includes intelligent process editor which supports customers in creating automation
processes according to different business scenario, and intelligent unmanned robots which supports the configuration and execution of
various task automatically. We entered into sales contracts at significant amounts with three customers in 2022, resulting in a significant
increase in revenue of sale of cloud platform products.
Technology
development service
Our
technology development service provided to customers comprises customized technology development services for specific needs. The revenue
from technology development service increased by 77.6% from US$9.25 million for the year ended December 31, 2021 to US$16.42 million
for the year ended December 31, 2022. Our revenue generated from technology development services was primarily due from three major
contracts, including:
(i)
Operation
and Technical Service Agreement of Intelligent Plan Review Platform Agreement (the "Support Agreement"), pursuant to which
we agreed to provide technical support and co-operation of the drawing review platform ("Drawing Platform") for a term of
three years. As the technical services for Drawing Platform were for specific software upgrades and customer can only receive the benefits
when they accept upgrade specifications, the revenue was recognized at point-in-time. The revenue recognized of technical services for
the Drawing Platform was US$3.24 million for the year ended December 31, 2022.
(ii)
Intelligent
Platform Technical Service Agreement related to intelligent education products, pursuant to which we provided customized technology development
services to develop and deliver the education products under the customer's specifications, including but not limited to intelligent
teaching platform, course learning platform and classroom management platform. The revenue recognized was US$3.60 million for the
year ended December 31, 2022.
(iii)
Intelligent
Virtual Simulation Platform Technical Service Agreement, also related to intelligent education products, pursuant to which we provided
customized technology development services to develop and deliver the video, 3D and VR experimental teaching platforms for primarily,
middle and high school. The revenue recognized was US$2.06 million for the year ended December 31, 2022.
Sale
of software products
Our
software products sold to customers comprising customized software products for specific needs. The revenue from sales of software products
decreased by 76.2% from US$14.88 million for the year ended December 31, 2021 to US$3.55 million for the year ended December
31, 2022. The significant amount in 2021 was primarily due to the major contract of smart graphic review software products sales signed
in 2021 amounted to US$11.88 million and the revenue was fully recognized in 2021.
75
M&S
service
We
provide M&S services for software products contracts which consist of future software updates, upgrades, and enhancements as well
as technical product support services, and the provision of updates and upgrades on a when-and-if-available basis. The revenue from sales
of M&S service decreased by 12.4% from US$2.77 million for the year ended December 31, 2021 to US$2.43 million for
the year ended December 31, 2022, primarily due to the decrease of sale of software products, and the accompanying M&S services
also decreased.
Sale
of hardware products
Our
hardware products sold to customers comprising the hardware designed for specific needs. The revenue from sales of hardware products
decreased by 38.3% from US$0.08 million for the year ended December 31, 2021 to US$0.05 million for the year ended December
31, 2022.
Cost
of revenues
Our
cost of revenues increased by 59.7% from US$10.89 million for the year ended December 31, 2021 to US$17.38 million for
the year ended December 31, 2022, which was primarily attributed to increase cost of materials, and partially offset by the decreased
cloud hosting services fees:
●
The
                                            cost of materials increased by 509.4% from US$1.35 million for the year ended December 31,
                                            2021 to the US$8.25 million for the year ended December 31,2022. The increase of cost of
                                            materials in 2022 was primarily for the completion of technology development for Intelligent
                                            Platform Technical Service Agreement and Intelligent Virtual Simulation Platform Technical
                                            Service Agreement, and software products upgrade demand from customers.
●
Staff
                                            costs increased by 33.1% from US$5.64 million for the year ended December 31, 2021
                                            to US$7.50 million for the year ended December 31, 2022, primarily due to the fact
                                            that we provided more labor investment to support increased sale of cloud platform products
                                            and the continuing services provided to maintain the operation of Drawing Platform.
●
Cloud
                                            hosting services fees decreased by 64.2% from US$3.67 million for the year ended December
                                            31, 2021 to the US$1.31 million for the year ended December 31,2022, primarily due to our
                                            improved utilization of the cloud hosting services to reduce idle cost.
Gross
Profit and Gross Profit Margin
We
have different types of products and services that have different profit margins. For the years ended December 31, 2021 and
2022, our gross profit was US$21.64 million and US$30.81 million, respectively, and our gross profit margins were 66.5% and
63.9%, respectively.
Gross
profit for sales increased by 42.4%, but the gross margins decreased slightly, primarily impacted by the technology development services
to develop Intelligent Platform related to education products, and Intelligent Virtual Simulation Platform, both with high cost of materials
and lower margins.
Selling
expenses
Our
selling expenses decreased by 15.3% from US$4.62 million for the year ended December 31, 2021 to US$3.91 million for the
year ended December 31, 2022, which was primarily attributable to (i) a decreased travel expenses and entertainment expenses of
US$0.26 million due to the lock-down of Shanghai from March to May in 2022, and (ii) decreased staff salary of US$0.30 million in 2022.
76
General
and administrative expenses
Our
general and administrative expenses decreased by 9.4% from US$6.66 million for the year ended December 31, 2021 to US$6.03 million
for the year ended December 31, 2022, which was primarily attributable to (i) a decrease in professional service expenses of
US$0.62 million as we recorded Initial Public Offering related professional service fees into deferred offering costs, and (ii) decreased
rental and utilities expenses of US$0.42 million, primarily due to one of Hong Kong offices termination of the lease, partially offset
by (i) increased bad debt expenses related to receivables of US$0.52 million.
Research
and development expenses
Our
research and development expenses increased by US$18.64 million from US$5.36 million for the year ended December 31, 2021 to
US$24.00 million for the year ended December 31, 2022, which was primarily attributable to the increase of professional service
fee of US$18.8 million for industrial internet platform research and other cloud platform products.
Other
income/(loss), net
Other
income primarily consists of: (i) government grants, which primarily include government support for project development; (ii) interest
expense of borrowings from banks and third parties; (iii) investment gain/(loss), which represent gain or losses from long-term
equity investment; and (iv) non-operating expenses, which primarily includes the loss of disposal of non-current assets.
The
other loss was US$2.21 million for the year ended December 31, 2022, compared with the other loss amounted to US$1.08 million
for the year ended December 31, 2021. The fluctuation was mainly due to the decrease of the government grants and the increase of
interest expenses. We recognized government subsidies for scientific research in the amount of US$0.85 million and US$0.22 million
for the years ended December 31, 2021 and 2022, respectively. In addition, we recognized interest expenses of US$1.87 million
and US$2.44 million for the years ended December 31, 2021 and 2022, respectively.
Income
tax benefits/(expenses)
Income
tax expenses were US$0.66 million in 2022, compared with income tax expenses of US$0.55 million in 2021. The fluctuation was
primarily due to the increase valuation allowance of deferred tax assets we recognized in 2022, We will invest significantly in the research
and development to improve our products and service, and as we are entitled to an additional deduction of 100% of research and development
expenses from January 1, 2023, we expect it more likely than not that all of the deferred tax assets will not be realized as the VIE
is not expect to generate enough taxable income to utilize all of the deferred tax assets in the future, and thus, we recognized an additional
$1.72 million of valuation allowance of the deferred tax assets of the VIE.
Net
income
As
a result of the foregoing, we had net loss of US$6.01 million in 2022, compared with a net income of US$3.37 million in 2021.
Comparison
of Years Ended December 31, 2020 and 2021
Net
revenues
Sale
of software products
Our
software products sold to customers comprising customized software products for specific needs. The revenue from sales of software products
increased by 191.8% from US$5.10 million for the year ended December 31, 2020 to US$14.88 million for the year ended December 31,
2021, primarily due to two major contracts signed in 2021, providing smart graphic review software products amounted to US$11.88 million
and technical services amounted to US$1.51 million, respectively.
We
entered into an Intelligent Drawing Review Platform License Agreement (the "License Agreement"). Pursuant to the terms of
the License Agreement, we agreed to provide China Construction with the Drawing Platform. The Drawing Platform was delivered, installed
and commissioned in accordance with the License Agreement in 2021. The revenue recognized for license of the Drawing Platform was US$11.88 million
in 2021.
77
Technology
development service
Our
technology development service provided to customers comprises customized technology development services for specific needs. The revenue
from technology development service increased by 44.4% from US$6.40  million for the year ended December 31, 2020 to US$9.25 million
for the year ended December 31, 2021.
In
connection with the License Agreement, we also entered into the Support Agreement with the customer, which was described under "Net
revenues of Comparison of Years Ended December 31, 2021 and 2022" immediately above. Pursuant to the terms of the Support Agreement,
we have agreed to provide technical support and co-operation of the Drawing Platform for a term of three years. During the term
of the Support Agreement, the customer, with the consent of us, may license the use of the Drawing Platform to third parties. In such
event, we shall be entitled to receive 30% of the license fee paid to the customer by any third party. The revenue recognized of technical
services for the Drawing Platform was US$1.51 million in 2021.
Sale
of cloud platform products
Our
cloud platform products, which is a newly established revenue stream in 2021, consist of standardized software products uploaded to our
cloud platform. The revenue from sales of cloud platform products increased from nil for the year ended December 31, 2020 to US$5.55 million
for the year ended December 31, 2021.
M&S
service
We
provide M&S services for software products contracts which consist of future software updates, upgrades, and enhancements as well
as technical product support services, and the provision of updates and upgrades on a when-and-if-available basis. The revenue from sales
of M&S service increased by 43.1% from US$1.94 million for the year ended December 31, 2020 to US$2.78 million for
the year ended December 31, 2021, primarily due to more residence service provided to customers in 2021.
Cost
of revenues
Our
cost of revenues increased by 50.6% from US$7.23 million for the year ended December 31, 2020 to US$10.89 million for
the year ended December 31, 2021, which was primarily attributable to the increased cost of US$3.67 million in cloud hosting
services fees for the new revenue stream. Staff costs increased by 4.3% from US$5.41 million for the year ended December 31,
2020 to US$5.64 million for the year ended December 31, 2021, primarily due to increased salaries of technical personnel. Cost
of materials decreased by 9.7% from US$1.50 million for the year ended December 31, 2020 to US$1.35 million for the year
ended December 31, 2021, primarily due to decreased demand of hardware products.
Gross
Profit and Gross Profit Margin
Gross
profit represents our revenue less cost of sales. Our gross profit margin represents our gross profit as a percentage of our revenue.
We have different types of products and services that have different profit margins. For the years ended December 31, 2020
and 2021, our gross profit was US$6.63 million and US$21.64 million, respectively, and our gross profit margins were 47.8%
and 66.5%, respectively.
Gross
profit for sales increased by 226.4%, primarily due to the major contract of smart graphic review software products sales incurred less
cost of revenues. For this major contract, our technology accumulation has reached a milestone and the software products required minimal
cost to update or customize, resulting in high profit margin.
Selling
expenses
Our
selling expenses increased by 1.2% from US$4.57 million for the year ended December 31, 2020 to US$4.62 million for the
year ended December 31, 2021, which remained relatively stable. We have accumulated customer resources for years and signed
several major contracts in 2021.
78
General
and administrative expenses
Our
general and administrative expenses increased by 16.9% from US$5.69 million for the year ended December 31, 2020 to US$6.66 million
for the year ended December 31, 2021, which was primarily attributable to (i) an increase in bad debt expenses related to receivables
from third parties of US$1.38 million, which lent to former business partners of us prior to fiscal year of 2019, and (ii) increased
professional services fees of US$0.53 million, partially offset by (i) decreased bad debt expenses related to customer receivables
of US$0.49 million due to amount received from customers, (ii) decreased rental expenses of US$0.36 million, and (iii) decreased
staff salaries and benefits of US$0.16 million in 2021.
Research
and development expenses
Our
research and development expenses increased by 26.6% from US$4.24 million for the year ended December 31, 2020 to US$5.36 million
for the year ended December 31, 2021, which was primarily attributable to the increase of salaries for research staff of US$0.69 million
and professional service fee of US$0.31 million.
Other
income/(loss), net
Other
income primarily consists of: (i) government grants, which primarily include government support for project development; (ii) interest
expense of borrowings from banks and third parties; (iii) investment gain/(loss), which represent gain or losses from long-term
equity investment; and (iv) non-operating expenses, which primarily includes the loss of disposal of non-current assets.
The
other income was US$0.58 million for the year ended December 31, 2020, compared with the other loss was US$1.08 million
for the year ended December 31, 2021. The fluctuation was mainly due to the decrease of the government grants and the increase of
interest expenses. We recognized government subsidies for scientific research in the amount of US$1.70 million and US$0.85 million
for the years ended December 31, 2020 and 2021, respectively. In addition, we recognized interest expenses of US$1.03 million
and US$1.87 million for the years ended December 31, 2020 and 2021, respectively.
Income
tax benefits/(expenses)
Income
tax expense was US$0.55 million in 2021, compared with income tax benefit was US$0.24 million in 2020. The fluctuation was
primarily due to the increase in income.
Net
income
As
a result of the foregoing, we earned net income of US$3.37 million in 2021, compared with a net loss of US$7.06 million in
2020.
B.
Liquidity and Capital Resources.
As
of December 31, 2021 and 2022, we had US$1.31 million and US$1.03 million in cash and cash equivalents, respectively.
Our cash and cash equivalents primarily consist of cash on hand. As of December 31, 2022, the VIE had total expected cash payment of
US$4.34 million of convertible loans, including principal and interests. The VIE intends to settle the remaining balance of the convertible
loans by cash through cash flow from operations, bank borrowings and other financing sources including financial support from related
parties. From January to April, 2023, Fumei Shi, Sunny Concord International Ltd., Senbiao Hu, Guoqiang Chen and Jun Xu entered into
a series of extension agreements with the VIE. In the latest extension agreement in April 2023, Guoqiang Chen, Sunny Concord International
Ltd. and Jun Xu extended the maturity date of convertible loans to May 31, 2023 with annual interest rate of 12%, 15% and 15%, respectively.
Pursuant to the extension agreements, the loans would be settled in cash without conversion options.
In
March and April, 2023, the VIE has repaid principal and interest of the convertible loans to Senbiao Hu and Fumei Shi, in amount of US$0.46
million and US$1.77 million, respectively.
79
In
March, 2023, we completed our initial public offering and was listed on the Nasdaq Global Market under the symbol
"AIXI". 5,700,000 American depositary shares (each, an "ADS", collectively, "ADSs"), each
represents one-third of an ordinary shares, were issued at a price of $6.8 per share for net proceeds of approximately $35.44
million, after deducting underwriting discounts, commissions and other offering expenses of $3.32 million. We intend to use the net
proceeds from the offering for research and development, investment in technology infrastructure, marketing and branding, and other
capital expenditure, and other general corporate purpose.
Xiao-I
is a holding company with no operations of its own. Xiao-I conducts its operations in China primarily through the PRC operating entities
in China. As a result, although other means are available for us to obtain financing at the holding company level, Xiao-I's ability
to pay dividends and other distributions to its shareholders and to service any debt it may incur may depend upon dividends and other
distributions paid by Xiao-I's PRC subsidiaries, which relies on dividends and other distributions paid by the PRC operating entities
pursuant to the VIE Agreements. If any of these entities incurs debt on its own in the future, the instruments governing such debt may
restrict its ability to pay dividends and other distributions to Xiao-I.
In
addition, dividends and distributions from WFOE and the VIE are subject to regulations and restrictions on dividends and payment to parties
outside of China. Applicable PRC law permits payment of dividends to Xiao-I by WFOE only out of net income, if any, determined in accordance
with PRC accounting standards and regulations. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years
have been offset by general reserve fund and profits (if general reserve fund is not enough). Profits retained from prior fiscal years
may be distributed together with distributable profits from the current fiscal year. In addition, registered share capital and capital
reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. In
contrast, there is presently no foreign exchange control or restrictions on capital flows into and out of Hong Kong. Hence, Xiao-I's
Hong Kong subsidiary is able to transfer cash without any limitation to the Cayman Islands under normal circumstances.
Further,
the PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the
PRC. Xiao-I's WFOE generates primarily all of its revenue in Renminbi, which is not freely convertible into other currencies.
As a result, any restriction on currency exchange may limit the ability of Xiao-I's WFOE to use its Renminbi revenues to pay dividends
to Xiao-I. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process
may be put forward by State Administration of Foreign Exchange (the "SAFE") for cross-border transactions falling under both
the current account and the capital account. Any limitation on the ability of Xiao-I's WFOE to pay dividends or make other kinds
of payments to Xiao-I could materially and adversely limit its ability to grow, make investments or acquisitions that could be beneficial
to our business, pay dividends, or otherwise fund and conduct our business.
Additionally,
the transfer of funds among the PRC operating entities are subject to the Provisions on Private Lending Cases, which was implemented
on January 1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations.
The Provisions on Private Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated
PRC operating entity's operations. Xiao-I or the PRC operating entities have not been notified of any other restriction which could
limit the PRC operating entities' ability to transfer cash among each other. In the future, cash proceeds from overseas financing
activities, including the IPO proceeds, may be transferred by Xiao-I to AI Plus, and then transferred to Xiao-i Technology, and then
transferred to WFOE via capital contribution or shareholder loans, as the case may be. Cash proceeds may flow to Shanghai Xiao-i from
WFOE pursuant to certain contractual arrangements between WFOE and Shanghai Xiao-i as permitted by the applicable PRC regulations. As
a result of these PRC laws and regulations, the PRC operating entities are restricted in their ability to transfer a portion of their
net assets to the Company.
As
of December 31, 2021 and 2022, US$1,254,528 and US$908,614 of cash and cash equivalents were denominated in RMB, US$15,170 and US$11,224
of cash and cash equivalents were denominated in US dollars, US$42,148 and US$106,407 of cash and cash equivalents were denominated in
Hong Kong dollars, respectively.
80
Cash
Flows
The
following table sets forth a summary of our cash flows for the periods indicated:
For the Years Ended December 31,
2020
2021
2022
Net cash used in operating activities
$
(3,463,094
)
$
(11,887,122
)
$
(10,923,346
)
Net cash (used in)/provided by investing activities
(25,825
)
77,259
(2,856,416
)
Net cash provided by financing activities
1,792,682
12,192,952
13,506,600
Effects of exchange rate changes on cash and cash equivalents and restricted cash
(797,954
)
101,728
(12,439
)
Net (decrease)/increase in cash, cash equivalents and restricted cash
(2,494,191
)
484,817
(285,601
)
Cash and cash equivalents at the beginning of the year
3,321,220
827,029
1,311,846
Cash and cash equivalents at the end of the year
$
827,029
$
1,311,846
$
1,026,245
Operating
Activities
Our net cash used in operating activities was
US$10.92 million in 2022, compared to net loss of US$6.01 million. The principal changes accounting for the difference between
our net income and our net cash used in operating activities in 2022 were an adjustment of $3.71 million non-cash items, an increase
in accounts receivable of US$15.01 million, and an increase in inventories of US$2.13 million, offset by the increase in accounts
payable of US$4.12 million, and an increase in accrued expenses and other current liabilities of US$5.16 million. The increase
in accounts receivable was mainly due to the growth of net revenues. The increase in accrued expenses and other current liabilities was
primarily due to the increase of payroll payable and interest payable.
Our
net cash used in operating activities was US$11.89 million in 2021, compared to net income of US$3.37 million. The principal
changes accounting for the difference between our net income and our net cash used in operating activities in 2021 were an adjustment
of $3.55 million non-cash items, an increase in accounts receivable of US$23.39 million, a decrease in lease payment liabilities
of US$1.07 million, and partially offset by the increase in accounts payable of US$3.39 million, an increase in accrued expenses
and other current liabilities of US$2.69 million and an increase in deferred revenue of US$1.04 million. The increase in accounts
receivable and deferred revenue was mainly due to the growth of our software products sales. The decrease in lease payment liabilities
was due to the termination of several rental properties. The increase in accrued expenses and other current liabilities was primarily
due to the increase of loans from third parties and the related interest payable.
Our
net cash used in operating activities was US$3.46 million in 2020, compared to net loss of US$7.06 million. The principal changes
accounting for the difference between our net income and our net cash used in operating activities in 2020 were an adjustment of $2.25 million
non-cash items, an increase in non-current accrued liabilities of US$5.04 million, an increase in accrued expenses and other current
liabilities of US$1.02 million, and a decrease of prepaid expenses and other current assets of US$0.96 million, partially offset
by an increase in prepaid expenses and other non-current assets of US$3.79 million and a decrease in lease payment liabilities of
US$1.31 million. The net changes of prepaid expenses and other assets were primarily due to the increase of prepaid lawsuit case
acceptance fee. The net changes of accrued expenses and other liabilities were primarily due to the increase of litigation related payable,
which mainly consisted of the litigation fee of the lawsuit with Apple paid by the third parties on behalf of us.
Investing
Activities
Our
net cash used in investing activities amounted to US$2.86 million in 2022, primarily due to purchase of equity method investment
of US$2.75 million.
Our
net cash provided by investing activities amounted to US$0.08 million in 2021, mainly due to proceeds of US$0.10 from disposal of
property and equipment, partially offset by purchase of property and equipment of US$0.02 million.
Our
net cash used in investing activities amounted to US$0.03 million in 2020, due mainly to purchase of property and equipment of US$0.02 million
and purchase of intangible assets of US$0.02 million, partially offset by proceeds of US$0.01 million from disposal of property
and equipment.
81
Financing
Activities
Our net cash provided by financing activities
amounted to US$13.51 million in 2022, mainly due to proceeds of US$21.25 million from short-term borrowings from banks, proceeds
of US$2.32 million from related parties and proceeds of US$7.95 million from third-parties borrowings, partially offset by
repayments of short-term borrowings from banks of US$10.63 million, repayments of borrowings from related parties of US$2.31 million,
repayments of borrowings from third-parties of US$2.07 million, repayments of convertible loans of US$1.63 million and deferred
offering costs of US$1.36 million.
Our
net cash provided by financing activities amounted to US$12.19 million in 2021, mainly due to proceeds of US$11.39 million
from short-term borrowings, proceeds of US$16.76 million from related parties and proceeds of US$15.12 million from third-parties
borrowings, partially offset by repayments of short-term borrowings of US$16.47 million, repayments of borrowings from related parties
of US$6.89 million and repayments of borrowings from third-parties of US$7.72 million.
Our
net cash provided by financing activities amounted to US$1.79 million in 2020, mainly due to proceeds of US$10.39 million from
short-term borrowings and US$2.91 million and borrowings from third-parties, partially offset by repayments of short-term borrowings
of US$11.01 million and repayments of borrowings from third-parties of US$0.51 million.
Disclosure
of Contractual Obligations
The
following table sets forth our contractual obligations as of December 31, 2022:
Payment Due by Period
Within one year
1 – 3 years
Total
Operating lease payment
$
526,810
$
261,661
$
788,471
Short-term bank borrowings
$
18,784,459
$
-
$
18,784,459
Convertible loans
$
3,754,269
$
-
$
3,754,269
Loans from related parties and third parties
$
7,049,601
$
11,885,729
$
18,935,330
Operating
lease obligations consist of leases in relation to certain offices and buildings, plants and other property for our sales and after-sales
network. Borrowings are short-term bank borrowings due in one year, and loans from related parties and third parties are for the purpose
of ordinary business operation.
Convertible
loans could be extended with both parties' consensus. In March and April, 2023, the VIE has repaid principal and interest of the
convertible loans to Senbiao Hu and Fumei Shi, in amount of US$0.46 and US$1.77 million, respectively.
Other
than those shown above, we did not have any other significant capital commitments and long-term obligations as of December 31, 2022.
Off-Balance
Sheet Arrangements
From February to October 2022, we pledged eleven
patents to obtain US$ 28.6 million credit limits from banks, with one to five years term. In October and November 2022, we pledged five
patents to a third party to obtain principal accounted for US$2,899,728 (RMB20 million) loans, and the interests were calculated under
effective interest method. These patents were not recorded in our consolidated balance sheets as they do not meet all the capitalization
criteria.
Other
than those shown above, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholder's
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 product development services with us.
82
C.
Research and Development, Patents and Licenses, etc.
See "Item 4. Information on the Company—B. Business Overview"
and "Item 5. Operating and Financial Review and Prospects—A. Operating Results."
D
.
Trend Information
.
Other
than as disclosed elsewhere in this report, we are not aware of any trends, uncertainties, demands, commitments or events for the year
ended December 31, 2020, 2021 and 2022 that are reasonably likely to have a material and adverse effect on our net revenues, income,
profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative
of future results of operations or financial conditions.
E.
Critical Accounting Estimates.
We
prepare our consolidated financial statements in accordance with U.S. GAAP, which requires our management to make estimates that
affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as
well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences
between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates
on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations
for the future based on available information. We evaluate these estimates on an ongoing basis.
Our
expectations regarding the future are based on available information and assumptions that we believe to be reasonable, which together
form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an
integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies
require a higher degree of judgment than others in their application.
We
consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that
were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely
to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material
impact on our financial condition or results of operations. When reading our consolidated financial statements, you should consider our
selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity
of reported results to changes in conditions and assumptions.
Out
of our significant accounting policies, which are described in Note 2 — Summary of Significant Accounting Policies of
our consolidated financial statements included elsewhere in this Form 20-F, certain accounting policies are deemed "critical,"
as they require management's highest degree of judgment, estimates and assumptions.
While
management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual
results may differ significantly from those estimates under different assumptions and conditions. We believe that the following critical
accounting estimates involve the most significant judgments used in the preparation of our financial statements.
(a)
Allowance for doubtful accounts
Accounts
receivable, net are stated at the original amount less an allowance for doubtful accounts. Accounts receivable are recognized in the
period when we have provided services to its customers and when its right to consideration is unconditional. We review the accounts receivable
on a periodic basis and make specific allowances when there is doubt as to the collectability of individual balances. We consider many
factors in assessing the collectability of its receivables, such as the age of the amounts due, the customer's payment history,
credit-worthiness and other specific circumstances related to the accounts. An allowance for doubtful accounts is recorded in the period
in which a loss is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted.
We made a provision of bad debt allowance amounted to US$758,019, US$270,649 and US$2,149,176 as of December 31, 2020, 2021 and
2022, respectively.
83
(b)
Valuation of deferred tax assets
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. Current income taxes are provided for in accordance with the laws of the relevant taxing
authorities.
As of December 31 2021 and 2022, we had net operating loss carryforwards
of approximately $36,288,770 and $28,198,108, respectively. As of December 31, 2021 and 2022, deferred tax assets from the net operating
loss carryforwards amounted to $6,239,757 and $4,475,379, respectively. Due to our history of recurrent losses, we did not expect to generate
enough profit to utilize the deferred tax assets in the future. We have recognized an increase to the valuation allowance of $570,253,
$810,159 and $1,723,347 for the years ended December 31, 2020, 2021 and 2022, respectively. While we consider the facts above,
our projections of future income qualified tax-planning strategies may be changed due to the macroeconomic conditions and our business
development. The deferred tax assets ("DTAs") could be utilized in the future years if we make profits in the future,
the valuation allowance shall be reversed.
The
provisions of ASC 740-10-25, "Accounting for Uncertainty in Income Taxes," prescribe a more-likely-than-not threshold
for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This
interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred
income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The
PRC operating entities in PRC are subject to examination by the relevant tax authorities. According to the PRC Tax Administration and
Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the
taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment
of taxes is more than RMB 100,000 ($14,930). In the case of transfer pricing issues, the statute of limitation is ten years. There
is no statute of limitation in the case of tax evasion. Penalties and interest incurred related to underpayment of income tax are classified
as income tax expense in the period incurred.
We
did not accrue any liability, interest or penalties related to uncertain tax positions in its provision for income taxes line of its
consolidated statements of operations for the years ended December 31, 2020, 2021 and 2022, respectively. We do not expect
that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
(c)    
transaction price allocation between software income and maintenance service income
We
provide M&S service along with the sale of software products and service for some contracts. As M&S service constitute a single
performance obligation, we use 10% of total transaction price to allocate to the M&S service for contracts with no specified price
term for M&S service renewal, due to the fact that contracts with specified renewal price were generally set to be approximately
10% of the total contract amount. We recognized $1,937,887, $2,772,795 and $2,429,526 revenue of the 10% allocation to M&S service
for the years ended December 31, 2020, 2021 and 2022, respectively.
Recent
Accounting Pronouncements
A
description of recent relevant accounting pronouncements is included in Note 2 "Summary of Principal Accounting Policies"
of our Consolidated Financial Statements.
84
Item
6.  Directors, Senior Management and Employees.
A.
Directors and Senior Management.
The
following table sets forth information regarding our directors and executive officers as of the date of this annual report.
Directors and Executive Officers
Age
Position/Title
Hui Yuan(2)(3)(4)
49
Chief Executive Officer, Director, Chairman of the Board of Directors
Wei Weng
37
Chief Financial Officer
Xiaomei Wu(5)
53
Director
Jun Xu (1)(2)(3)(5)
48
Independent Director
Zhong Lin (1)(2)(3)(5)
53
Independent Director
H. David Sherman (1)(3)(5)
74
Independent Director
(1)
Audit committee member
(2)
Compensation committee member
(3)
Nominating and Corporate Governance committee member
(4)
Executive Director
(5)
Non-Executive Director
The current business address for our executive officers and board of
directors is c/o Xiao-I Corporation, 1F, Building 383, No. 1555 of West Jinshajiang Road, Shanghai, China, 201803.
Director
and Executive Officer Biographies
Mr.
Hui Yuan
Mr. Hui Yuan serves as the CEO and Chairman of the board of directors of Xiao-I Corporation since March 2018. Mr. Yuan
has been the CEO and Chairman of the board of directors of Shanghai Xiao-i since 2009. Prior to that, Mr. Yuan served as the executive
director of Incesoft from 2001 to 2012. Recognized as a pioneer and expert in the field of artificial intelligence, Mr. Yuan's
has been invited to share his thought leadership on numerous world stages, including the World Economic Forum/Davos Forum, Boao Forum
for Asia, and many others. Mr. Yuan continues to drive the success of Shanghai Xiao-i through research and development of natural language
processing cognitive intelligence-related technologies and the commercialization of the resulting technologies. In addition to his leadership
at Shanghai Xiao-i, Mr. Yuan serves as the vice chairman of the Artificial Intelligence Industry Innovation Alliance, the Executive Director
of CCCS, the vice chairman of the Shanghai Artificial Intelligence Development Alliance, the vice chairman of the Shanghai Robot Industry
Association, a member of the All-China Youth Federation and the Shanghai IT Youth Talent Association, and a director and member of the
executive committee of Shanghai Jiading District Federation of Industry and Commerce, among others. Mr. Yuan graduated from Jianghan
University with a major in Computer Application in July 1995 and received his EMBA degree from Guanghua School of Management, Peking
University in July 2021.
Ms.
Wei Weng
Ms. Weng has served as the Chief Financial Officer of Xiao-I Corporation since July 2019. As the CFO, Ms. Weng makes financial
plans for the company, manages and controls operating costs, and supervises the company's financial activities. She has extensive
experience in corporate finance, taxation and auditing. Ms. Weng has been the Chief Financial Officer of Shanghai Xiao-i since 2015.
Prior to joining Shanghai Xiao-i in 2015, she worked in a leading international accounting firm for seven years, and is proficient in
financial accounting, financial regulations and other professional knowledge. She received her bachelor's degree in accounting
and management from Lixin Accounting College in Shanghai in 2008.
Ms.
Xiaomei Wu Ms. Xiaomei Wu is director of Xiao-I Corporation. Ms. Wu serves as a member of Shanghai Xiao-i's supervisory board since
2013, and she has extensive experience in corporate management and corporate fund raising. From March 2017 to September 2020, Ms.
Wu served as the General Manager of Light Control Haiyin Fund in Everbright Holdings Management Service Co., LTD., responsible for the
establishment of the fund, the whole investment process, post-investment management and the establishment and management of the fund
team. From April 2010 to February 2017, Ms. Wu served as the founding partner of Haiyin (Tianjin) Equity Investment Management Co., LTD.,
where she was in charge of capital raising, limited partner management, project investment and post-investment management. From January
2005 to March 2009, Ms. Wu served as the General manager of Beijing Junping Technology Co., LTD., responsible for the overall operation
management of the company. Ms. Wu received her EMBA from Peking University School of Private Economics in May 28, 2009 and her MBA from
Concordia University — Wisconsin in December 2012.
Mr.
Jun Xu
Mr. Jun Xu is an independent director of Xiao-I Corporation. Mr. Xu founded and continues to run Shanghai Liancheng Real Estate
Appraisal and Consulting Co., Ltd., Shanghai Zhonggulian Information Technology Co., Ltd., Shanghai Puruo Information Technology Limited
Partnership, Shanghai Gravel Bank Business Information Consulting Limited Partnership, entities primarily engaged in asset appraisal,
consulting and other related businesses. Mr. Xu has earned titles as a senior member of China's Registered Real Estate Appraiser,
China Registered Land Appraiser, China Registered Real Estate Broker, member of American Institute of Appraisers, member of Royal Institute
of Chartered Surveyors, member of Hong Kong Institute of Surveyors, and executive vice president of Shanghai Real Estate Brokerage Association.
Mr. Xu earned his MBA degree from China Europe International Business School in 2017.
85
Dr.
Zhong Lin
Dr. Zhong Lin is an independent director of Xiao-I Corporation. Dr. Lin possesses more than 25 years' experience
in the areas of international commercial law and is the founder and Managing Partner of Leadvisor Law, a leading China-based business
law firm. Dr. Lin advises clients on a vast array of complex matters spanning private equity, venture capital, foreign direct investment,
cross-border mergers and acquisitions, corporate governance, and antitrust. Prior to founding Leadvisor Law, Dr. Lin was a partner of
the law firm Shanghai Chen & Co. from 2006 to 2021, a partner of the law firm Shanghai Haoliwen from 2003 to 2006, a manager of the
international headquarters of a Big 4 firm's legal practice in Paris, and a lecturer of law at Xiamen University. Dr. Lin's
experience covers various industrial sectors including, inter alia, life sciences, healthcare, automotive and technology, media and telecom.
Dr. Lin is especially active in the antitrust law field. He served as vice director of the Antimonopoly Law Committee of the All China
Lawyers Association, vice chairman of the Competition Law Research Institution of Shanghai Law Society, director of the International
Investment & Antimonopoly Research Committee of Shanghai Lawyers Association, and has served as independent director on two listed
companies in China. Dr. Lin was admitted to the Chinese bar in 1992. He received an LL.B. from Peking University in 1990, and an LL.M
and PhD from Xiamen University in 1993 and 1996 respectively.
Mr.
H. David Sherman
H. David Sherman is an independent director of Xiao-I Corporation. Professor Sherman is a professor at Northeastern
University, specializing in financial and management accounting, and contemporary accounting issues. Professor Sherman's research
areas include shareholder reporting and corporate governance; management and financial accounting, financing and managing new ventures;
service business productivity and data envelopment analysis; and mergers and acquisition performance measurement. Professor Sherman teaches
Northeastern University MBA courses in accounting, control, and global financial statement analysis with a focus on international shareholder
reporting. Professor Sherman currently serves as a board member and chair of the audit committee for Nuvve (NYSE: NVVE), Universe Pharmaceutical
Corp (NYSE: UPC), Lakeshore Acquisition I Corp (NYSE: LAAA), Lakeshore Acquisition II Corp (NYSE: LBBB), and Prime Number Acquisition
I Corp. (NYSE: PNACU). He has served on the board and as audit chair of several U.S. and Chinese businesses, including Kingold Corporation
(NYSE: KGJI), China HGS Real Estate Inc. (NASDAQ: HGSH), Agfeed Corporation, Dunxin (DXF — NYSE/Amer) and China Growth Alliance,
Ltd. He also serves on two nonprofit boards: American Academy of Dramatic Arts, and D-Tree International. Professor Sherman was on the
faculty of the Sloan School of Management at Massachusetts Institute of Technology from 1981 to 1984.
Board
Diversity
The
table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.
Board
    Diversity Matrix
Country
    of Principal Executive Offices
China
Foreign
    Private Issuer
Yes
Disclosure
    Prohibited Under Home Country Law
No
Total
    Number of Directors
5
Part
    I: Gender Identity
Female
Male
Non-Binary
Did
                                            Not
Disclose
    Gender
Directors
1
4
0
0
Part
    II: Demographic Background
Underrepresented
    Individual in Home Country Jurisdiction
1
LGBTQ+
0
Did
    Not Disclose Demographic Background
0
86
Family
Relationships
There
are no family relationships among the directors and executive officers of the Company.
B.
Compensation.
Compensation
of Directors and Executive Officers
For the fiscal year ended December 31, 2021, we
paid an aggregate of US$113,376 in cash to our executive officers, and we paid US$42,987 to our non-executive director. For the fiscal
year ended December 31, 2022, we paid an aggregate of US$95,014 in cash to our executive officers, and we paid US$40,190 to our non-executive
director. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive
officers. WFOE and the PRC operating entities are required by law to make contributions equal to certain percentages of each employee's
salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident
fund.
2023
Share Incentive Plan
On
November 30, 2022, the Company adopted our 2023 share incentive plan (the "2023 Plan"), to promote the success and enhance
the value of the Company by linking the personal interests of the Directors, Employees, and Consultants to those of the Company's
shareholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company's
shareholders. Under the 2023 Plan, the maximum aggregate number of Ordinary Shares which may be issued pursuant to all awards under such
plan shall initially be 2,600,000, provided, that if the aggregate number of Ordinary Shares reserved and available for future grants
of awards under the 2023 Plan falls below 3.0% of the total Ordinary Shares in issue and outstanding on the last day of the immediately
preceding calendar year (the "Limit"), such number shall automatically be increased so that the aggregate number of Ordinary
Shares reserved and available for future grants of awards under the 2023 Plan shall be equal to the Limit on January 1 thereafter, assuming,
for purposes of determining the number of Ordinary Shares outstanding on such date, that all preferred shares, options, warrants, convertible
notes and other equity securities that are convertible into or exercisable or exchangeable for Shares (whether or not by their terms
then currently convertible, exercisable or exchangeable) that were outstanding on such date, are deemed to have been so converted, exercised
or exchanged. As of the date of this annual report, we have not granted any awards under the 2023 Plan.
The
following paragraphs summarize the principal terms of the 2023 Plan.
Types
of awards
. The 2023 Plan permits the awards of options, restricted shares, restricted share units or any other type of awards approved
by our board of directors or compensation committee of the board.
Plan
administration
. Our board of directors or the compensation committee shall administer the 2023 Plan. The board or the committee shall
determine, among other things, the participants to receive awards, the type and number of awards to be granted to each participant, and
the terms and conditions of each award grant.
87
Award
agreement
. Awards granted under the 2023 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations
for each award, which may include the term of the award, the provisions applicable in the event of the grantee's employment or
service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility
.
We may grant awards to our employees, directors and consultants.
Vesting
schedule
. In general, the plan administrator or, in its absence, the compensation committee determines the vesting schedule, which
is specified in the relevant award agreement.
Exercise
of awards
. The exercise price per share subject to an option is determined by the plan administrator or, the compensation committee
and set forth in the award agreement, which may be a fixed price or a variable price related to the fair market value of the shares.
The vested portion of option will expire if not exercised prior to the time as the plan administrator or, the compensation committee
determines at the time of its grant.
Transfer
restrictions
. Awards may not be transferred in any manner by the eligible participant other than in accordance with the limited exceptions,
such as transfers to our company or a subsidiary of ours, transfers to the immediate family members of the participant by gift, the designation
of a beneficiary to receive benefits if the participant dies, permitted transfers or exercises on behalf of the participant by the participant's
duly authorized legal representative if the participant has suffered a disability, or, subject to the prior approval of the plan administrator
or our executive officer or director authorized by the plan administrator, transfers to one or more natural persons who are the participant's
family members or entities owned and controlled by the participant and/or the participant's family members, including but not limited
to trusts or other entities whose beneficiaries or beneficial owners are the participant and/or the participant's family members,
or to such other persons or entities as may be expressly approved by the plan administrator, pursuant to such conditions and procedures
as the plan administrator may establish.
Termination
and amendmen
t. Unless terminated earlier, the 2023 Plan has a term of ten years. Our board of directors may terminate, amend or modify
the plan, subject to the limitations of applicable laws. However, no such action may adversely affect in any material way any award previously
granted without prior written consent of the participant.
Limitation
on Liability and Other Indemnification Matters
Cayman Islands law does not limit the extent to which a company's
memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision
may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the
consequences of committing a crime. Our amended and restated memorandum and articles of association provide that that we shall indemnify
our directors and officers, and their personal representatives, against all actions, proceedings, costs, charges, expenses, losses, damages
or liabilities incurred or sustained by such persons, other than by reason of such person's dishonesty, willful default or fraud,
in or about the conduct of our company's business or affairs (including as a result of any mistake of judgment) or in the execution
or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs,
expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings
concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere.
In
addition, we entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree
to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with
claims made by reason of their being a director or officer of our company.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in
the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
C.
Board Practices.
Our board of directors consists of five directors.
A director is not required to hold any shares in our company to qualify to serve as a director. A director who is in any way, whether
directly or indirectly, interested in a contract or transaction or proposed contract or transaction with our company is required to declare
the nature of his interest at a meeting of our directors. A director may vote with respect to any contract or transaction or proposed
contract or transaction notwithstanding that he may be interested therein, and if she/he does so his vote shall be counted and he may
be counted in the quorum at any meeting of our directors at which any such contract or transaction is considered. Our directors may exercise
all the powers of our company to borrow money, mortgage or charge its undertaking, property and uncalled capital and to issue debentures
or other securities whenever money is borrowed or as security for any debt, liability or obligation of our company or of any third party.
Director
Independence
Our
board has reviewed the independence of our directors, applying Nasdaq independence standards. Based on this review, the board determined
that each H. David Sherman, Jun Xu and Zhong Lin is "independent" within the meaning of the Nasdaq Global Market rules. In
making this determination, our board considered the relationships that each of these non-employee director candidates has with us and
all other facts and circumstances our board deemed relevant in determining their independence. As required under applicable Nasdaq Global
Market rules, our independent directors will meet on a regular basis as often as necessary to fulfill their responsibilities, including
at least annually in executive session without the presence of non-independent directors and management.
88
Committees
of the Board of Directors
We
have three committees under the board of directors with a charter for each of the three committees. Each committee's members and
functions are described below.
Audit
Committee
. Our audit committee consists of H. David Sherman, Jun Xu and Zhong Lin, and is chaired by H. David Sherman. Each committee
member satisfies the "independence" requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Global Market and
meets the independence standards under Rule 10A-3 under the Exchange Act. We have determined that H. David Sherman qualifies as an "audit
committee financial expert." The audit committee oversees our accounting and financial reporting processes and the audits of the
financial statements of our company. The audit committee is responsible for, among other things:
●
selecting
                                            the independent registered public accounting firm and pre-approving all auditing and non-auditing
                                            services permitted to be performed by the independent registered public accounting firm;
●
reviewing
                                            with the independent registered public accounting firm any audit problems or difficulties
                                            and management's response;
●
reviewing
                                            and approving all proposed related party transactions, as defined in Item 404 of Regulation
                                            S-K under the Securities Act;
●
discussing
                                            the annual audited financial statements with management and the independent registered public
                                            accounting firm;
●
reviewing
                                            major issues as to the adequacy of our internal controls and any special audit steps adopted
                                            in light of material control deficiencies;
●
annually
                                            reviewing and reassessing the adequacy of our audit committee charter;
●
meeting
                                            separately and periodically with management and the independent registered public accounting
                                            firm; and
●
reporting
                                            regularly to the board.
Compensation
Committee
. Our compensation committee consists of Hui Yuan, Jun Xu and Zhong Lin,
and is chaired by Hui Yuan. Except for Hui Yuan, Jun Xu and Zhong Lin each satisfies the "independence" requirements of Rule
5605(c)(2) of the Listing Rules of the Nasdaq Global Market. The compensation committee assists the board in reviewing and approving the
compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer
may not be present at any committee meeting during which his compensation is deliberated upon. The compensation committee is responsible
for, among other things:
●
reviewing
                                            the total compensation package for our executive officers and making recommendations to the
                                            board with respect to it;
●
reviewing
                                            the compensation of our non-employee directors and making recommendations to the board with
                                            respect to it; and
●
periodically
                                            reviewing and approving any long-term incentive compensation or equity plans, programs or
                                            similar arrangements, annual bonuses, and employee pension and welfare benefit plans.
89
Nominating
and Corporate Governance Committee
. Our nominating and corporate governance committee consists of Hui Yuan,
Jun Xu, Zhong Lin and H. David Sherman, and is chaired by Hui Yuan. Except for Hui Yuan, Jun Xu, Zhong Lin and H. David Sherman each satisfies
the "independence" requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Global Market. The nominating committee
assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.
The nominating committee is responsible for, among other things:
●
recommending
                                            nominees to the board for election or re-election to the board, or for appointment to fill
                                            any vacancy on the board;
●
reviewing
                                            annually with the board the current composition of the board with regards to characteristics
                                            such as independence, age, skills, experience and availability of service to us;
●
selecting
                                            and recommending to the board the names of directors to serve as members of the audit committee
                                            and the compensation committee, as well as of the nominating committee itself; and
●
monitoring
                                            compliance with our code of business conduct and ethics, including reviewing the adequacy
                                            and effectiveness of our procedures to ensure proper compliance.
Duties
of Directors
Under
Cayman Islands law, our directors owe fiduciary duties to our company, including (i) duty to act in good faith in what the director or
officer believes to be in the best interests of the company as a whole; (ii) duty to exercise powers for the purposes for which those
powers were conferred and not for a collateral purpose; (iii) directors should not improperly fetter the exercise of future discretion;
(iv) duty to exercise powers fairly as between different sections of shareholders; (v) duty to exercise independent judgment; and (vi)
duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests.
Our directors also owe to our company a duty to act with skill and care. It was previously considered that a director need not exhibit
in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.
However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these
authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance
with our memorandum and articles of association, as amended and restated from time to time. We have the right to seek damages if a duty
owed by our directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name
if a duty owed by our directors is breached.
Terms
of Directors
Our
directors may be elected by a resolution of our board of directors, or by an ordinary resolution of our shareholders. Our directors are
not subject to a term of office and hold office until such time as they are removed from office by ordinary resolution of the shareholders.
A director will cease to be a director if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition
with his creditors; (ii) dies or is found by our company to be or becomes of unsound mind, (iii) resigns his office by notice in writing
to the company, or (iv) without special leave of absence from our board, is absent from three consecutive board meetings and our directors
resolve that his office be vacated.
D.
Employees.
As
of March 31, 2023, we had 352 full-time employees. The following table sets forth the number of our full-time employees by function
as of March 31, 2023:
Function/Department
Management
58
Sales and Marketing
51
Research and Development
214
Production
29
Total
352
90
Our
success depends on our ability to attract, retain and motivate qualified employees. As part of our human resource strategy, we offer
employees a dynamic work environment, competitive salaries, performance-based cash bonuses and other incentives. As a result, we have
generally been able to attract and retain qualified personnel and maintain a stable core management team.
We
primarily recruit our employees through on-campus job fairs, recruitment agencies and online channels, including our corporate website
and third-party employment websites. We provide regular training and reviews to our employees to enhance their performance.
Substantially
all of our employees as of March 31, 2023 are stationed in China. We enter into standard employment, confidentiality and non-compete
agreements with our employees. As required by PRC laws and regulations, we participate in housing fund and various employee social security
plans that are organized by applicable local municipal and provincial governments, including housing, pension, medical, work-related
injury and unemployment benefit plans.
None
of our employees are currently represented by labor unions. We believe that we maintain good working relationship with our employees
and we have not experienced any material labor disputes.
E.
Share Ownership.
For
information regarding the share ownership of directors and officers, see "Item 7.A. Major Shareholders and Related Party Transactions—Major
Shareholders." For information as to our equity incentive plan, see "Item 6.B. Director, Senior Management and Employees—Compensation—2023
Share Incentive Plan."
F.
Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation.
Not
applicable.
Item
7.  Major Shareholders and Related Party Transactions.
A.
Major Shareholders.
The
following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange
Act, of our ordinary shares as of the date of this annual report:
●
each
                                            of our directors and executive officers who beneficially own our ordinary shares;
●
our
                                            directors and executive officers as a group; and
●
each
                                            person known to us to own beneficially more than 5% of our ordinary shares.
Beneficial
ownership includes voting or investment power with respect to the securities. Except as indicated below, and subject to applicable community
property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares shown as beneficially
owned by them. Percentage of beneficial ownership of each listed person is based on 24,015,592 ordinary shares on an as-converted basis
outstanding as of the date of this annual report.
91
Information
with respect to beneficial ownership has been furnished by each director, officer, or beneficial owner of 5% or more of our ordinary
shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting
or investment power with respect to securities. In computing the number of shares beneficially owned by a person listed below and the
percentage ownership of such person, shares underlying options, warrants, or convertible securities held by each such person that are
exercisable or convertible within 60 days of the date of this annual report are deemed outstanding, but are not deemed outstanding for
computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to this table, or as required
by applicable community property laws, all persons listed have sole voting and investment power for all shares shown as beneficially
owned by them. As of the date of this annual report, none of the Company's major shareholders have different voting rights. Except
as otherwise indicated below, the business address of our director and executive officer is 7
th
floor, Building 398, No. 1555
West Jinshajiang Rd, Shanghai, People's Republic of China.
Ordinary
Shares
Beneficially
Owned
Number
Percent
Directors and Executive Officers:
Hui Yuan
(3)
3,255,966
13.34
%
All directors and executive officers as a group (1 individual):
3,255,966
13.34
%
Other ≥ 5% Beneficial Owners
AI Smart Holding Limited
(4)
2,119,738
8.68
%
ZunTian Holding Limited
(5)
1,969,546
8.07
%
PP Smart Holding Limited
(6)
1,668,542
6.83
%
River Hill China Fund L.P
(7)
1,458,532
5.97
%
Grand Glory (Hong Kong) Corporation Limited
(8)
1,444,752
5.92
%
iTeam Holding Limited
(9)
1,286,420
5.27
%
Shanghai Maocheng Enterprise Management Center (Limited Partnership)
(10)
1,203,972
4.93
%
Shanghai Tongjun Enterprise Management Consulting Partnership (Limited Partnership)
(11)
1,146,350
4.7
%
(1)
Beneficial
                                            ownership is determined in accordance with the rules of the SEC and includes voting or investment
                                            power with respect to the Ordinary Shares. All shares represent only common shares held by
                                            shareholders as no options are issued or outstanding.
(2)
Assuming
                                            the underwriters do not exercise their over-allotment option.
(3)
Includes
                                            shares held by ZunTian Holding Limited and iTeam Holding Limited.
(4)
AI
                                            Smart Holding Limited is incorporated in British Version Islands and is wholly owned and
                                            controlled by Li Aini. The registered address of AI Smart Holding Limited is Sea Meadow House,
                                            P.O. Box 116, Road Town, Tortola, British Virgin Islands.
(5)
ZunTian
                                            Holding Limited is incorporated in British Virgin Islands and is wholly owned and controlled
                                            by our Chairman and CEO, Mr. Yuan. The registered address of ZunTian Holding Limited is Sea
                                            Meadow House, P.O. Box 116, Road Town, Tortola, British Virgin Islands.
(6)
PP
                                            Smart Holding Limited is incorporated in British Virgin Islands and is wholly owned and controlled
                                            by Zhu Pinpin. The registered address of PP Smart Holding Limited is Sertus Chambers, P.O.
                                            Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands.
(7)
River
                                            Hill China Fund L.P. is formed in Cayman Islands and is wholly owned and controlled by Hangzhou
                                            Ali Venture Capital Co., Ltd. (a Chinese company), which in return is wholly owned and controlled
                                            by Hangzhou Zhenxi Investment Co., Ltd. (a Chinese company), which in return is owned by
                                            Hangzhou Zhengqiang Investment Management Partnership (Limited Partnership) (a Chinese company)
                                            ("Hangzhou Zhengqiang") and Hangzhou Zhensheng Investment Management Partnership
                                            (Limited Partnership) (a Chinese company) ("Hangzhou Zhensheng") 50/50. Hangzhou
                                            Zhengqiang is owned by five individuals (Yong Zhang, Ying Zhao, Junfang Zheng, Xiaofeng Shao,
                                            Zeming Wu) with each owning 19.999% and Hangzhou Zhengyue Enterprise Management Co., Ltd.
                                            owning 0.0001%. Hangzhou Zhensheng is owned by five individuals (Yong Zhang, Ying Zhao, Junfang
                                            Zheng, Xiaofeng Shao, Zeming Wu) owning 19.999% each and Hangzhou Zhengyue Enterprise Management
                                            Co., Ltd. owning 0.0001%. The registered address of River Hill China Fund L.P. is Maples
                                            Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
92
(8)
Grand
                                            Glory (Hong Kong) Corporation Limited is incorporated in Hong Kong and is wholly owned and
                                            controlled by Zhejiang Geely Holding Group Co., Ltd. (a Chinese company), which in return
                                            is wholly owned and controlled by Zhejiang Geely Holding (Group) Co., Ltd. (a Chinese company),
                                            of which Shufu Li, Xingxing Li and Zhejiang Geely Holding (Group) Co., Ltd. own 82.23%, 8.058%
                                            and 9.709% respectively. The registered address of Grand Glory (Hong Kong) Corporation Limited
                                            is Unit 2204, 22/F Lippo Ctr Tower 2, 89 Queensway, Hong Kong.
(9)
iTeam
                                            Holding Limited is incorporated in British Virgin Islands and is owned by our Chairman and
                                            CEO, Mr. Yuan who controls 100% of the voting power of iTeam Holding Limited. The registered
                                            address of iTeam Holding Limited is Sertus Chambers, P.O. Box 905, Quastisky Building, Road
                                            Town, Tortola, British Virgin Islands.
(10)
Shanghai
                                            Maocheng Enterprise Management Center (Limited Partnership) is formed in Shanghai, China
                                            and is owned by Jiaxing Well Known Investment Partnership (limited Partnership) (a Chinese
                                            company), with 99% ownership and Zhiwei Zheng with 1%, which in return is owned by Zhiwei
                                            Zheng and Lijun Zhong 50/50. The registered address of Shanghai Maocheng Enterprise Management
                                            Center (Limited Partnership) is Floor 5, Building 7, No. 3601, Dongfang Road, Pudong New
                                            Area, Shanghai, China.
(11)
Shanghai
                                            Tongjun Enterprise Management Consulting Partnership (Limited Partnership) is formed in Shanghai,
                                            China and is owned by Tianjin Haiyin Equity Investment Fund Partnership (Limited Partnership)
                                            (a People's Republic of China company), with 99.8% ownership and Tianjin Haifeng Yinhua
                                            Investment Management Partnership (limited partnership) (a Chinese company) with 0.2%, of
                                            which Tianjin Haifeng Yinhua Investment Management Partnership (limited partnership) (a Chinese
                                            company), Hengtong Jiuding (Beijing) Investment, Holding Co., Ltd. (a Chinese company), Zhi
                                            Xu, Ying Jin, and others (here, others mean other individuals all together) own 8.721%, 5.988%,
                                            3.779%, 3.488% and 78.023%, respectively. The registered address of Shanghai Tongjun Enterprise
                                            Management Consulting Partnership (Limited Partnership) is Floor 5, Building 7, No. 3601,
                                            Dongfang Road, Pudong New Area, Shanghai, China.
As
of the date of this annual report, none of our outstanding ordinary shares were held by record holders in the United States.
As
of the date of this annual report we have a total of 58 shareholders, with 8 of them owning more than 5% each, and 50 of them owning
less than 5% each. The names of the entities and their corresponding ownership percentages are listed on the principal shareholders table
above. Other than these shareholders, to the extent known to the company (1) no other corporations, individuals or foreign governments
directly or indirectly controls the company, (2) no other corporations, individuals or foreign governments directly owns the company,
(3) some entities or individuals, other than foreign governments, indirectly own certain small percentage of the company which are listed
on our corporate legal structure diagram in detail. See our corporate legal structure diagram for detailed information.
We
are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
B.
Related Party Transactions.
Contractual
Arrangements
Xiao-I's
indirect wholly owned subsidiary, Zhizhen Artificial Intelligent Technology (Shanghai) Co. Ltd. ("Zhizhen Technology" or
"WFOE") entered into a series of contractual arrangements that establish the VIE structure (the "VIE Agreements").
The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where Chinese law prohibits
direct foreign investment in the operating companies. Xiao-I has evaluated the guidance in FASB ASC 810 and determined that Xiao-I is
the primary beneficiary of the VIE, for accounting purposes, based upon such contractual arrangements. ASC 810 requires a VIE to be consolidated
if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE's residual
returns. A VIE is an entity in which a company or its WFOE, through contractual arrangements, is fully and exclusively responsible for
the management of the entity, absorbs all risk of losses of the entity (excluding non-controlling interests), receives the benefits of
the entity that could be significant to the entity (excluding non-controlling interests), and has the exclusive right to exercise all
voting rights of the entity, and therefore the company or its WFOE is the primary beneficiary of the entity for accounting purposes.
Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity
has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE's
economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant
to the VIE. Through the VIE Agreements, the Company is deemed the primary beneficiary of the VIE for accounting purposes. The VIE has
no assets that are collateral for or restricted solely to settle its obligations. The creditors of the VIE do not have recourse to the
Company's general credit. Accordingly, under U.S. GAAP, the results of the PRC operating entities are consolidated in Xiao-I's
financial statements. However, investors will not and may never hold equity interests in the PRC operating entities. The VIE Agreements
may not be effective in providing control over Shanghai Xiao-i. Uncertainties exist as to Xiao-I's ability to enforce the VIE Agreements,
and the VIE Agreements have not been tested in a court of law. The Chinese regulatory authorities could disallow this VIE structure,
which would likely result in a material change in the PRC operating entities' operations and the value of Xiao-I's ADSs,
including that it could cause the value of such securities to significantly decline or become worthless.
93
The
VIE Agreements
The
PRC government regulates the telecommunications and internet industry, including software industry, through strict business licensing
requirements and other government regulations. These laws and regulations also include limitations on foreign ownership of PRC companies
that engage in software business. Xiao-I, AI Plus and Zhizhen Technology, are considered as foreign invested enterprises. To comply with
these regulations, the Company conducts the majority of its activities in PRC through the PRC operating entities. Uncertainties exist
as to the Company's ability to enforce the VIE Agreements, and the VIE Agreements have not been tested in a court of law.
Zhizhen
Technology has entered into the following contractual arrangements with Shanghai Xiao-i and 61 of its shareholders, whom together hold
100% equity interest in Shanghai Xiao-i, that enable the Company to (i) have power to direct the activities that most significantly affect
the performance of Shanghai Xiao-i and its subsidiaries, and (ii) receive the benefits of Shanghai Xiao-i and its subsidiaries that could
be significant to Shanghai Xiao-i and its subsidiaries. The Company, through its indirect wholly owned subsidiary, Zhizhen Technology,
is fully and exclusively responsible for the management of Shanghai Xiao-i, absorbs all risk of losses of Shanghai Xiao-i (excluding
non-controlling interests) and has the exclusive right to exercise all voting rights of Shanghai Xiao-i's shareholders. In exchange,
Shanghai Xiao-i pays service fees to Zhizhen Technology. The service fees shall consist of 100% of the profit before tax of Shanghai
Xiao-i, after the deduction of all costs, expenses, taxes and other fee required under PRC laws and regulations. Shanghai Xiao-i agrees
not to accept the same or any similar services provided by any third party and shall not establish cooperation relationships similar
to that formed by the Exclusive Business Cooperation Agreement with any third party, except with the prior written consent of Zhizhen
Technology. Therefore, the Company, through its wholly owned subsidiaries AI Plus and Zhizhen Technology, has been determined to be the
primary beneficiary of Shanghai Xiao-i and the VIE's subsidiaries for accounting purposes and has consolidated Shanghai Xiao-i's
and its subsidiaries' assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements.
Exclusive
Call Option Agreement
Pursuant
to the Exclusive Call Option Agreement signed on March 29, 2019 by and among Zhizhen Technology, Shanghai Xiao-i and its shareholders,
the shareholders irrevocably granted Zhizhen Technology or any third party designated by Zhizhen Technology an option to purchase all
or part of their equity interests in Shanghai Xiao-i at any time at a price determined at Zhizhen Technology's discretion. According
to the Exclusive Call Option Agreement, the purchase price to be paid by the Company to each shareholder of Shanghai Xiao-i will be the
minimum price permitted by applicable PRC Law at the time when such share transfer occurs. Without Zhizhen Technology's prior written
consent, the shareholders and Shanghai Xiao-i agreed not to, among other things: set encumbrance on, transfer all or part of, or dispose
of the equity interests; amend the articles of association of Shanghai Xiao-i; change the registered capital of Shanghai Xiao-i or holding
structure; change Shanghai Xiao-i's business activities; sell, assign, mortgage or dispose of any legal or beneficial rights to
or in any of Shanghai Xiao-i's assets, business, or revenue; incur, assume or guarantee any debts; enter into any material contract;
extend any loan or credit to any party, or provide any guarantee or assume any obligation of any party; merge or consolidate with any
third party or acquire or invest in any third party; or distribute dividends. The shareholders and Shanghai Xiao-i agreed to manage business
and handle financial and commercial affairs prudently and in accordance with relevant laws and codes of practice. This agreement will
continue with full force and effect until the earlier of the date on which Zhizhen Technology has acquired all of the Equity Interests
in Shanghai Xiao-i, or this Agreement is terminated by the mutual written consent.
94
Exclusive
Business Cooperation Agreement
On
March 29, 2019, Zhizhen Technology entered into an Exclusive Business Cooperation Agreement with Shanghai Xiao-i to enable Zhizhen
Technology to engage in the development and operation of the Internet technology development in accordance with applicable laws. Under
this agreement, Shanghai Xiao-i appointed Zhizhen Technology to provide exclusive comprehensive business support, technical services,
consulting services and other services to Shanghai Xiao-i, and Shanghai Xiao-i agreed to accept such services. The term of the Services
provided by Zhizhen Technology shall be 10 years from the effective date of March 29, 2019, and will be automatically extended after
the expiration until when terminated in writing by Zhizhen Technology. Additionally, Zhizhen Technology has the full and exclusive right
to manage and direct all cash flow and assets of Shanghai Xiao-i and to direct and administrate the financial affairs and daily operation
of Shanghai Xiao-i. In exchange, Shanghai Xiao-i pays service fees to Zhizhen Technology. The service fees shall consist of 100% of the
profit before tax of Shanghai Xiao-i, after the deduction of all costs, expenses, taxes and other fee required under PRC laws and regulations.
If Shanghai Xiao-i is unable to pay the service fees due to the actual managing situation, with the written consent of Zhizhen Technology,
the unpaid part of the service fees in the previous fiscal year can be deferred to the end of the next year and settled together. Shanghai
Xiao-i agrees not to accept the same or any similar services provided by any third party and shall not establish cooperation relationships
similar to that formed by the Exclusive Business Cooperation Agreement with any third party, except with the prior written consent of
Zhizhen Technology. During the validity term of this agreement, Zhizhen Technology will bear all the economic benefits and risks arising
from the business of Shanghai Xiao-i and its subsidiaries. Zhizhen Technology will provide financial support to Shanghai Xiao-i or its
subsidiaries in the event of a loss or serious operational difficulties.
Power
of Attorney Agreement
On
March 29, 2019, each shareholder of Shanghai Xiao-i, signed the Power of Attorney Agreement to irrevocably entrust Zhizhen Technology
or any person(s) designated by Zhizhen Technology to act as its attorney-in-fact to exercise any and all of its rights as a shareholder
of Shanghai Xiao-i, including, but not limited to, the right to convene, attend and present the shareholders' meetings, vote, sign
and perform as a shareholder; transfer, pledge or dispose of all the equity interest of Shanghai Xiao-i held by the shareholder; collect
the dividend, and participate in litigation procedures. This agreement is effective and irrevocable until all of each shareholder's
equity interest in Shanghai Xiao-i has been transferred to Shanghai Xiao-i or the person(s) designated by Zhizhen Technology.
Share
Interest Pledge Agreement
Under
the Share Interest Pledge Agreement signed on March 29, 2019 by and among Zhizhen Technology and each shareholder of Shanghai Xiao-i,
the shareholders of Shanghai Xiao-i have agreed to pledge 100% equity interest in Shanghai Xiao-i to Zhizhen Technology to guarantee
the performance obligations of Shanghai Xiao-i under the Exclusive Business Cooperation Agreement, and the performance obligations of
each shareholder under the Exclusive Call Option Agreement. If Shanghai Xiao-i or its shareholders breach their contractual obligations
under these agreements, Zhizhen Technology, as pledgee, will have the right to exercise the pledge.
The
shareholders also agreed that, without prior written consent of Zhizhen Technology, they will not dispose of the pledged equity interests
or create or allow any encumbrance on the pledged equity interests. The pledge of equity interests in Shanghai Xiao-i has been registered
with the relevant office of the State Administration for Market Regulation in accordance with the Civil Code of the People's Republic
of China.
Spousal
Commitment Letter
The
spouses of each individual shareholder of Shanghai Xiao-i have each signed a Commitment Letter. Under the Commitment Letter, the signing
spouse unconditionally and irrevocably has agreed to the execution by his or her spouse of the above-mentioned Exclusive Business Cooperation
Agreement, Exclusive Call Option Agreement, Power of Attorney Agreement and Share Interest Pledge Agreement, and that his or her spouse
may perform, amend or terminate such agreements without his or her consent. In addition, in the event that the spouse obtains any equity
interest in Shanghai Xiao-i held by his or her spouse for any reason, he or she agrees to be bound by and sign any legal documents substantially
similar to the contractual arrangements entered into by his or her spouse, as may be amended from time to time.
95
The
VIE structure is used to provide investors with exposure to foreign investment in China-based companies where Chinese law prohibits direct
foreign investment in the operating companies. Xiao-I has evaluated the guidance in FASB ASC 810 and determined that Xiao-I is the primary
beneficiary of the VIE, for accounting purposes, based upon such contractual arrangements. ASC 810 requires a VIE to be consolidated
if the company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE's residual
returns. A VIE is an entity in which a company, through contractual arrangements, is fully and exclusively responsible for the management
of the entity, absorbs all risk of losses of the entity (excluding non-controlling interests), receives the benefits of the entity that
could be significant to the entity (excluding non-controlling interests), and has the exclusive right to exercise all voting rights of
the entity, and therefore the company is the primary beneficiary of the entity for accounting purposes. Under ASC 810, a reporting entity
has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics:
(a) the power to direct the activities of the VIE that most significantly affect the VIE's economic performance; and (b) the obligation
to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. Through the VIE agreements, the
Company is deemed the primary beneficiary of the VIE for accounting purposes. The VIE has no assets that are collateral for or restricted
solely to settle its obligations. The creditors of VIE do not have recourse to the Company's general credit. Accordingly, under
U.S. GAAP, the results of the PRC operating entities are consolidated in Xiao-I's financial statements.
However,
investors will not and may never hold equity interests in the PRC operating entities. The VIE Agreements may not be effective in providing
control over Shanghai Xiao-i. Uncertainties exist as to Xiao-I's ability to enforce the VIE Agreements, and the VIE Agreements
have not been tested in a court of law. If the VIE or its shareholders fail to perform their respective obligations under the contractual
arrangements, Xiao-I may have to incur substantial costs and expend additional resources to enforce such arrangements. The Chinese regulatory
authorities could disallow this VIE structure, which would likely result in a material change in the PRC operating entities' operations
and the value of Xiao-I's ADSs, including that it could cause the value of such securities to significantly decline or become worthless.
See "Risk Factors — Risks Relating to Our Corporate Structure."
Consolidation
Xiao-I
conducts substantially all of its business in China through Shanghai Xiao-i, the VIE, due to PRC legal restrictions of foreign ownership
in certain sectors. Substantially all of Xiao-I's revenues, costs and net income in China are directly or indirectly generated
through the VIE. Xiao-I, through its indirect wholly owned subsidiary, Zhizhen Technology, has signed various agreements with the
VIE and shareholders of the VIE to allow the transfer of economic benefits from the VIE to Zhizhen Technology and to direct the activities
of the VIE. Total assets and liabilities presented on Xiao-I's consolidated balance sheets and revenue, expense, net income presented
on consolidated statement of operations and comprehensive income as well as the cash flow from operating, investing and financing activities
presented on the consolidated statement of cash flows are the financial position, operation and cash flow of the PRC operating entities
(excluding non-controlling interests). The Company has not provided any financial support to the PRC operating entities for the fiscal years
ended at December 31, 2020, 2021 and 2022, and the variable interest entities accounted for an aggregate of 100%, 95%, and 96% of
the Company's total assets and total liabilities, respectively. As of December 31, 2021 and 2022, $1,254,528 and US$908,614
of cash and cash equivalents were denominated in RMB, respectively.
Xiao-I
and its directly and indirectly wholly owned subsidiaries, AI Plus, Xiao-i Technology and Zhizhen Technology do not have any substantial
assets or liabilities or result of operations. The following table sets forth the assets, liabilities, results of operations and changes
in cash, cash equivalents of the PRC operating entities, which were included in the Company's consolidated balance sheets and statements
of comprehensive income/(loss) and statements of cash flows with intercompany transactions eliminated:
96
For the year ended December 31, 2020
Condensed Consolidating Schedule of Results of Operations
Parent
VIE and its consolidated subsidiaries
WFOE
Other Subsidiaries
Elimination Adjustments
Consolidated Total
(in U.S. dollars)
Net revenues
-
13,856,734
-
-
-
13,856,734
Cost of revenues
-
(7,228,046
)
-
-
-
(7,228,046
)
Gross profit
-
6,628,688
-
-
-
6,628,688
Operating expenses
-
(14,498,268
)
-
-
-
(14,498,268
)
Loss of VIE and VIE's subsidiaries absorbed by WFOE
-
-
(6,808,365
)
-
6,808,365
-
Share of loss in subsidiaries
(6,808,365
)
-
-
-
6,808,365
-
Total operating expenses
(6,808,365
)
(14,498,268
)
(6,808,365
)
-
13,616,730
(14,498,268
)
Loss from operations
(6,808,365
)
(7,869,580
)
(6,808,365
)
-
13,616,730
(7,869,580
)
Other income
-
577,684
-
-
-
577,684
Income tax benefits
-
235,854
-
-
-
235,854
Net loss
(6,808,365
)
(7,056,042
)
(6,808,365
)
-
13,616,730
(7,056,042
)
Net loss attributable to non-controlling interests
-
(247,677
)
-
-
-
(247,677
)
Net loss attributable to XIAO-I CORPORATION shareholders
(6,808,365
)
(6,808,365
)
-
-
6,808,365
(6,808,365
)
For the year ended December 31, 2020
Condensed Consolidating Schedule of Cash Flows
Parent
VIEs and their consolidated subsidiaries
WFOE
Other Subsidiaries
Elimination Adjustments
Consolidated Total
(in U.S. dollars)
Net cash used in operating activities
-
(3,463,094
)
-
-
-
(3,463,094
)
Net cash used in investing activities
-
(25,825
)
-
-
-
(25,825
)
Net cash provided by financing activities
-
1,792,682
-
-
-
1,792,682
Effect of exchange rate changes
-
(797,954
)
-
-
-
(797,954
)
Net change in cash, cash equivalents and restricted cash
-
(2,494,191
)
-
-
-
(2,494,191
)
Cash, cash equivalents and restricted cash, at beginning of year
1,105
3,320,111
-
4
-
3,321,220
Cash, cash equivalents and restricted cash, at end of year
1,105
825,920
-
4
-
827,029
97
As of December 31, 2021
Condensed Consolidating Schedule of Financial Position
Parent
VIE and its consolidated subsidiaries
WFOE
Other Subsidiaries
Elimination Adjustments
Consolidated Total
(in U.S. dollars)
Assets
Current assets:
Cash and cash equivalents
1,105
1,310,737
-
4
-
1,311,846
Accounts receivable, net
-
31,184,779
-
-
-
31,184,779
Amounts due from related parties
-
391,919
-
-
-
391,919
Inventories
-
768,762
-
-
-
768,762
Contract costs
-
1,669,519
-
-
-
1,669,519
Deferred offering costs
-
-
-
-
-
-
Advance to suppliers
90,350
90,350
Prepaid expenses and other current assets, net
4
388,844
-
-
-
388,848
Total current assets
1,109
35,804,910
-
4
-
35,806,023
Non-current assets:
Property and equipment, net
-
207,989
-
-
-
207,989
Intangible assets, net
-
798,459
-
-
-
798,459
Long-term investment
-
335,448
-
-
-
335,448
Right of use assets
-
1,194,859
-
-
-
1,194,859
Deferred tax assets, net
-
4,906,287
-
-
-
4,906,287
Prepaid expenses and other, non-current assets
-
3,941,346
-
-
-
3,941,346
Total non-current assets
-
11,384,388
-
-
-
11,384,388
TOTAL ASSETS
1,109
47,189,298
-
4
-
47,190,411
Liabilities
Current liabilities:
Short-term borrowings
-
9,117,158
-
-
-
9,117,158
Accounts payable
-
5,581,879
-
-
-
5,581,879
Amount due to related parties-current
-
1,558,642
-
-
-
1,558,642
Deferred revenue
-
2,953,238
-
-
-
2,953,238
Convertible loans
-
5,717,737
-
-
-
5,717,737
Accrued liabilities and other current liabilities
-
10,316,428
-
4
-
10,316,432
Lease liabilities, current
-
800,658
-
-
-
800,658
Income tax payable
-
17,904
-
-
-
17,904
Deficit of VIE and VIE's subsidiaries absorbed by WFOE
-
-
190,267
-
(190,267
)
-
Investment deficit in subsidiaries
190,267
-
-
-
(190,267
)
-
Total current liabilities
190,267
36,063,644
190,267
4
(380,534
)
36,063,648
Non-current liabilities:
Amount due to related parties-non current
-
8,905,313
-
-
-
8,905,313
Accrued liabilities, non-current
-
5,157,971
-
-
-
5,157,971
Lease liabilities, non-current
-
446,140
-
-
-
446,140
Total non-current liabilities
-
14,509,424
-
-
-
14,509,424
TOTAL LIABILITIES
190,267
50,573,068
190,267
4
(380,534
)
50,573,072
Shareholders' deficit
Ordinary shares
1,106
-
-
-
-
1,106
Additional paid-in capital
75,621,294
75,621,294
-
-
(75,621,294
)
75,621,294
Statutory reserve
237,486
237,486
-
-
(237,486
)
237,486
Accumulated deficit
(72,584,621
)
(72,584,621
)
(190,267
)
-
72,774,888
(72,584,621
)
Accumulated other comprehensive loss
(3,464,423
)
(3,464,426
)
-
-
3,464,426
(3,464,423
)
XIAO-I CORPORATION shareholders' deficit
(189,158
)
(190,267
)
(190,267
)
-
380,534
(189,158
)
Non-controlling interests
-
(3,193,503
)
-
-
-
(3,193,503
)
Total shareholders' deficit
(189,158
)
(3,383,770
)
(190,267
)
-
380,534
(3,382,661
)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
1,109
47,189,298
-
4
-
47,190,411
98
For the year ended December 31, 2021
Condensed Consolidating Schedule of Results of Operations
Parent
VIE and its consolidated subsidiaries
WFOE
Other Subsidiaries
Elimination Adjustments
Consolidated Total
(in U.S. dollars)
Net revenues
-
32,524,013
-
-
-
32,524,013
Cost of revenues
-
(10,885,731
)
-
-
-
(10,885,731
)
Gross profit
-
21,638,282
-
-
-
21,638,282
Operating expenses
-
(16,641,273
)
-
-
-
(16,641,273
)
Income of VIE and VIE's subsidiaries absorbed by WFOE
-
-
3,677,813
-
(3,677,813
)
-
Share of income in subsidiaries
3,677,813
-
-
-
(3,677,813
)
-
Total operating expenses
3,677,813
(16,641,273
)
3,677,813
-
(7,355,626
)
(16,641,273
)
Income from operations
3,677,813
4,997,009
3,677,813
-
(7,355,626
)
4,997,009
Other loss
-
(1,079,652
)
-
-
-
(1,079,652
)
Income tax expenses
-
(552,355
)
-
-
-
(552,355
)
Net income
3,677,813
3,365,002
3,677,813
-
(7,355,626
)
3,365,002
Net loss attributable to non-controlling interests
-
(312,811
)
-
-
-
(312,811
)
Net income attributable to XIAO-I CORPORATION shareholders
3,677,813
3,677,813
-
-
(3,677,813
)
3,677,813
For the year ended December 31, 2021
Condensed Consolidating Schedule of Cash Flows
Parent
VIEs and their consolidated subsidiaries
WFOE
Other Subsidiaries
Elimination Adjustments
Consolidated Total
(in U.S. dollars)
Net cash used in operating activities
-
(11,887,122
)
-
-
-
(11,887,122
)
Net cash provided by investing activities
-
77,259
-
-
-
77,259
Net cash provided by financing activities
-
12,192,952
-
-
-
12,192,952
Effect of exchange rate changes
-
101,728
-
-
-
101,728
Net change in cash, cash equivalents and restricted cash
-
484,817
-
-
-
484,817
Cash, cash equivalents and restricted cash, at beginning of year
1,105
825,920
-
4
-
827,029
Cash, cash equivalents and restricted cash, at end of year
1,105
1,310,737
-
4
-
1,311,846
99
As of December 31, 2022
Condensed Consolidating Schedule of
    Financial Position
Parent
VIE and its consolidated subsidiaries
WFOE
Other Subsidiaries
Elimination Adjustments
Consolidated Total
(in U.S. dollars)
Assets
Current assets:
Cash and cash equivalents
1,104
1,025,141
-
-
-
1,026,245
Accounts receivable, net
-
41,362,705
-
-
-
41,362,705
Amounts due from related parties
-
346,517
-
-
-
346,517
Inventories
-
768,216
-
-
-
768,216
Contract costs
-
2,012,309
-
-
-
2,012,309
Deferred offering costs
-
1,330,902
-
-
-
1,330,902
Advance to suppliers
-
1,115,672
-
-
-
1,115,672
Prepaid expenses and other current assets, net
2
460,850
1
1
-
460,854
Total current assets
1,106
48,422,312
1
1
-
48,423,420
-
-
Non-current assets:
Property and equipment, net
-
219,470
-
-
-
219,470
Intangible assets, net
-
637,114
-
-
-
637,114
Long-term investment
-
204,899
2,647,593
-
-
2,852,492
Right of use assets
-
865,399
-
-
-
865,399
Deferred tax assets, net
-
3,888,574
-
-
-
3,888,574
Prepaid expenses and other, non-current assets
-
3,697,675
-
-
-
3,697,675
Total non-current assets
-
9,513,131
2,647,593
-
-
12,160,724
-
TOTAL ASSETS
1,106
57,935,443
2,647,594
1
-
60,584,144
-
Liabilities
Current liabilities:
Short-term borrowings
-
18,784,459
-
-
-
18,784,459
Accounts payable
-
9,180,532
-
-
-
9,180,532
Amount due to related parties-current
-
896,431
-
-
-
896,431
Deferred revenue
-
2,553,808
-
-
-
2,553,808
Convertible loans
-
3,754,269
-
-
-
3,754,269
Accrued expenses and other current liabilities
-
17,006,680
30
3
-
17,006,713
Lease liabilities, current
-
435,462
-
-
-
435,462
Deficit of VIE and VIE's subsidiaries absorbed by WFOE
-
-
5,887,042
-
(5,887,042
)
-
Investment deficit in subsidiaries
5,887,042
-
-
-
(5,887,042
)
-
Total current liabilities
5,887,042
52,611,641
5,887,072
3
(11,774,084
)
52,611,674
Non-current liabilities:
Amount due to related parties-non current
-
8,581,743
-
-
-
8,581,743
Accrued liabilities, non-current
-
5,391,664
2,682,248
-
-
8,073,912
Lease liabilities, non-current
-
300,974
-
-
-
300,974
Total non-current liabilities
-
14,274,381
2,682,248
-
-
16,956,629
TOTAL LIABILITIES
5,887,042
66,886,022
8,569,320
3
(11,774,084
)
69,568,303
-
Shareholders' deficit
Ordinary shares
1,106
-
-
-
-
1,106
Additional paid-in capital
75,621,294
75,621,294
-
-
(75,621,294
)
75,621,294
Statutory reserve
237,486
237,486
-
-
(237,486
)
237,486
Accumulated deficit
(78,483,156
)
(78,447,606
)
(5,922,592
)
(2
)
84,370,200
(78,483,156
)
Accumulated other comprehensive loss
(3,262,666
)
(3,263,530
)
866
-
3,262,664
(3,262,666
)
XIAO-I CORPORATION shareholders' deficit
(5,885,936
)
(5,852,356
)
(5,921,726
)
(2
)
11,774,084
(5,885,936
)
Non-controlling interests
(3,098,223
)
-
(3,098,223
)
Total shareholders' deficit
(5,885,936
)
(8,950,579
)
(5,921,726
)
(2
)
11,774,084
(8,984,159
)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
1,106
57,935,443
2,647,594
1
-
60,584,144
100
For the year ended December 31, 2022
Condensed Consolidating Schedule of
    Results of Operations
Parent
VIE and its consolidated subsidiaries
WFOE
Other Subsidiaries
Elimination Adjustments
Consolidated Total
(in U.S. dollars)
Net revenues
-
48,184,958
-
-
-
48,184,958
Cost of revenues
-
(17,379,144
)
-
-
-
(17,379,144
)
Gross profit
-
30,805,814
-
-
-
30,805,814
Operating expenses
-
(33,941,593
)
-
-
-
(33,941,593
)
Income of VIE and VIE's subsidiaries absorbed by WFOE
-
-
(5,898,535
)
-
5,898,535
-
Share of income in subsidiaries
(5,898,535
)
-
-
-
5,898,535
-
Total operating expenses
(5,898,535
)
(33,941,593
)
(5,898,535
)
-
11,797,070
(33,941,593
)
Loss from operations
(5,898,535
)
(3,135,779
)
(5,898,535
)
-
11,797,070
(3,135,779
)
Other loss
-
(2,173,328
)
(35,550
)
(2
)
-
(2,208,880
)
Income tax expenses
-
(660,655
)
-
-
-
(660,655
)
Net loss
(5,898,535
)
(5,969,762
)
(5,934,085
)
(2
)
11,797,070
(6,005,314
)
Net loss attributable to non-controlling interests
-
(106,779
)
-
-
-
(106,779
)
Net loss attributable to XIAO-I CORPORATION shareholders
(5,898,535
)
(5,898,535
)
-
-
5,898,535
(5,898,535
)
For the year ended December 31, 2022
Condensed Consolidating Schedule of Cash Flows
Parent
VIEs and their consolidated subsidiaries
WFOE
Other Subsidiaries
Elimination Adjustments
Consolidated Total
(in U.S. dollars)
Net cash used in operating activities
(1
)
(10,923,345
)
-
-
-
(10,923,346
)
Net cash used in investing activities
-
(107,122
)
(2,749,294
)
-
-
(2,856,416
)
Net cash provided by financing activities
-
10,757,306
2,749,294
-
-
13,506,600
Effect of exchange rate changes
-
(12,435
)
(4
)
-
-
(12,439
)
Net change in cash, cash equivalents and restricted cash
(1
)
(285,596
)
-
(4
)
-
(285,601
)
Cash, cash equivalents and restricted cash, at beginning of year
1,105
1,310,737
-
4
-
1,311,846
Cash, cash equivalents and restricted cash, at end of year
1,104
1,025,141
-
-
-
1,026,245
As
of the date of this annual report, cash was transferred among the Company, WFOE, other subsidiaries of the Company, the VIE and its consolidated
subsidiaries, in the following manners: (i) the Company provided a total of US$10,000,550 in cash to its other subsidiaries while other
subsidiaries transferred US$4,500 to the Company; (ii) Other subsidiaries of the Company provided a total of US$10,000,000 in cash to
WFOE; (iii) WFOE provided a total of US$9,859,073 (RMB68,000,000) to VIE and its subsidiaries while VIE and its subsidiaries transferred
US$36,247 (RMB250,000) to WFOE; (iv) VIE and its subsidiaries transferred US$8,000 to other subsidiaries of the Company. The aforementioned
cash transfers were generally for working capital purpose among the Company, WFOE, VIE and its consolidated subsidiaries, and other subsidiaries.
Xiao-I intends to keep any future earnings to finance the expansion of its business, and it does not anticipate that any cash dividends
will be paid in the foreseeable future.
The
Company, WFOE, the VIE and its consolidated subsidiaries maintain cash management policies that dictate the purpose, amount, appropriate
internal control procedures on the handling, depositing, receiving, transferring, safeguarding, and documentation and recording of cash
transfers. Subject to the amounts of cash transfer and the nature of the use of funds, requisite internal approval shall be obtained
prior to each cash transfer. Specifically, all transactions require the approval of the financial manager. As for the large quantity
transactions, the Chief Financial Officer and Chief Executive Officer are required to conduct regular review and approve.
101
Xiao-I
is a holding company with no operations of its own. It conducts its operations in China primarily through the PRC operating entities
in China. As a result, although other means are available for Xiao-I to obtain financing at the holding company level, Xiao-I's
ability to pay dividends and other distributions to its shareholders and to service any debt it may incur may depend upon dividends and
other distributions paid by Xiao-I's PRC subsidiaries, which relies on dividends and other distributions paid by the PRC operating
entities pursuant to the VIE Agreements. If any of these entities incurs debt on its own in the future, the instruments governing such
debt may restrict its ability to pay dividends and other distributions to Xiao-I.
In
addition, dividends and distributions from Xiao-I's PRC subsidiaries and the VIE are subject to regulations and restrictions on
dividends and payment to parties outside of China. Applicable PRC law permits payment of dividends to Xiao-I by WFOE only out of net
income, if any, determined in accordance with PRC accounting standards and regulations. A PRC company is not permitted to distribute
any profits until any losses from prior fiscal years have been offset by general reserve fund and profits (if general reserve fund is
not enough). Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal
year. In addition, registered share capital and capital reserve accounts are also restricted from withdrawal in the PRC, up to the amount
of net assets held in each operating subsidiary. In contrast, there is presently no foreign exchange control or restrictions on capital
flows into and out of Hong Kong. Hence, Xiao-I's Hong Kong subsidiary is able to transfer cash without any limitation to the Cayman
Islands under normal circumstances. As a result of these PRC laws and regulations, the PRC operating entities are restricted in their
ability to transfer a portion of their net assets to the Company.
Moreover,
the transfer of funds among the PRC operating entities are subject to the Provisions on Private Lending Cases, which was implemented
on January 1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The
Provisions on Private Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated PRC
operating entity's operations. Xiao-I, its subsidiaries or the PRC operating entities have not been notified of any other restriction
which could limit the PRC operating entities' ability to transfer cash among each other. In the future, cash proceeds from overseas
financing activities, including the IPO proceeds, may be transferred by Xiao-I to AI Plus, and then transferred to Xiao-i Technology, and
then transferred to WFOE via capital contribution or shareholder loans, as the case may be. Cash proceeds may flow to Shanghai Xiao-i
from WFOE pursuant to certain contractual arrangements between WFOE and Shanghai Xiao-i as permitted by the applicable PRC regulations.
Under
Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided
that in no circumstances may a dividend be paid out of share premium if this would result in the company being unable to pay its debts
due in the ordinary course of business. Xiao-I does not expect to pay dividends in the foreseeable future. If, however, it declares dividends
on its Ordinary Shares, the depositary will pay you the cash dividends and other distributions it receives on Xiao-I's Ordinary
Shares after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement. If it determines to pay
dividends on any of its Ordinary Shares in the future, as a holding company, it will rely on payments made from Shanghai Xiao-i to WFOE,
pursuant to the VIE Agreements between them, and the distribution of such payments to Xiao-i Technology from WFOE, and then to AI Plus
from Xiao-i Technology, and then to Xiao-I from AI Plus as dividends, unless it receives proceeds from future offerings. See "Risk
Factors — Risks Relating to Doing Business in China —
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
."
Other
Related Party Transactions
The
following provides descriptions of related party transactions based on (1) names of related parties and their relationships with the
Company through its wholly-owned subsidiaries, variable interest entity ("VIE") and VIE's subsidiaries (collectively,
the "Group"), (2) amounts due from related parties, (3) amounts due to related parties and (4) nature of loans/transactions
and interest rates of the loans.
102
Related
parties
The
following is a list of related parties which the Group has transactions with:
No.
Name
    of Related Parties
Relationship
1
Zhejiang
    Baiqianyin Network Technology Co., Ltd ("Zhejiang Baiqianyin")
An
    entity which has a common director of the Board of Directors with the Group
2
Shanghai
    Shenghan
An
    entity which the Group holds 16.56% equity interests
3
Shanghai
    Aoshu Enterprise Management Partnership (Limited Partnership) ("Shanghai Aoshu")
An
    entity which is the Group's employee stock ownership platform, and has a common director of the Board of Directors with the
    Group
4
Shanghai
    Machinemind Intelligent Technology Co., Ltd.
An
    entity which the Company holds 18% equity interests
5
Jiaxing
    Sound Core Intelligent Technology Co., LTD
An
    entity which Shanghai Shenghan holds 20% equity interests
6
Hui
    Yuan
Chairman
    of the board, one of the major shareholders holding 14.73% equity interests of the Company
7
Weng
    Wei
CFO
    of the Company
8
Tianjin
    Haiyin Equity Investment Fund Partnership (Limited Partnership) ("Tianjin Haiyin")
A
    significant shareholder holding 5.18% equity interests of the Company
9
Jiaxing
    Chiyu Investment Partnership (limited Partnership)
A
    significant shareholder holding 5.44% equity interests of the Company
10
Haiyin
    Capital Investment (International) Limited
A
    subsidiary of Tianjin Haiyin
11
Zhizhen
    Guorui
An
    entity which the Group holds 37% equity interests
Amounts
due from related parties
Amounts
due from related parties consisted of the following for the periods indicated:
As of December 31,
2021
2022
Accounts receivable
$
$
Zhejiang Baiqianyin (a)
52,883
48,860
Other receivables
Zhejiang Baiqianyin (b)
316,981
297,657
Shanghai Aoshu (c)
22,055
20,377
Bad debt provisions
-
(20,377
)
Total
$
391,919
$
346,517
(a).
In
                                            April 2023, the Group collected accounts receivable from Zhejiang Baiqianyin;
(b).
Other
                                            receivable from Zhejiang Baiqianyin consists of the interest-free borrowings for ordinary
                                            business. In April 2023, the Group collected other receivables from Zhejiang Baiqianyin;
(c).
Other
                                            receivable from Shanghai Aoshu was the payment to an employee on behalf of Shanghai Aoshu.
                                            For the year ended December 31, the Group made fully provisions of receivables from Shanghai
                                            Aoshu.
103
Amounts
due to related parties
Amount
due to related parties consisted of the following for the periods indicated:
As of December 31,
2021
2022
Due to related parties-current
Accounts payable
Shanghai Shenghan
$
470,765
$
201,465
Shanghai Machinemind Intelligent Technology Co., Ltd.
76,892
-
Jiaxing Sound Core Intelligent Technology Co., LTD
98,076
32,622
Zhizhen Guorui (Shanghai) Information Technology Development Co., Ltd.
-
97,868
Interest-free loans (c)
Jiaxing Chiyu Investment Partnership (limited Partnership)
$
784,610
$
434,959
Haiyin Capital Investment (International) Limited
128,299
129,517
Subtotal-due to related parties-current
1,558,642
896,431
Due to related parties-non current
Interest-free loans (c)
Hui Yuan
$
8,905,313
$
8,581,743
Subtotal-due to related parties-non current
8,905,313
8,581,743
Total
$
10,463,955
$
9,478,174
(c)
The
                                            balance represents the advance funds from related parties for daily operational purposes.
                                            The funds are interest-free, unsecured and repayable on demand. Loans from Hui Yuan are not
                                            required to be settled within one year.
Significant
transactions with related parties
For the years ended December 31,
Nature
2020
2021
2022
Software and service income
Zhejiang Baiqianyin
$
2,449,560
$
286,875
$
-
Technology service fee payable
Shanghai Shenghan
$
130,356
$
465,058
$
-
Zhizhen Guorui (Shanghai) Information Technology Development Co., Ltd.
-
-
100,315
Interest-free loans from related parties
Zhejiang Baiqianyin
$
1,448
$
5,782,216
$
1,783,326
Hui Yuan
-
9,696,450
532,026
Haiyin Capital Investment (International) Limited
-
126,744
-
Jiaxing Chiyu Investment Partnership (limited Partnership)
-
775,097
-
Tianjin Haiyin
-
310,038
-
Weng Wei
-
74,409
-
Interest-free loans repayment to related parties
Zhejiang Baiqianyin
$
-
$
5,470,627
$
1,788,230
Jiaxing Chiyu Investment Partnership (limited Partnership)
-
-
297,221
Hui Yuan
-
899,111
169,416
Jiaxing Sound Core Intelligent Technology Co., LTD
-
-
59,444
Shanghai Shenghan
-
139,517
-
Weng Wei
-
74,409
-
Tianjin Haiyin
-
310,038
-
Return of inventories to a related party
Shanghai Shenghan
$
-
$
-
$
239,330
Debt relief
Shanghai Machinemind Intelligent Technology Co., Ltd.
$
-
$
-
$
72,819
104
Arrangements with Our Executive Officers
and Directors
Agreements with Our Non-Executive Directors
We have entered into
an independent director agreement with one of our non-executive directors.
Indemnification Agreements
We have entered into
indemnification agreements with each of our directors and executive officers. See "Item 6.B. Directors and Senior Management—Compensation—Limitations
on Liability and Indemnification Matters."
2023 Share Incentive Plan
See "Item 6.B. Director, Senior Management
and Employees—Compensation—2023 Share Incentive Plan."
Related Person Transaction Policy
Our board of directors
has adopted a written related party transactions policy setting forth the policies and procedures for the review and approval or ratification
of related person transactions. This policy covers any transaction or proposed transactions between us and a related person that are material
to us or the related person, including without limitation, purchases of goods or services by or from the related person or entities in
which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In
reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including,
but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm's length transaction
and the extent of the related person's interest in the transaction.
C.
Interests of Experts and Counsel.
Not applicable.
Item
8.  Financial Information.
A.
Consolidated Statements and Other Financial Information.
Please
see Item 18. "Financial Statements" for our audited consolidated financial statements filed as part of this annual report.
Litigation
In
the ordinary course of business, the Group may be subject to legal proceedings regarding contractual and employment relationships and
a variety of other matters. The Group records contingent liabilities resulting from such claims, when a loss is assessed to be probable
and the amount of the loss is reasonably estimable.
On
August 3, 2020, Shanghai Xiao-i filed a lawsuit with the High People's Court of Shanghai in China, against Apple Computer Trading
(Shanghai) Co., Ltd., Apple, Inc., and Apple Computer Trading (Shanghai) Co., Ltd. (together, "Apple"), demanding that Apple
cease its infringement of Shanghai Xiao-i's intelligent assistant patent (ZL200410053749.9 invention patent) by its Siri (intelligent
assistant) (the "Patent Infringement Case"). The lawsuit seeks various remedies, including but not limited to, requiring
Apple to stop manufacturing, using, offering to sell, selling or importing products that infringe Shanghai Xiao-i's patent, and
a temporary claim amount of 10 billion yuan (RMB). On August 10, 2020, the High People's Court of Shanghai formally accepted the
Patent Infringement Case filed by Shanghai Xiao-i against Apple. On September 4, 2021, Shanghai Xiao-i filed a behavior preservation
application (injunction) with the Shanghai High People's Court, demanding Apple to immediately stop the patent infringement involving
Siri, including but not limited to stopping the production, selling, offering to sell, importing or using of iPhone products that infringe
Shanghai Xiao-i's patent. As of the date of this annual report, the Patent Infringement Case is pending in the High People's
Court of Shanghai.
In the opinion of management, there were no other
pending or threatened claims and litigation as of December 31, 2022 and through the date of this Annual Report.
Dividend
Policy
In
the following discussion of dividend policy, "we," "us," or "our" refer to Xiao-I.
We
have not previously declared or paid cash dividends and we have no plan to declare or pay any dividends in the near future on our shares.
We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. Any
future determination related to a dividend policy will be made at the discretion of our board of directors, and subject to Cayman Islands
law. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or its share premium account, provided
that in no circumstances may a dividend be paid out of share premium if this would result in the company being unable to pay its debts
as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing,
amount and form of future dividends, if any, will be based upon conditions then existing, including our results of operations, financial
condition, current and anticipated capital requirements, business prospects, contractual restrictions and other factors our board of
directors deems relevant, and subject to the restrictions contained in any future financing instruments.
B.
Significant Changes.
No
significant change has occurred since the date of the financial statements included in this Annual Report.
105
Item
9.  The Offer and Listing.
A.
Offer and Listing Details.
Our
ADSs are traded on the Nasdaq Global Market.
B.
Plan of Distribution
.
Not
applicable.
C.
Markets.
Our
ADSs are listed on the Nasdaq Global Market under the symbol "AIXI."
D.
Selling Shareholders.
Not
applicable.
E.
Dilution.
Not
applicable.
F.
Expenses of the Issuer.
Not
applicable.
Item
10. Additional Information.
A.
Share Capital.
Not
applicable.
B.
Memorandum and Articles of Association.
The
following are summaries of material provisions of our amended and restated memorandum and articles of association and of the Companies
Act, insofar as they relate to the material terms of our Ordinary Shares.
Objects
of Our Company
. Under our amended and restated memorandum and articles of association, the objects of our company are unrestricted,
and we are capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit,
as provided by section 27(2) of the Companies Act.
Ordinary
Shares
. s Our Ordinary Shares are issued in registered form and are issued when registered in our register of members. We may not
issue shares to bearer. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares.
Dividends
.
The holders of our Ordinary Shares are entitled to such dividends as may be declared by our board of directors. Our amended and restated
memorandum and articles of association provide that dividends may be declared and paid out of the funds of our company lawfully available
therefor. Under the laws of the Cayman Islands, our company may pay a dividend out of either profit or share premium account; provided
that in no circumstances may a dividend be paid out of above premium if this would result in our company being unable to pay its debts
as they fall due in the ordinary course of business.
106
Voting
Right
s. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by:
●
the
                                            chairperson of such meeting;
●
by
                                            at least three shareholders present in person or by proxy for the time being entitled to
                                            vote at the meeting;
●
by
                                            shareholder(s) present in person or by proxy representing not less than one-tenth of the
                                            total voting rights of all shareholders having the right to vote at the meeting; and
●
by
                                            shareholder(s) present in person or by proxy and holding shares in us conferring a right
                                            to vote at the meeting being shares on which an aggregate sum has been paid up equal to not
                                            less than one-tenth of the total sum paid up on all shares conferring that right.
An
ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching
to the Ordinary Shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the
votes cast attaching to the issued and outstanding Ordinary Shares at a meeting. A special resolution will be required for important
matters such as a change of name or making changes to our amended and restated memorandum and articles of association, a reduction of
our share capital and the winding up of our company. Our shareholders may, among other things, divide or combine their shares by ordinary
resolution.
General
Meetings of Shareholders
. As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders'
annual general meetings. Our amended and restated memorandum and articles of association provide that we shall, if required by the Companies
Act, in each year hold a general meeting as its annual general meeting, and shall specify the meeting as such in the notices calling
it, and the annual general meeting shall be held at such time and place as may be determined by our directors. General meetings, including
annual general meetings, may be held at such times and in any location in the world as may be determined by the Board. A general meeting
or any class meeting may also be held by means of such telephone, electronic or other communication facilities as to permit all persons
participating in the meeting to communicate with each other, and participation in such a meeting constitutes presence at such meeting.
Shareholders'
general meetings may be convened by the chairperson of our board of directors or by a majority of our board of directors. Advance notice
of at least ten clear days is required for the convening of our annual general shareholders' meeting (if any) and any other general
meeting of our shareholders. A quorum required for any general meeting of shareholders consists of, at the time when the meeting proceeds
to business, two shareholders holding shares which carry in aggregate (or representing by proxy) not less than one-third of all votes
attaching to issued and outstanding shares in our company entitled to vote at such general meeting.
Transfer
of Ordinary Shares
. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her Ordinary
Shares by an instrument of transfer in the usual or common form or in a form prescribed by Nasdaq Global Market or any other form approved
by our board of directors. Notwithstanding the foregoing, Ordinary Shares may also be transferred in accordance with the applicable rules
and regulations of Nasdaq Global Market.
Our
board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up
or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
●
the
                                            instrument of transfer is lodged with us, accompanied by the certificate for the Ordinary
                                            Shares to which it relates and such other evidence as our board of directors may reasonably
                                            require to show the right of the transferor to make the transfer;
107
●
the
                                            instrument of transfer is in respect of only one class of Ordinary Shares;
●
the
                                            instrument of transfer is properly stamped, if required; in the case of a transfer to joint
                                            holders, the number of joint holders to whom the ordinary share is to be transferred does
                                            not exceed four; and
●
a
                                            fee of such maximum sum as the Nasdaq Global Market may determine to be payable or such lesser
                                            sum as our directors may from time to time require is paid to us in respect thereof.
If
our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged,
send to each of the transferor and the transferee notice of such refusal.
The
registration of transfers may, after compliance with any notice required in accordance with the rules of the Nasdaq Global Market, be
suspended and the register closed at such times and for such periods as our board of directors may from time to time determine; provided,
however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our board
may determine. The period of 30 days may be extended for a further period or periods not exceeding 30 days in respect of any year if
approved by the shareholders by ordinary resolution.
Liquidation
.
On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to
repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders
in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares
in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available
for distribution are insufficient to repay all of the paid-up capital, such the assets will be distributed so that, as nearly as may
be, the losses are borne by our shareholders in proportion to the par value of the shares held by them.
Calls
on Shares and Forfeiture of Shares
. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid
on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares
that have been called upon and remain unpaid are subject to forfeiture.
Redemption,
Repurchase and Surrender of Shares
. We may issue shares on terms that such shares are subject to redemption, at our option or at
the option of the holders of these shares, on such terms and in such manner, including out of capital, as may be determined by our board
of directors. Our company may also repurchase any of our shares on such terms and in such manner as have been approved by our board of
directors. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company's profits, share premium
or out of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital if our company
can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies
Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in
there being no shares outstanding or (c) if the company has commenced liquidation. In addition, our company may accept the surrender
of any fully paid share for no consideration.
Variations
of Rights of Shares
. Whenever the capital of our company is divided into different classes the rights attached to any such class
may, subject to any rights or restrictions for the time being attached to any class, only be varied with the sanction of a resolution
passed by a majority of two-thirds of the votes cast at a separate meeting of the holders of the shares of that class. The rights conferred
upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the
terms of issue of the shares of that class, be deemed to be varied by the creation, allotment or issue of further shares ranking pari
passu with such existing class of shares.
Issuance
of Additional Shares
. Our amended and restated memorandum and articles of association authorizes our board of directors to issue
additional Ordinary Shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued
shares.
108
Our
amended and restated memorandum and articles of association also authorizes our board of directors to establish from time to time one
or more series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series,
including, among other things:
●
the
                                            designation of the series;
●
the
                                            number of shares of the series;
●
the
                                            dividend rights, dividend rates, conversion rights, voting rights; and
●
the
                                            rights and terms of redemption and liquidation preferences.
Our
board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued. Issuance of
these shares may dilute the voting power of holders of Ordinary Shares.
Inspection
of Books and Records
. Holders of our Ordinary Shares will have no general right under Cayman Islands law to inspect or obtain copies
of our list of shareholders or our corporate records. However, amended and restated memorandum and articles of association have provisions
that give our shareholders the right to inspect our register of shareholders without charge, and to receive our annual audited financial
statements. See "Where You Can Find Additional Information."
Anti-Takeover
Provisions
. Some provisions of our amended and restated memorandum and articles of association may discourage, delay or prevent a
change of control of our company or management that shareholders may consider favorable, including provisions that authorize our board
of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions
of such preference shares without any further vote or action by our shareholders. Further shareholders have no right under the amended
and restated memorandum and articles of association to requisition and convene general meetings of shareholders.
However,
under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our amended and restated memorandum
and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
Exempted
Company
. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary
resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside
of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the
same as for an ordinary company except that an exempted company:
●
does
                                            not have to file an annual return of its shareholders with the Registrar of Companies;
●
is
                                            not required to open its register of members for inspection;
●
does
                                            not have to hold an annual general meeting;
●
may
                                            issue negotiable or bearer shares or shares with no par value;
●
may
                                            obtain an undertaking against the imposition of any future taxation (such undertakings are
                                            usually given for 20 years in the first instance);
●
may
                                            register by way of continuation in another jurisdiction and be deregistered in the Cayman
                                            Islands;
●
may
                                            register as a limited duration company; and
●
may
                                            register as a segregated portfolio company.
"Limited
liability" means that the liability of each shareholder is limited to the amount unpaid by the shareholder on that shareholder's
shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an
illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).
109
Differences
in Corporate Law
The
Companies Act is derived, to a large extent, from the older Companies Acts of England but does not follow recent English statutory enactments
and accordingly there are significant differences between the Companies Act and the current Companies Act of England. In addition, the
Companies Act differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant
differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the United
States and their shareholders.
Mergers
and Similar Arrangements
. The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman
Islands companies and non-Cayman Islands companies. For these purposes, (a) "merger" means the merging of two or more constituent
companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (b) a
"consolidation" means the combination of two or more constituent companies into a consolidated company and the vesting of
the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation,
the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a)
a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in
such constituent company's articles of association. The plan must be filed with the Registrar of Companies of the Cayman Islands
together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each
constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors
of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Court
approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.
A
merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders
of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that
member agrees otherwise. For this purpose, a company is a "parent" of a subsidiary if it holds issued shares that together
represent at least ninety percent (90%) of the votes at a general meeting of the subsidiary. The consent of each holder of a fixed or
floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.
Save
in certain limited circumstances, a shareholder of a Cayman constituent company who dissents from the merger or consolidation is entitled
to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court)
upon dissenting to the merger or consolidation, provided the dissenting shareholder complies strictly with the procedures set out in
the Companies Act. The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which
he or she might otherwise be entitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or
consolidation is void or unlawful.
Separate
from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory provisions that facilitate
the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by seventy-five
per cent in value of the members or class of members, as the case may be, with whom the arrangement is to be made and a majority in number
of each class of creditors with whom the arrangement is to be made, and who must in addition represent seventy-five per cent in value
of each such class of creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings,
convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the
Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved,
the court can be expected to approve the arrangement if it determines that:
●
the
                                            statutory provisions as to the required majority vote have been met;
110
●
the
                                            shareholders have been fairly represented at the meeting in question and the statutory majority
                                            are acting bona fide without coercion of the minority to promote interests adverse to those
                                            of the class;
●
the
                                            arrangement is such that may be reasonably approved by an intelligent and honest man of that
                                            class acting in respect of his interest; and
●
the
                                            arrangement is not one that would more properly be sanctioned under some other provision
                                            of the Companies Act.
The
Companies Act also contains a statutory power of compulsory acquisition which may facilitate the "squeeze out" of a dissentient
minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected within four
months, the offeror may, within a two-month period commencing on the expiration of such four-month period, require the holders of the
remaining shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the
Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud,
bad faith or collusion.
If
an arrangement and reconstruction by way of scheme of arrangement is thus approved and sanctioned, or if a tender offer is made and accepted,
in accordance with the foregoing statutory procedures, a dissenting shareholder would have no rights comparable to appraisal rights,
save that objectors to a takeover offer may apply to the Grand Court of the Cayman Islands for various orders that the Grand Court of
the Cayman Islands has a broad discretion to make, which would otherwise ordinarily be available to dissenting shareholders of Delaware
corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
The
Companies Act also contains statutory provisions which provide that a company may present a petition to the Grand Court of the Cayman
Islands for the appointment of a restructuring officer on the grounds that the company (a) is or is likely to become unable to pay its
debts within the meaning of section 93 of the Companies Act; and (b) intends to present a compromise or arrangement to its creditors
(or classes thereof) either, pursuant to the Companies Act, the law of a foreign country or by way of a consensual restructuring. The
petition may be presented by a company acting by its directors, without a resolution of its members or an express power in its articles
of association. On hearing such a petition, the Cayman Islands court may, among other things, make an order appointing a restructuring
officer or make any other order as the court thinks fit.
Shareholders'
Suits. Conyers, Dill & Pearman, our Cayman Islands legal counsel, is not aware of any reported class action having been brought in
a Cayman Islands court. Derivative actions have been brought in the Cayman Islands courts, and the Cayman Islands courts have confirmed
the availability for such actions. In most cases, we will be the proper plaintiff in any claim based on a breach of duty owed to us,
and a claim against (for example) our officers or directors usually may not be brought by a shareholder. However, based both on Cayman
Islands authorities and on English authorities, which would in all likelihood be of persuasive authority and be applied by a court in
the Cayman Islands, exceptions to the foregoing principle apply in circumstances in which:
●
a
                                            company is acting, or proposing to act, illegally or beyond the scope of its authority;
●
the
                                            act complained of, although not beyond the scope of the authority, could be effected if duly
                                            authorized by more than the number of votes which have actually been obtained; or
●
those
                                            who control the company are perpetrating a "fraud on the minority."
A
shareholder may have a direct right of action against us where the individual rights of that shareholder have been infringed or are about
to be infringed.
Indemnification
of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which a company's
memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision
may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the
consequences of committing a crime. Our amended and restated memorandum and articles of association provide that that we shall indemnify
our directors and officers, and their personal representatives, against all actions, proceedings, costs, charges, expenses, losses, damages
or liabilities incurred or sustained by such persons, other than by reason of such person's dishonesty, wilful default or fraud,
in or about the conduct of our company's business or affairs (including as a result of any mistake of judgment) or in the execution
or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs,
expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings
concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere. This standard of conduct is generally
the same as permitted under the Delaware General Corporation Law for a Delaware corporation.
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In
addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional
indemnification beyond that provided in our amended and restated memorandum and articles of association.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling
us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
Directors'
Fiduciary Duties
. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and
its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act
in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director
must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction.
The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation.
He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that
the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling
shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed
basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption
may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by
a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.
As
a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company
and therefore it is considered that he owes the following duties to the company — a duty to act in good faith in the best interests
of the company, a duty not to make a personal profit based on his position as director (unless the company permits him to do so), a duty
not to put himself in a position where the interests of the company conflict with his personal interest or his duty to a third party
and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the
company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties
a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth
courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed
in the Cayman Islands.
Shareholder
Action by Written Consent
. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act
by written consent by amendment to its certificate of incorporation. Cayman Islands law permits us to eliminate the right of shareholders
to act by written consent and our amended and restated amended and restated articles of association provide that any action required
or permitted to be taken at any general meetings may be taken upon the vote of shareholders at a general meeting duly noticed and convened
in accordance with our amended and restated amended and restated articles of association and may not be taken by written consent of the
shareholders without a meeting.
Shareholder
Proposals
. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting
of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board
of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special
meetings.
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The
Companies Act does not provide shareholders with any right to requisition a general meeting or to put any proposal before a general meeting.
As an exempted Cayman Islands company, we are not obliged by law to call shareholders' annual general meetings.
Cumulative
Voting
. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation's
certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders
on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single
director, which increases the shareholder's voting power with respect to electing such director. There are no prohibitions in relation
to cumulative voting under the laws of the Cayman Islands but our amended and restated memorandum and articles of association do not
provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders
of a Delaware corporation.
Removal
of Directors
. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only
for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides
otherwise. Under our amended and restated memorandum and articles of association, subject to certain restrictions as contained therein,
directors may be removed with or without cause, by an ordinary resolution of our shareholders. An appointment of a director may be on
terms that the director shall automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual
general meeting or upon any specified event or after any specified period in a written agreement between the company and the director,
if any; but no such term shall be implied in the absence of express provision. Under our amended and restated memorandum and articles
of association, a director's office shall be vacated if the director (i) becomes bankrupt or has a receiving order made against
him or suspends payment or compounds with his creditors; (ii) is found to be or becomes of unsound mind or dies; (iii) resigns his office
by notice in writing to the company; (iv) without special leave of absence from our board of directors, is absent from three consecutive
meetings of the board and the board resolves that his office be vacated; (v) is prohibited by law from being a director or; (vi) is removed
from office pursuant to the laws of the Cayman Islands or any other provisions of our amended and restated memorandum and articles of
association.
Transactions
with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations
whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation,
it is prohibited from engaging in certain business combinations with an "interested shareholder" for three years following
the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which
owns or owned 15% or more of the target's outstanding voting share within the past three years. This has the effect of limiting
the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The
statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board
of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder.
This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target's
board of directors.
Cayman
Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business
combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders,
it does provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect of
constituting a fraud on the minority shareholders.
Dissolution;
Winding up
. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution
must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the
board of directors may it be approved by a simple majority of the corporation's outstanding shares. Delaware law allows a Delaware
corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated
by the board.
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Under
Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its
members or, if the company is unable to pay its debts, by an ordinary resolution of its members. The court has authority to order winding
up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.
Variation
of Rights of Shares
. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the
approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our
amended and restated memorandum and articles of association, if our share capital is divided into more than one class of shares, the
rights attached to any such class may only be materially adversely varied with the sanction of a resolution passed by a majority of two-thirds
of the votes cast at a separate meeting of the holders of the shares of that class.
Amendment
of Governing Documents. Under the Delaware General Corporation Law, a corporation's governing documents may be amended with the
approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under
Cayman Islands law, our amended and restated memorandum and articles of association may only be amended with a special resolution of
our shareholders.
Rights
of Non-resident or Foreign Shareholders
. There are no limitations imposed by our amended and restated memorandum and articles of
association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there
are no provisions in our amended and restated memorandum and articles of association governing the ownership threshold above which shareholder
ownership must be disclosed.
Anti-Money
Laundering — Cayman Islands
. In order to comply with legislation or regulations aimed at the prevention of money laundering,
the Company may be required to adopt and maintain anti-money laundering procedures, and may require subscribers to provide evidence to
verify their identity. Where permitted, and subject to certain conditions, the Company may also delegate the maintenance of our anti-money
laundering procedures (including the acquisition of due diligence information) to a suitable person.
The
Company reserves the right to request such information as is necessary to verify the identity of a subscriber. In the event of delay
or failure on the part of the subscriber in producing any information required for verification purposes, we may refuse to accept the
application, in which case any funds received will be returned without interest to the account from which they were originally debited.
The
Company also reserves the right to refuse to make any redemption payment to a shareholder if directors or officers suspect or are advised
that the payment of redemption proceeds to such shareholder might result in a breach of applicable anti-money laundering or other laws
or regulations by any person in any relevant jurisdiction, or if such refusal is considered necessary or appropriate to ensure compliance
with any such laws or regulations in any applicable jurisdiction.
C.
Material Contracts.
Except
as otherwise disclosed in this Annual Report (including the exhibits thereto), we are not currently, and have not been in the last two
years, party to any material contract, other than contracts entered into in the ordinary course of business.
D.
Exchange Controls.
Regulations on Foreign
Currency Exchange
Under the PRC Foreign
Currency Administration Rules promulgated on January 29, 1996 and last amended on August 5, 2008 and various regulations issued by SAFE
and other relevant PRC government authorities, payment of current account items in foreign currencies, such as trade and service payments,
payment of interest and dividends can be made without prior approval from SAFE by following the appropriate procedural requirements. By
contrast, the conversion of RMB into foreign currencies and remittance of the converted foreign currency outside the PRC for the purpose
of capital account items, such as direct equity investments, loans and repatriation of investment, requires prior approval from SAFE or
its local office.
On February 13, 2015,
SAFE promulgated the Circular on Simplifying and Improving the Foreign Currency Management Policy on Direct Investment, effective from
June 1, 2015, which cancels the requirement for obtaining approvals of foreign exchange registration of foreign direct investment and
overseas direct investment from SAFE. The application for the registration of foreign exchange for the purpose of foreign direct investment
and overseas direct investment may be filed with qualified banks, which, under the supervision of SAFE, may review the application and
process the registration.
SAFE promulgated the
Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested
Enterprises, or SAFE Circular 19, effective in June 2015. According to SAFE Circular 19, the flow and use of the RMB capital converted
from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used
for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of banks loans that have been transferred
to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested
enterprise to be used for equity investments within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated
capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. SAFE promulgated
the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy
of Capital Account, or SAFE Circular 16, effective in June 2016, which reiterates some of the rules set forth in SAFE Circular 19, but
changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested
company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises. SAFE Circular
19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from
our initial public offering, to our PRC subsidiary, which may adversely affect our liquidity and our ability to fund and expand our business
in the PRC. On October 23, 2019, SAFE issued Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation
of Cross-border Trade and Investment, or the Circular 28. Circular 28 allows non-investment foreign-invested enterprises to use their
capital funds to make equity investments in China, provided that such investments do not violate the Negative List and the target investment
projects are genuine and in compliance with PRC laws. Since Circular 28 was issued only recently, its interpretation and implementation
in practice are still subject to substantial uncertainties.
On January 26, 2017,
SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance
Verification, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profits
from domestic entities to offshore entities, including (i) banks must check whether the transaction is genuine by reviewing board resolutions
regarding profit distribution, original copies of tax filing records and audited financial statements, and (ii) domestic entities must
retain income to account for previous years' losses before remitting any profits. Moreover, pursuant to SAFE Circular 3, domestic
entities must explain in detail the sources of capital and how the capital will be used, and provide board resolutions, contracts and
other proof as a part of the registration procedure for outbound investment.
In light of the various
requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, and the fact
that the PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future, we
cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals
on a timely basis, if at all, with respect to future loans to PRC subsidiaries or future capital contributions by us to our PRC subsidiary.
As a result, uncertainties exist as to our ability to provide prompt financial support to our subsidiaries when needed. If we fail to
complete such registrations or obtain such approvals, our ability to use our available funds to capitalize or otherwise fund our PRC operations
may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business
of our PRC subsidiary and consolidated affiliated entities.
Regulations on Foreign
Exchange Registration of Overseas Investment by PRC Residents
SAFE issued the Circular
on Relevant Issues Relating to Domestic Resident's Investment and Financing and Roundtrip Investment through Special Purpose Vehicles,
or SAFE Circular 37, which became effective in July 2014, to replace the Circular of the State Administration of Foreign Exchange on Issues
Concerning the Regulation of Foreign Exchange in Equity Finance and Roundtrip Investments by Domestic Residents through Offshore Special
Purpose Vehicles, to regulate foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or
entities to seek offshore investment and financing or conduct round trip investment in China. SAFE Circular 37 defines a SPV as an offshore
entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or
making offshore investment, using legitimate onshore or offshore assets or interests, while "round trip investment" is defined
as direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the
ownership, control rights and management rights. SAFE Circular 37 stipulates that, prior to making contributions into an SPV, PRC residents
or entities be required to complete foreign exchange registration with SAFE or its local branch. In addition, SAFE promulgated the Notice
on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015 (which amended
SAFE Circular 37), as amended in 2019, local banks will examine and handle foreign exchange registration for overseas direct investment,
including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 from June 1, 2015.
PRC residents or entities
who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration as required before the
implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified banks. An amendment
to the registration is required if there is a material change with respect to the SPV registered, such as any change of basic information
(including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges
of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent
notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through
round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise,
including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation,
to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities
to penalties under PRC foreign exchange administration regulations.
If our shareholders who
are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiary may be prohibited from
distributing its profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in
our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above
could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.
Currently, most of our
shareholders have completed Circular 37 Registration and are in compliance. Some of our beneficial owners, who are PRC residents, have
not completed the Circular 37 Registration. All our significant shareholders, directors and officers have completed Circular 37 Registration.
We have asked our shareholders who are Chinese residents to make the necessary applications and filings as required by Circular 37. We
attempt to comply and attempt to ensure that our shareholders who are subject to these rules comply, with the relevant requirements. We
cannot, however, provide any assurances that all of our and future shareholders who are Chinese residents will comply with our request
to make or obtain any applicable registration or comply with other requirements required by Circular 37 or other related rules. In addition,
seven of our shareholders did not register according to the registration procedures stipulated in Circular 37 Registration of the SAFE
when they conducted their other external investment activities unrelated to us. As a result, WFOE is unable to open a new capital account
with banks within China, and may be restricted from remitting funds or handling other foreign exchange businesses within China. Currently,
we are unable to use most of the IPO proceeds (for product development and company operations because we are unable to transfer the funds
from Xiao-I Corporation to WFOE and then to the VIE due to WFOE's inability to open a new capital account as discussed above. We
are trying to assist these shareholders with remedying their non-compliance with Circular 37, but we are not sure when we will be able
to accomplish it. See "Item 3. Key Information—D. Risk Factors —Risks Related to Our Corporate Structure— Some
of our shareholders are not in compliance with the PRC's regulations relating to offshore investment activities by PRC residents,
and as a result, currently WFOE is unable to open a new capital account with banks within China, and may be restricted from remitting
funds or handling other foreign exchange businesses within China unless and until we remediate the non-compliance," and "Item
3. Key Information—D. 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 our
available funds to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional capital contributions
to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand the business of our
PRC subsidiary and consolidated affiliated entities."
Regulations on Dividend
Distribution
Distribution of dividends
of foreign investment enterprises are mainly governed by the Foreign Investment Enterprise Law, issued in 1986 and amended in 2000 and
2016 respectively, and the Implementation Rules under the Foreign Investment Enterprise Law, issued in 1990 and amended in 2001 and 2014
respectively. Thus, dividends and distributions from WFOE and the VIE are subject to regulations and restrictions on dividends and payment
to parties outside of China. These regulations permit payment of dividends to Xiao-I by WFOE only out of net income, if any, determined
in accordance with PRC accounting standards and regulations. A PRC company is not permitted to distribute any profits until any losses
from prior fiscal years have been offset by general reserve fund and profits (if general reserve fund is not enough). Profits retained
from prior fiscal years may be distributed together with distributable profits from the current fiscal year. In addition, a wholly
foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain
statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. As of December 31, 2022, our PRC
operating entities had restricted amount of US$237,486 (RMB1,569,546) the reserve fund. Moreover, registered share capital and capital
reserve accounts are also restricted from withdrawal in the PRC, up to the amount of net assets held in each operating subsidiary. We
have not previously declared or paid cash dividends and we have no plan to declare or pay any dividends in the near future.
114
115
E.
Taxation.
The
following summary of material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in ADSs or Ordinary Shares
is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change.
This summary does not deal with all possible tax consequences relating to an investment in ADSs or Ordinary Shares, such as the tax consequences
under state, local and other tax laws.
Cayman
Islands Taxation
The
Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is
no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to investors levied by the
government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought
within the jurisdiction of the Cayman Islands. The Cayman Islands is a party to a double tax treaty entered with the United Kingdom in
2010 but is otherwise is not party to any double tax treaties which are applicable to any payments made to or by our company. There are
no exchange control regulations or currency restrictions in the Cayman Islands.
Payments
of dividends and capital in respect of Ordinary Shares (including Ordinary Shares represented by the ADSs) will not be subject to taxation
in the Cayman Islands and no withholding will be required under Cayman Islands laws on the payment of a dividend or capital to any holder
of Ordinary Shares (including Ordinary Shares represented by the ADSs), nor will gains derived from the disposal of ADSs or Ordinary
Shares be subject to Cayman Islands income or corporation tax.
No
stamp duty is payable in the Cayman Islands in respect of the issue of our ADSs or Ordinary Shares or on an instrument of transfer in
respect of our ADSs or Ordinary Shares except those which hold interests in land in the Cayman Islands.
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People's
Republic of China Taxation
Under
the PRC EIT Law and its implementation rules, an enterprise established outside the PRC with a "
de facto
management body"
within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global
income. The implementation rules define the term "
de facto
management body" as the body that exercises full and substantial
control over and overall management of the business, production, personnel, accounts and properties of an enterprise. In April 2009,
the SAT issued the Circular of the SAT on Issues Relating to Identification of PRC-Controlled Overseas Registered Enterprises as Resident
Enterprises in Accordance with the De Facto Standards of Organizational Management (the "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 the
SAT's general position on how the "
de facto
management body" test 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 the PRC only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the
PRC; (ii) decisions relating to the enterprise's financial and human resource matters are made or are subject to approval by organizations
or personnel in the PRC; (iii) the enterprise's primary assets, accounting books and records, company seals, and board and shareholder
resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside
in the PRC.
Further
to SAT Circular 82, the SAT issued Announcement of the State Administration of Taxation on Printing and Distributing the Administrative
Measures for Income Tax on Chinese-controlled Resident Enterprises Incorporated Overseas (Trial Implementation) (the "SAT Bulletin
45"), which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides
for procedures and administration details of determination on resident status and administration on post-determination matters. Our company
is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and
its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders)
are maintained, outside the PRC. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises
either. As such, we do not believe that our company meets all of the conditions above or is 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." There can be no assurance that the PRC government
will ultimately take a view that is consistent with us. If the PRC tax authorities determine that our Cayman Islands holding company
is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. For example,
Xiao-I Corporation may be subject to enterprise income tax at a rate of 25% with respect to its worldwide taxable income. Also, a 10%
withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders (including our ADS holders) and with respect
to gains derived by our non-PRC enterprise shareholders (including our ADS holders) from transferring our Ordinary Shares or ADSs and
potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders (including our ADS holders)
and with respect to gains derived by our non-PRC individual shareholders (including our ADS holders) from transferring our Ordinary Shares
or ADSs. See "Risk Factors — Risks Relating to Doing Business in China — Under the PRC Enterprise Income Tax Law, we
may be classified as a PRC "resident enterprise," which could result in unfavorable tax consequences to us and our shareholders
or ADS holders and have a material adverse effect on our results of operations and the value of your investment."
The
SAT and the Ministry of Finance issued the Notice of Ministry of Finance and State Administration of Taxation on Several Issues relating
to Treatment of Corporate Income Tax Pertaining to Restructured Business Operations of Enterprises (the "SAT Circular 59")
in April 2009, which took effect on January 1, 2008. On October 17, 2017, the SAT issued the Announcement of the State Administration
of Taxation on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, which took effect on December 1, 2017
and was amended on June 15, 2018 (the "SAT Circular 37"). By promulgating and implementing the SAT Circular 59 and the SAT
Circular 37, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident
enterprise by a non-PRC resident enterprise.
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Pursuant
to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and
Tax Evasion on Income, or the Tax Arrangement, where a Hong Kong resident enterprise which is considered a non-PRC tax resident enterprise
directly holds at least 25% of a PRC enterprise, the withholding tax rate in respect of the payment of dividends by such PRC enterprise
to such Hong Kong resident enterprise is reduced to 5% from a standard rate of 10%, subject to approval of the PRC local tax authority.
Pursuant
to the Circular of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements
("Circular 81"), a resident enterprise of the counter-party to such Tax Arrangement should meet all of the following conditions,
among others, in order to enjoy the reduced withholding tax under the Tax Arrangement: (i) it must take the form of a company; (ii) it
must directly own the required percentage of equity interests and voting rights in such PRC resident enterprise; and (iii) it should
directly own such percentage of capital in the PRC resident enterprise anytime in the 12 consecutive months prior to receiving the dividends.
Furthermore, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties, or the Administrative Measures,
which took effect in November 2015, requires that the non-resident taxpayer shall determine whether it may enjoy the treatments under
relevant tax treaties and file the tax return or withholding declaration subject to further monitoring and oversight by the tax authorities.
Accordingly, Xiao-I Corporation may be able to enjoy the 5% withholding tax rate for the dividends it receives from WFOE, if it satisfies
the conditions prescribed under Circular 81 and other relevant tax rules and regulations. However, according to Circular 81, if the relevant
tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment,
the relevant tax authorities may adjust the favorable withholding tax in the future.
Notwithstanding
the foregoing, Shanghai Xiao-I and Guizhou Xiao-I enjoy preferential income tax rate of 15% until 2022 and 2024, respectively, due to
their treatment as "National High-Tech Enterprises" in China.
United
States Federal Income Taxation Considerations
The
following is a summary of certain United States federal income tax considerations generally applicable to the ownership and disposition
of our ADSs or Ordinary Shares by a U.S. holder (as defined below) that acquired our ADSs in our initial public offering or otherwise
and holds our ADSs or Ordinary Shares as "capital assets" (generally, property held for investment).
This
summary does not address all aspects of United States federal income taxation that may be important to particular investors in light
of their individual circumstances, including investors subject to special tax rules, for example, certain financial institutions, insurance
companies, broker-dealers, traders in securities that have elected the mark-to-market method of accounting for their securities, partnerships
and their partners, regulated investment companies, real estate investment trusts, and tax-exempt organizations (including private foundations),
investors who are not U.S. holders, investors who own directly, indirectly, or constructively 10% or more of our stock (by vote or value),
investors that will hold their ADSs or Ordinary Shares as part of a straddle, hedge, conversion, constructive sale, or other integrated
transaction for United States federal income tax purposes, investors required to accelerate the recognition of any item of gross income
with respect to our ADSs or Ordinary Shares as a result of such income being recognized on an applicable financial statement, or investors
that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly
from those summarized below.
This
summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings
and judicial decisions in effect as of the date hereof. Those authorities may be changed, possibly with retroactive effect, which could
result in United States federal income tax consequences different from those summarized below. This summary does not address all aspects
of United States federal income taxes, such as consequences under the Medicare contribution tax or the alternative minimum tax, and does
not deal with all tax considerations that may be relevant to beneficial owners in light of their personal circumstances. Further, this
summary does not address the consequences under any United States federal tax laws other than United States federal income tax laws (such
as U.S. federal gift or estate tax laws), and does not address the consequences under the tax laws of any state, local or non-U.S. jurisdiction.
We will not seek a ruling from the Internal Revenue Service ("IRS") with respect to any of the United States federal income
tax consequences discussed below and there can be no assurance that the IRS would not assert, or that a court would not sustain, positions
contrary to those described in this summary.
118
INVESTORS
SHOULD CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE UNITED STATES FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL
AS THE STATE AND LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF OUR ADSs OR ORDINARY SHARES AND
THE POSSIBLE EFFECTS OF ANY CHANGES IN APPLICABLLE TAX LAWS.
General
For
purposes of this discussion, a "U.S. holder" is a beneficial owner of our ADSs or Ordinary Shares that is, for United States
federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity
treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United States
or any state thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income taxation
regardless of its source, or (iv) a trust if (A) it is subject to the primary supervision of a United States court and one or more United
States persons (as defined in the Code) are authorized to control all substantial decisions of the trust or (B) it has in effect a valid
election under applicable Treasury regulations to be treated as a United States person for U.S. federal income tax purposes.
If
a partnership (or other entity or arrangement treated as a partnership for United States federal income tax purposes) is a beneficial
owner of our ADSs or Ordinary Shares, the tax treatment of a partner in the partnership generally will depend upon the status of the
partner and the activities of the partnership. Partnerships holding our ADSs or Ordinary Shares and partners in such partnerships are
urged to consult their tax advisors as to the particular United States federal income tax consequences of an investment in our ADSs or
Ordinary Shares.
The
discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit
agreement and any related agreement will be complied with in accordance with their terms. Based on such assumptions, if you hold ADSs,
you should generally be treated as the holder of the underlying Ordinary Shares represented by those ADSs for United States federal income
tax purposes.
The
United States Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer
of the underlying Ordinary Shares may be taking actions that are inconsistent with the beneficial ownership of the underlying Ordinary
Shares. Accordingly, the creditability of foreign tax credits by U.S. Holders of ADSs or the availability of the reduced tax rate for
dividends received by certain non-corporate U.S. Holders could be affected by actions taken by intermediaries in the chain of ownership
between the holder of an ADS and the Company.
Passive
Foreign Investment Company Considerations
A
non-U.S. corporation, such as our company, will be classified as a passive foreign investment company, or PFIC, for any taxable year
if either (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average value of its assets (generally
determined on a quarterly basis) consists of assets that produce passive income or are held for the production of passive income. For
purposes of these calculations, we will be treated as earning our proportionate share of the income and owning our proportionate share
of the assets of any other corporation in which we own, directly or indirectly, 25% (by value) of the stock. Although the law in this
regard is not entirely clear, we treat the VIE and its subsidiaries as being owned by us for U.S. federal income tax purposes because
we control their management decisions and are entitled to all of the economic benefits associated with them (excluding non-controlling
interests). As a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined,
however, that we are not the owner of the VIE and its subsidiaries for U.S. federal income tax purposes, we may be treated as a PFIC
for the current taxable year and any subsequent taxable year.
Assuming
that we are the owner of the VIE and its subsidiaries for U.S. federal income tax purposes, and based upon the manner in which we currently
operate our business through the VIE, the expected composition of our income and assets and the value of our assets, we do not presently
expect to be a PFIC for the current taxable year or the foreseeable future. However, this is a factual determination that must be made
annually after the close of each taxable year, and the application of the PFIC rules is subject to uncertainty in several respects. The
value of our assets for purposes of the PFIC determination generally will be determined by reference to the market price of our ADSs
or Ordinary Shares, which could fluctuate significantly. In addition, our PFIC status will depend on the manner we operate our business.
Furthermore, it is not entirely clear how the contractual arrangements between us, the VIE and its nominal shareholders will be treated
for purposes of the PFIC rules, and we may be or become a PFIC if the VIE is not treated as owned by us. Because of these uncertainties,
there can be no assurance that we will not be a PFIC for the current taxable year in future taxable years.
119
The
discussion below under "— Dividends" and "— Sale or Other Disposition of ADSs or Ordinary Shares"
is written on the basis that we will not be or become a PFIC for U.S. federal income tax purposes. If we are a PFIC for any taxable year
during which a U.S. holder holds our ADSs or Ordinary Shares, the PFIC rules discussed below under "— Passive Foreign Investment
Company Rules" generally will apply to such U.S. holder for such taxable year, and unless the U.S. holder makes certain elections,
will apply in future years even if we cease to be a PFIC.
Dividends
Any
cash distributions (including the amount of any PRC tax withheld) paid on our Ordinary Shares or ADSs out of our current or accumulated
earnings and profits, as determined under U.S. federal income tax principles, generally will be includible in the gross income of a U.S.
holder as dividend income on the day actually or constructively received by the U.S. holder. Because we do not intend to determine our
earnings and profits on the basis of U.S. federal income tax principles, the full amount of any distribution we pay generally will be
treated as a "dividend" for U.S. federal income tax purposes. Dividends received on our Ordinary Shares or ADSs will not
be eligible for the dividends received deduction generally allowed to corporations. Dividends received by individuals and certain other
non-corporate U.S. holders may be subject to tax at the lower capital gain tax rates applicable to "qualified dividend income,"
provided that certain conditions are satisfied, including that (1) our ADSs or Ordinary Shares, as applicable, on which the dividends
are paid are readily tradable on an established securities market in the United States, or, in the event that we are deemed to be a PRC
resident enterprise under the PRC Enterprise Income Tax Law, we are eligible for the benefits of the United States-PRC income tax treaty
(the "Treaty"), (2) we are neither a PFIC nor treated as such with respect to such a U.S. holder for the taxable year in
which the dividend was paid and the preceding taxable year, and (3) certain holding period requirements are met. Ordinary shares or ADSs
will generally be considered for the purpose of clause (1) above to be readily tradable on an established securities market in the United
States if they are listed on Nasdaq, as our ADSs are expected to be, although there can be no assurance in this regard.
In
the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see "— People's
Republic of China Taxation"), we may be eligible for the benefits of the Treaty. If we are eligible for such benefits, dividends
we pay on our Ordinary Shares or ADSs would be eligible for the reduced rates of taxation described in the preceding paragraph.
Dividends
paid on our Ordinary Shares or ADSs, if any, generally will be treated as income from foreign sources and generally will constitute passive
category income for U.S. foreign tax credit purposes. Depending on the U.S. holder's individual facts and circumstances, a U.S.
holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any non-refundable foreign
withholding taxes imposed on dividends received on our Ordinary Shares or ADSs. A U.S. holder who does not elect to claim a foreign tax
credit for foreign taxes withheld may instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholding,
but only for a year in which such holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax
credit are complex and their outcome depends in large part on the U.S. holder's individual facts and circumstances. Accordingly,
U.S. holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
Sale
or Other Disposition of Our ADSs or Ordinary Shares
Subject
to the PFIC rules discussed below, a U.S. holder generally will recognize capital gain or loss upon the sale or other disposition of
our ADSs or Ordinary Shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. holder's
adjusted tax basis in such ADSs or Ordinary Shares. Any capital gain or loss will be long-term if the ADSs or Ordinary Shares have been
held for more than one year and generally will be United States source gain or loss for United States foreign tax credit purposes. Long-term
capital gain of individuals and certain other non-corporate U.S. holders generally is eligible for a reduced rate of taxation. The deductibility
of a capital loss may be subject to limitations.
120
In
the event that we are treated as a PRC "resident enterprise" under the Enterprise Income Tax Law and gain from the disposition
of the ADSs or Ordinary Shares is subject to tax in the PRC, a U.S. holder that is eligible for the benefits of the income tax treaty
between the United States and the PRC may elect to treat the gain as PRC-source gain under the Treaty. If a U.S. holder is not eligible
for the benefits of the income tax treaty or fails to make the election to treat any such gain as PRC-source, then such U.S. holder may
not be able to use the foreign tax credit arising from any PRC tax imposed on the disposition of the ADSs or Ordinary Shares unless such
credit can be applied (subject to applicable limitations) against U.S. federal income tax due on other income derived from foreign sources
in the same income category (generally, the passive category). U.S. holders are advised to consult their tax advisors regarding the tax
consequences if a foreign tax is imposed on a disposition of our ADSs or Ordinary Shares, including the availability of the foreign tax
credit under their particular circumstances and the election to treat any gain as PRC-source. The deductibility of a capital loss may
be subject to limitations.
Passive
Foreign Investment Company Rules
If
we are a PFIC for any taxable year during which a U.S. holder holds our ADSs or Ordinary Shares, and unless the U.S. holder makes a mark-to-market
election (as described below), the U.S. holder generally will be subject to special tax rules that have a penalizing effect, regardless
of whether we remain a PFIC for subsequent taxable years, on (i) any excess distribution that we make to the U.S. holder (which generally
means any distribution paid during a taxable year to a U.S. holder that is greater than 125% of the average annual distributions paid
in the three preceding taxable years or, if shorter, the U.S. holder's holding period for the ADSs or Ordinary Shares), and (ii)
any gain realized on the sale or other disposition, including, under certain circumstances, a pledge, of ADSs or Ordinary Shares. Under
the PFIC rules:
●
such
                                            excess distribution and/or gain will be allocated ratably over the U.S. holder's holding
                                            period for the ADSs or Ordinary Shares;
●
the
                                            amount allocated to the current taxable year and any taxable years in the U.S. holder's
                                            holding period prior to the first taxable year in which we are a PFIC, or pre-PFIC year,
                                            will be taxable as ordinary income;
●
the
                                            amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject
                                            to tax at the highest tax rate in effect for that year; and
●
an
                                            interest charge generally applicable to underpayments of tax will be imposed on the tax attributable
                                            to each prior taxable year, other than a pre-PFIC year.
If
we are a PFIC for any taxable year during which a U.S. holder holds our ADSs or Ordinary Shares and any of our non-United States subsidiaries,
our consolidated VIE or any subsidiary of our consolidated VIE is also a PFIC, such U.S. holder would be treated as owning a proportionate
amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. holders are advised to consult
their tax advisors regarding the application of the PFIC rules to any of our subsidiaries, our consolidated VIE or any subsidiary of
our consolidated VIE.
As
an alternative to the foregoing rules, a U.S. holder of "marketable stock" in a PFIC may make a mark-to-market election with
respect to such stock, provided that such stock is regularly traded on a qualified exchange or other market, as defined in applicable
United States Treasury Regulations. We expect that our ADSs to be listed on Nasdaq and to be treated as marketable stock for this purposes.
We anticipate that our ADSs should qualify as being regularly traded, but no assurances may be given in this regard. If a U.S. holder
makes this election, the holder generally will (i) include as ordinary income for each taxable year that we are a PFIC the excess, if
any, of the fair market value of ADSs or Ordinary Shares held at the end of the taxable year over the adjusted tax basis of such ADSs
or Ordinary Shares and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ADSs or Ordinary Shares over
the fair market value of such ADSs or Ordinary Shares held at the end of the taxable year, but such deduction will only be allowed to
the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. holder's adjusted
tax basis in the ADSs or Ordinary Shares would be adjusted to reflect any income or loss resulting from the mark-to-market election.
If a U.S. holder makes a mark-to-market election in a year when we are classified as a PFIC and we subsequently cease to be classified
as a PFIC, the holder will not be required to take into account the gain or loss described above during any period that we are not classified
as a PFIC. If a U.S. holder makes a mark-to-market election, any gain such U.S. holder recognizes upon the sale or other disposition
of our ADSs or Ordinary Shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary
loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of
the mark-to-market election. If a U.S. holder makes a mark-to-market election it will be effective for the taxable year for which the
election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a qualified exchange or the IRS consents
to the revocation of the election.
121
Because
a mark-to-market election cannot be made for any lower-tier PFICs that a PFIC may own, a U.S. holder who makes a mark-to-market election
with respect to our ADSs or Ordinary Shares generally will continue to be subject to the general PFIC rules with respect to such U.S.
holder's indirect interest in any investments held by us that are treated as an equity interest in a PFIC for United States federal
income tax purposes.
We
do not intend to provide information necessary for U.S. holders to make qualified electing fund elections, which, if available, would
result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described above.
If
a U.S. holder owns our ADSs or Ordinary Shares during any taxable year that we are a PFIC, such holder would generally be required to
file an annual IRS Form 8621. Each U.S. holder is advised to consult its tax advisors regarding the potential tax consequences to such
holder if we are or become a PFIC, including the possibility of making a mark-to-market election.
F.
Dividends and Paying Agents.
Not
applicable.
G.
Statement by Experts.
Not
applicable.
H.
Documents on Display.
We
are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required
to file annually a Form 20-F containing financial statements audited by an independent registered public accounting firm no later than
120 days after the close of each fiscal year, which is December 31 of each year. The SEC also maintains a web site at www.sec.gov that
contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the
SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing
and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting
and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
We
also make available on our website, free of charge, our Annual Report and the text of our reports on Form 6-K, including any amendments
to these reports, as well as some other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished
to the SEC. Our website address is
www.xiaoi.com
. The reference to our website is an inactive textual reference only, and information
contained therein or connected thereto is not incorporated into this Annual Report.
I.
Subsidiary Information.
Not
applicable.
J.
Annual Report to Security Holders.
Not
applicable.
Item
11. Quantitative and Qualitative Disclosures About Market Risk.
122
Concentration of Credit Risk
Financial instruments that potentially expose us to concentrations
of credit risk consist primarily of accounts receivable. We conduct credit evaluations of our customers, and generally do not require
collateral or other security from them. We evaluate our collection experience and long outstanding balances to determine the need for
an allowance for doubtful accounts. We conduct periodic reviews of the financial condition and payment practices of our customers to minimize
collection risk on accounts receivable. For the years ended December 31, 2020, 2021 and 2022, the percentage of our revenue attributable
to our largest customer amounted to 17.7%, 41.2% and 20.4%, respectively, while the percentage of our revenue attributable our five largest
customers for the years ended December 31, 2021 and 2022 amounted to 42.8%, 67.1% and 58.4%, respectively.
Concentration of Suppliers Risk
We rely on a limited
number of suppliers for certain essential services to operate our network and provide products and solutions to our customers. Due to
the limited number of relevant suppliers available in China, we rely on a limited number of suppliers for cloud, internet data center
services and hardware. Our purchase from top-three suppliers in aggregate accounted for 62.5%, 79.2% and 66.8% of total purchase for the
years ended December 31, 2020, 2021 and 2022, respectively. We may experience shortages in components or delays in delivery as a result
of natural disasters, increased demand in the industry or our suppliers' lacking sufficient rights to supply the servers or other
products or services.
Foreign Exchange Risk
Foreign currency risk
arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. Substantially
all of our revenue-generating transactions, and a majority of our expense-related transactions, are denominated in Renminbi, which is
the functional currency of our operations. We do not hedge against currency risk.
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.
To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar
would reduce the Renminbi amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the
purpose of making payments for dividends to holders of our ADSs, or for other business purposes, appreciation of the U.S. dollar against
the Renminbi would reduce the U.S. dollar amounts available to us.
Our functional currency
is the RMB, and our financial statements are presented in U.S. dollars. The RMB appreciated by 8.23% and depreciated by 2.34% for the
years ended December 31, 2022 and 2021, respectively. It is difficult to predict how market forces or PRC or U.S. government policy may
impact the exchange rate between the RMB and the U.S. dollar in the future. The change in the value of the RMB relative to the U.S. dollar
may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying changes in our business or
results of operations. Currently, our assets, liabilities, revenues and costs are denominated in RMB.
Interest Rate Risk
We are not currently
exposed to interest rate risk. We do not own any interest-bearing instruments and our interest-bearing debt carries a fixed rate.
Market Price Risk
We are not currently
exposed to commodity price risk or market price risk.
Seasonality
Seasonality does not
materially affect our business or the results of our operations.
Liquidity
risk
We
aim to maintain sufficient cash, cash equivalents and short-term investments in wealth management products to meet obligations coming
due as well as future operating and capital requirements.
Inflation
Risk
We
do not believe that inflation has had a material effect on our business, financial condition, or results of operations. If our costs
become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our
inability or failure to do so could harm our business, financial condition, and operating results.
123
Item
12. Description of Securities Other than Equity Securities.
A.
Debt Securities.
Not
applicable.
B.
Warrants and Rights.
Not
applicable.
C.
Other Securities.
Not
applicable.
D.
American Depositary Shares.
Citibank,
N.A. has, as depositary, will register and deliver the ADSs. Citibank's depositary offices are located at 388 Greenwich Street,
New York, New York 10013. Each ADS represents one-third of an Ordinary Share deposited with Citibank, N.A. — Hong Kong,
located at 9/F Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong, as custodian for the depositary.
The
depositary will hold the Ordinary Shares underlying your ADSs. As an ADS holder, you will not be treated as one of Xiao-I's shareholders
and you will not have direct shareholder rights. You will have the rights of an ADS holder as provided in the deposit agreement among
Xiao-I, the depositary and holders and beneficial owners of ADSs from time to time.
Xiao-I does
not expect to pay dividends in the foreseeable future. If, however, it declares dividends on its Ordinary Shares, the depositary will
pay you the cash dividends and other distributions it receives on Xiao-I's Ordinary Shares after deducting its fees and expenses
in accordance with the terms set forth in the deposit agreement.
You
may surrender your ADSs to the depositary in exchange for Ordinary Shares. The depositary will charge you fees for any exchange.
Fees
and Charges
As
an ADS holder, you will be required to pay the following fees under the terms of the deposit agreement:
Service
Rate
(1)
    Issuance of ADSs (
e.g.
, an issuance upon a deposit of Shares, upon a change in the ADS(s)-to-Share(s) ratio, or for any other
    reason), excluding issuances as a result of distributions described in paragraph (4) below.
Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) issued.
(2)
    Cancellation of ADSs (
e.g.
, a cancellation of ADSs for Delivery of deposited Shares, upon a change in the ADS(s)-to-Share(s)
    ratio, or for any other reason).
Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) cancelled.
(3)
    Distribution of cash dividends or other cash distributions (
e.g.
, upon a sale of rights and other entitlements).
Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) held.
(4)
    Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) an exercise of rights to purchase
    additional ADSs.
Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) held.
(5)
    Distribution of securities other than ADSs or rights to purchase additional ADSs (
e.g.
, spin-off shares).
Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) held.
(6)
    ADS Services.
Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) held on the applicable record date(s) established by the Depositary.
(7)
    Registration of ADS Transfers (
e.g.
, upon a registration of the transfer of registered ownership of ADSs, upon a transfer
    of ADSs into DTC and
vice versa
, or for any other reason).
Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) transferred.
(8)
    Conversion of ADSs of one series for ADSs of another series (
e.g.
, upon conversion of Partial Entitlement ADSs for Full Entitlement
    ADSs, or upon conversion of Restricted ADSs into freely transferable ADSs, and
vice versa
).
Up
    to U.S. $5.00 per 100 ADSs (or fraction thereof) converted.
124
As
an ADS holder, you will also be responsible to pay certain charges such as:
●
taxes
(including applicable interest and penalties) and other governmental charges;
●
the
registration fees as may from time to time be in effect for the registration of Ordinary Shares on the share register and applicable
to transfers of Ordinary Shares to or from the name of the custodian, the depositary or any nominees upon the making of deposits and
withdrawals, respectively;
●
certain
cable, telex and facsimile transmission and delivery expenses;
●
the
fees, expenses, spreads, taxes and other charges of the depositary and/or service providers (which may be a division, branch or affiliate
of the depositary) in the conversion of foreign currency;
●
the
reasonable and customary out-of-pocket expenses incurred by the depositary in connection with compliance with exchange control regulations
and other regulatory requirements applicable to Ordinary Shares, ADSs and ADRs;
●
the
fees, charges, costs and expenses incurred by the depositary, the custodian, or any nominee in connection with the ADR program; and
●
the
amounts payable to the depositary by any party to the deposit agreement pursuant to any ancillary agreement to the deposit agreement
in respect of the ADR program, the ADSs and the ADRs.
ADS
fees and charges for (i) the issuance of ADSs, and (ii) the cancellation of ADSs are charged to the person for whom the ADSs
are issued (in the case of ADS issuances) and to the person for whom ADSs are cancelled (in the case of ADS cancellations). In the case
of ADSs issued by the depositary into The Depository Trust Company ("DTC"), the ADS issuance and cancellation fees and charges
may be deducted from distributions made through DTC, and may be charged to the DTC participant(s) receiving the ADSs being issued
or the DTC participant(s) holding the ADSs being cancelled, as the case may be, on behalf of the beneficial owner(s) and will
be charged by the DTC participant(s) to the account of the applicable beneficial owner(s) in accordance with the procedures
and practices of the DTC participants as in effect at the time. ADS fees and charges in respect of distributions and the ADS service
fee are charged to the holders as of the applicable ADS record date. In the case of distributions of cash, the amount of the applicable
ADS fees and charges is deducted from the funds being distributed. In the case of (i) distributions other than cash and (ii) the
ADS service fee, holders as of the ADS record date will be invoiced for the amount of the ADS fees and charges and such ADS fees and
charges may be deducted from distributions made to holders of ADSs. For ADSs held through DTC, the ADS fees and charges for distributions
other than cash and the ADS service fee may be deducted from distributions made through DTC, and may be charged to the DTC participants
in accordance with the procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADS fees
and charges to the beneficial owners for whom they hold ADSs. In the case of (i) registration of ADS transfers, the ADS transfer
fee will be payable by the ADS Holder whose ADSs are being transferred or by the person to whom the ADSs are transferred, and (ii) conversion
of ADSs of one series for ADSs of another series, the ADS conversion fee will be payable by the Holder whose ADSs are converted or by
the person to whom the converted ADSs are delivered.
In
the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service
until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder. Note that
the fees and charges you may be required to pay may vary over time and may be changed by us and by the depositary. You will receive prior
notice of such changes. The depositary may reimburse us for certain expenses incurred by us in respect of the ADR program, by making
available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the
depositary agree from time to time.
Payments
by Depositary
As
of April 25, 2023, we had not received any  payments  from Citibank, N.A., the current depositary bank for our
ADR program.
125
PART
II
Item
13. Defaults, Dividend Arrearages and Delinquencies.
None.
Item
14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
On
March 8, 2023, the SEC declared effective our registration statement on Form F-1 (File No. 333-268889), as amended, filed in connection
with our IPO (the "Registration Statement"). Pursuant to the Registration Statement, we registered the offer and sale of
6,900,000 of our ADSs, including up to 900,000 ADSs pursuant to the underwriters' option to purchase additional ADSs. Prime Number
Capital LLC acted as representative of the underwriters for the offering.
On March 13, 2023, we issued and sold 5,700,000
of our ADSs, at a price to the public of $6.80 per share. The aggregate offering price of the shares sold was approximately $38.76 million.
We received net proceeds of $35.44 million, after deducting underwriting discounts, commissions and offering expenses of $3.32 million.
No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any
persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates. The offering terminated after the sale
of all securities registered pursuant to the Registration Statement.
Below
is a summary of the currently expected use of the net proceeds from our IPO:
●
research
                                            and development;
●
investment
                                            in technology infrastructure, marketing and branding, and other capital expenditure; and
●
other
                                            general corporate purposes.
Item
15. Controls and Procedures.
(a)
Disclosure Controls and Procedures.
As
required by Rule 13a-15 under the Exchange Act, management, including our chief executive officer and our chief financial officer, has
evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Disclosure
controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports
we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC. Disclosure controls and procedures include, without limitations, controls and procedures designed to ensure that
information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated
to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate
to allow timely decisions regarding our required disclosures.
Based
on the foregoing, our chief executive officer and our chief financial officer have concluded that, as of December 31, 2022, our disclosure
controls and procedures were not effective due to two material weaknesses in our internal control over the financial statement closing
process.
(b)
Management's Annual Report on Internal
Control over Financial Reporting
.
This
Annual Report does not include a report of management's assessment regarding internal control over financial reporting due to a
transition period established by rules of the SEC for newly public companies.
126
In connection with the audit of our consolidated
financial statements, as of and for the years ended December 31, 2021 and 2022, we identified two material weaknesses in our internal
control over the financial statement closing process. 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 consolidated
financial statements will not be prevented or detected on a timely basis. The material weakness that have been identified relates to (i)
our lack of sufficient and competent financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and reporting
requirements set forth by the SEC to address complex U.S. GAAP technical accounting issues, and to prepare and review consolidated financial
statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements and (ii) our lack of internal file management
procedures and effective recognition procedures to recognize revenue and costs timely.
We are working to remediate these material weaknesses
and are taking steps to strengthen our internal control. Specifically, we are working to develop and implement a staffing plan for hiring
additional accounting and finance personnel in 2023, hire additional qualified resources with appropriate knowledge and expertise to handle
complex accounting issues and effectively prepare financial statements and conduct regular and continuous U.S. GAAP accounting and financial
reporting training programs for our financial reporting and accounting personnel. In order to maintain and improve the effectiveness of
our disclosure controls and procedures and internal controls over financial reporting, we will need to expend significant resources and
provide significant management oversight. We plan to adopt measures to improve our internal file management procedures and an effective
recognition procedure by (i) establishing internal document management policies and systems, (ii) continuing our efforts to implement
necessary review and controls at relevant levels and all important documents and contracts will be submitted to the office of our chief
administrative officers for retention and review, and (iii) establishing standard procedures to recognize revenue and costs based on the
contracts service periods.
(c)
Attestation Report of the Registered
Public Accounting Firm
.
This
Annual Report does not include an attestation report of the Company's registered public accounting firm due to a transition period
established by rules of the SEC for newly public companies and because we are an emerging growth company under the JOBS Act.
(d)
Changes in Internal Control over Financial Reporting.
Other than as described above, there were no changes in our internal
control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the year ended December 31, 2022
that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item
16. [Reserved]
Item
16.A. Audit Committee Financial Expert.
Our audit committee, which consists of H. David
Sherman, Jun Xu and Zhong Lin, assists the board in overseeing our accounting and financial reporting processes and the audits of our
consolidated financial statements. H. David Sherman serves as Chairman of the committee. Each committee member satisfies the "independence"
requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Global Market and meets the independence standards under Rule 10A-3
under the Exchange Act. In addition, our board of directors has determined that H. David Sherman qualifies as an "audit committee
financial expert" as defined in Item 16A of the Instructions to Form 20-F and meets NASDAQ's financial sophistication requirements
due to his current and past experience in various companies in which he was responsible for, amongst others, the financial oversight responsibilities.
127
Item
16.B. Code of Ethics.
Our
board has adopted, a Code of Business Conduct and Ethics that is applicable to all our employees, directors and executive officers, a
copy of which is available under the "Governance Documents" section of our website at https://ir.xiaoi.com/. We expect to
disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and
Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons
performing similar functions.
Item
16.C. Principal Accountant Fees and Services.
The
following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered
by Marcum Asia CPAs LLP, our principal external auditors, for the periods indicated.
Year Ended December 31,
2021
2022
Audit fees
(1)
$
377,000
$
340,000
All other fees
(2)
–
–
Total
$
377,000
$
340,000
(1)
"Audit
                                            fees" means the aggregate fees billed in each of the fiscal years listed for professional
                                            services rendered by our principal auditors for the audit of our consolidated and subsidiary
                                            financial statements and other audit or interim review services provided in connection with
                                            statutory and regulatory filings or engagements.
(2)
"All
                                            other fees" means the aggregate fees billed in each of the fiscal years listed for
                                            products and services provided by our principal auditors, other than the services reported
                                            under audit fees, audit-related fees and tax fees.
Our
audit committee pre-approves all audit and non-audit services to be performed by the independent auditors and the related fees for such
services other than prohibited nonauditing services as promulgated under rules and regulations of the SEC (subject to the inadvertent
de minimis exceptions set forth in the Exchange Act and the SEC rules).
Item 16.D. Exemptions from the Listing Standards for Audit Committees.
Not
applicable.
Item
16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
None.
Item
16.F. Change in Registrant's Certifying Accountant.
None.
Item
16.G. Corporate Governance.
We are a "foreign private issuer,"
as defined by the SEC. Under the federal securities laws of the United States, foreign private issuers are subject to different disclosure
requirements than U.S.-domiciled registrants. As a result, in accordance with the rules and regulations of Nasdaq, we may at our option
comply with home country governance requirements and certain exemptions thereunder rather than complying with Nasdaq Global Market corporate
governance standards. We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable
corporate governance requirements of the Sarbanes-Oxley Act, the rules adopted by the SEC and the Nasdaq Global Market listing standards.
We currently intend to rely on the home country practices that will exempt us from having a compensation committee or a nominating and
corporate governance committee consisting entirely of independent directors. See "Item 3. Key Information—D. Risk Factors—
SUMMARY OF RISK FACTORS—Foreign Private Issuer" and "Item 3. Key Information—D. Risk Factors—Risks Relating
to the ADSs— As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation
to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may
afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards."
128
Accordingly,
our shareholders will not have the same protections afforded to shareholders of companies that are mandatorily subject to all of the
corporate governance requirements of Nasdaq and the domestic reporting requirements of the SEC. We may utilize these exemptions for as
long as we continue to qualify as a foreign private issuer.
Item
16.H. Mine Safety Disclosure.
Not
applicable.
Item
16.I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not
applicable.
Item
16.J. Insider Trading Policies.
We have adopted an insider trading policy (the "Policy")
to promote compliance with applicable securities laws and regulations, including those that prohibit insider trading. The Policy applies
to all officers, directors, and employees of the Company. As someone subject to the Policy, individuals are responsible for ensuring that
members of their immediate family and household also comply with the Policy. The Policy also applies to any entities that individuals
control, including any corporations, partnerships, or trusts, and transactions by such entities should be treated for the purposes of
the Policy and applicable securities laws as if they were for their own account. The Company may determine that the Policy applies to
additional persons with access to material nonpublic information, such as contractors or consultants. The Policy extends to all activities
within and outside individuals' Company duties.
The insider trading policy establishes the following guidelines and
procedures:
●
No
                                            officer, director, or employee (or any other person designated as subject to this Policy)
                                            shall purchase or sell any type of security while in possession of material nonpublic information
                                            relating to the security or the issuer of such security, whether the issuer of such security
                                            is the Company or any other company.
●
Additionally,
                                            no officer, director or employee shall purchase or sell any security of the Company during
                                            the period beginning on the 14th calendar day before the end of any fiscal quarter of the
                                            Company and ending upon completion of the second full trading day after the public release
                                            of earnings data for such fiscal quarter or during any other trading suspension period declared
                                            by the Company.
●
From
                                            time to time, events will occur that are material to the Company and cause certain officers,
                                            directors, or employees to be in possession of material nonpublic information. When that
                                            happens, the Company will recommend that those in possession of the material nonpublic information
                                            suspend all trading in the Company's securities until the information is no longer
                                            material or has been publicly disclosed.
●
When
                                            such event-specific blackout periods occur, those subject to it will be notified by the Company.
                                            The event-specific blackout period will not be announced to those not subject to it, and
                                            those subject to it or otherwise aware of it should not disclose it to others.
●
Even
                                            if the Company has not notified you that you are subject to an event-specific blackout period,
                                            if you are aware of material nonpublic information about the Company, you should not trade
                                            in Company securities. Any failure by the Company to designate you as subject to an event-specific
                                            blackout period, or to notify you of such designation, does not relieve you of your obligation
                                            not to trade in the Company's securities while possessing material nonpublic information.
●
No
                                            officer, director, or employee shall directly or indirectly communicate (or "tip")
                                            material nonpublic information to anyone outside the Company (except in accordance with the
                                            Company's policies regarding the protection or authorized external disclosure of Company
                                            information) or to anyone within the Company other than on a "need-to-know" basis.
●
Insiders
                                            may be liable for communicating or tipping material nonpublic information to a third party
                                            ("tippee"), and insider trading violations are not limited to trading or tipping
                                            by insiders. Persons other than insiders can also be liable for insider trading, including
                                            tippees who trade on material nonpublic information tipped to them or individuals who trade
                                            on material nonpublic information that has been misappropriated. Insiders may be held liable
                                            for tipping even if they receive no personal benefit from tipping and even if no close personal
                                            relationship exists between them and the tippee.
●
Tippees
                                            inherit an insider's duties and are liable for trading on material nonpublic information
                                            illegally tipped to them by an insider. Similarly, just as insiders are liable for the insider
                                            trading of their tippees, so are tippees who pass the information along to others who trade.
                                            In other words, a tippee's liability for insider trading is no different from that
                                            of an insider. Tippees can obtain material nonpublic information by receiving overt tips
                                            from others or through, among other things, conversations at social, business, or other gatherings.
We are committed to maintaining the highest standards of ethical conduct
and have implemented these insider trading policies and procedures to ensure compliance with applicable securities laws and to protect
the interests of our shareholders.
129
PART
III
Item
17. Financial Statements.
We
have elected to furnish financial statements and related information specified in Item 18.
Item
18. Financial Statements.
Financial
statements are filed as part of this Annual Report beginning on page F-1.
Item
19. Exhibits.
Exhibit
Number
Description
of Document
1.1*
Amended and Restated Memorandum and Articles of Association of the Registrant
2.1
Registrant's Specimen American Depositary Receipt (included in Exhibit 2.3) (1)
2.2
Registrant's Specimen Certificate for Ordinary Shares (2)
2.3
Form of Deposit Agreement, among the Registrant, the depositary and the holders and beneficial owners of American Depositary Shares issued thereunder (3)
2.4*
Description of Securities
4.1
2023 Share Incentive Plan (4)
4.2
Form of Indemnification Agreement between the Registrant and its directors and executive officers (5)
4.3
English Translation of Exclusive Business Cooperation Agreement between Zhizhen Artificial Intelligence Technology (Shanghai) Company Limited and Shanghai Xiao-i Robot Technology Company Limited dated March 29, 2019 (6)
4.4
English Translation of Exclusive Option Agreement among Zhizhen Artificial Intelligence Technology (Shanghai) Company Limited, Shanghai Xiao-i Robot Technology Company Limited and Each Shareholder of Shanghai Xiao-i Robot Technology Company Limited dated March 29, 2019 (7)
4.5
English Translation of Share Interest Pledge Agreement among Zhizhen Artificial Intelligence Technology (Shanghai) Company Limited and Each Shareholder of Shanghai Xiao-i Robot Technology Company Limited dated March 29, 2019 (8)
4.6
English Translation of Power of Attorney Agreement granted to Zhizhen Artificial Intelligence Technology (Shanghai) Company Limited by each shareholder of Shanghai Robot Technology Company Limited dated March 29, 2019 (9)
4.7
English Translation of Form of Spousal Commitment Letters Signed by Each Spouse of the Shareholders of Shanghai Xiao-i Robot Technology Co., Ltd. (10)
4.8
English Translation of Form Investment Agreement Related to Convertible Loans (11)
4.9
English Translation of Intelligent Drawing Review Platform License Agreement between Shanghai Xiao-i Robot Technology Company Limited and China Construction Third Engineering Bureau Group Limited. (Customer A) (12)
4.10
English Translation of Cloud Computing Technical Services Cooperation Agreement between Shanghai Xiao-i Robot Technology Company Limited and Beijing Blanstar Technology Co., Ltd. (Supplier A) (13)
4.11
English Translation of Operation and Technical Service Agreement of Intelligent Plan Review Platform Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and China Construction Third Engineering Bureau Group Limited (Customer A) (14)
4.12
English Translation of AI Core Product Cloud Platform Lease Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Beijing Wanjie Data Technology Co., Ltd. (Customer B) (15)
4.13
English Translation of Software Procurement Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Beijing Kaiwu Digital Intelligence Technology Co., Ltd. (Supplier B) (16)
4.14
English Translation of Services Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and China Construction Third Bureau Installation Engineering Co., Ltd. (Customer C) (17)
4.15
English Translation of Supplier Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and Beijing Telecom Tongchangda Information Co., Ltd. (Supplier C) (18)
4.16
English Translation of Services Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and Fengzhuo Jiye Technology Innovation (Beijing) Co., Ltd. (Customer D) (19)
4.17
English Translation of Services Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and Shanghai Lirui Water Treatment Technology Co., Ltd. (Customer E) (20)
4.18
Independent Director Agreement, Dated on January 18, 2023, between H. David Sherman and Xiao-I Corporation (21)
4.19*
English Translation of AI Cloud Platform Service Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Customer F dated June 27, 2022
4.20*
English Translation of Beijing Housing Lease Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Supplier D dated September 25, 2019
4.21*
English Translation of Software License Use and Development Service Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Supplier E dated November 30, 2020
4.22*
English Translation of Supplemental Agreement between Shanghai Xiao-i Robot Technology Co., Ltd. and Supplier F dated December 24, 2020
4.23*
English Translation of Talefull Human Resource Management Software Deployment Service Contract between Shanghai Xiao-i Robot Technology Co., Ltd. and Supplier F date August 1, 2018
8.1*
List of Significant Subsidiaries and VIE of the Registrant
11.1
Code of Business Conduct and Ethics of the Registrant (22)
11.2*
Insider Trading Policy
12.1*
CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*
CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1**
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2**
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
Inline
    XBRL Instance Document
101.SCH*
Inline
    XBRL Taxonomy Extension Schema Document
101.CAL*
Inline
    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline
    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline
    XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline
    XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover
    Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
(1)
Incorporated
    by reference to Exhibit (a) to the Registrant's registration statement on Form F-6 (File No. 333- 268889) filed with the
    SEC on February 1, 2023.
130
(2)
Incorporated
    by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(3)
Incorporated
    by reference to Exhibit (a) to the Registrant's registration statement on Form F-6 (File No. 333- 268889) filed with the
    SEC on February 1, 2023.
(4)
Incorporated
    by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(5)
Incorporated
    by reference to Exhibit 10.2 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(6)
Incorporated
    by reference to Exhibit 10.3 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(7)
Incorporated
    by reference to Exhibit 10.4 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(8)
Incorporated
    by reference to Exhibit 10.5 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(9)
Incorporated
    by reference to Exhibit 10.6 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(10)
Incorporated
    by reference to Exhibit 10.7 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(11)
Incorporated
    by reference to Exhibit 10.8 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(12)
Incorporated
    by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with the
    SEC on December 20, 2022.
(13)
Incorporated
    by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with
    the SEC on December 20, 2022.
(14)
Incorporated
    by reference to Exhibit 10.11 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with
    the SEC on December 20, 2022.
(15)
Incorporated
    by reference to Exhibit 10.12 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with
    the SEC on December 20, 2022.
(16)
Incorporated
    by reference to Exhibit 10.13 to the Registrant's Registration Statement on Form F-1 (File No. 333-268889) filed with
    the SEC on December 20, 2022.
(17)
Incorporated
    by reference to Exhibit 10.14 to the Registrant's Amendment No.1 to Registration Statement on Form F-1 (File No. 333-268889)
    filed with the SEC on February 13, 2023.
(18)
Incorporated
    by reference to Exhibit 10.15 to the Registrant's Amendment No.1 to Registration Statement on Form F-1 (File No. 333-268889)
    filed with the SEC on February 13, 2023.
(19)
Incorporated
    by reference to Exhibit 10.16 to the Registrant's Amendment No.1 to Registration Statement on Form F-1 (File No. 333-268889)
    filed with the SEC on February 13, 2023.
(20)
Incorporated
    by reference to Exhibit 10.17 to the Registrant's Amendment No.1 to Registration Statement on Form F-1 (File No. 333-268889)
    filed with the SEC on February 13, 2023.
(21)
Incorporated
    by reference to Exhibit 10.18 to the Registrant's Amendment No.1 to Registration Statement on Form F-1 (File No. 333-268889)
    filed with the SEC on February 13, 2023.
(22)
Incorporated
    by reference to Exhibit 99.8 to the Registrant's Amendment No.1 to Registration Statement on Form F-1 (File No. 333-268889)
    filed with the SEC on February 13, 2023.
*
Filed
    with this annual report on Form 20-F.
**
Furnished
    with this annual report on Form 20-F.
Some
agreements filed as exhibits to this Annual Report contain representations and warranties that the parties thereto made to each other.
These representations and warranties have been made solely for the benefit of the other parties to such agreements and may have been
qualified by specific information that has been disclosed to the other parties to such agreements and that may not be reflected in such
agreements. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements
contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such
representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter
of any such representations and warranties may have changed since the date of such agreements.
131
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.
XIAO-I
    CORPORATION
Date:
    April 28, 2023
By:
/s/
    Hui Yuan
Hui
    Yuan
Chief Executive Officer
132
XIAO-I CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
PAGE(S)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:
5395
)
F-2
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 AND 2022
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 AND 2022
F-4
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 AND 2022
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 AND 2022
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
F-
1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Shareholders and Board of Directors of
XIAO-I CORPORATION
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of XIAO-I CORPORATION (the "Company") as of December 31, 2021 and 2022, the related consolidated statements
of operations and comprehensive (loss)/income
,
changes in deficit and cash flows for each of the three years in the period ended
December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2022, and the results
of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Marcum Asia CPAs LLP
Marcum Asia CPAs LLP
We have served as the Company's auditor since 2021.
New York, NY
April 28, 2023
F-
2
XIAO-I CORPORATION
CONSOLIDATED BALANCE SHEETS
(In U.S. dollars, except for share and
per share data, or otherwise noted)
As of December 31,
2021
2022
Assets
Current assets:
Cash and cash equivalents
$
1,311,846
$
1,026,245
Accounts receivable, net
31,184,779
41,362,705
Amounts due from related parties
391,919
346,517
Inventories
768,762
768,216
Contract costs
1,669,519
2,012,309
Deferred offering costs
-
1,330,902
Advance to suppliers
90,350
1,115,672
Prepaid expenses and other current assets, net
388,848
460,854
Total current assets
35,806,023
48,423,420
Non-current assets:
Property and equipment, net
207,989
219,470
Intangible assets, net
798,459
637,114
Long-term investment
335,448
2,852,492
Right of use assets
1,194,859
865,399
Deferred tax assets, net
4,906,287
3,888,574
Prepaid expenses and other, non-current assets
3,941,346
3,697,675
Total non-current assets
11,384,388
12,160,724
TOTAL ASSETS
$
47,190,411
$
60,584,144
Commitments and Contingencies
Liabilities
Current liabilities:
Short-term borrowings
$
9,117,158
$
18,784,459
Accounts payable
5,581,879
9,180,532
Amount due to related parties-current
1,558,642
896,431
Deferred revenue
2,953,238
2,553,808
Convertible loans
5,717,737
3,754,269
Accrued expenses and other current liabilities
10,316,432
17,006,713
Lease liabilities, current
800,658
435,462
Income tax payable
17,904
-
Total current liabilities
36,063,648
52,611,674
Non-current liabilities:
Amount due to related parties-non current
8,905,313
8,581,743
Accrued liabilities, non-current
5,157,971
8,073,912
Lease liabilities, non-current
446,140
300,974
Total non-current liabilities
14,509,424
16,956,629
TOTAL LIABILITIES
50,573,072
69,568,303
Shareholders' deficit
Ordinary shares (par value of $
0.00005
per share;
1,000,000,000
shares authorized as of December 31, 2021 and December 31, 2022, respectively;
22,115,592
shares issued and outstanding as of December 31,2021 and December 31, 2022, respectively)
$
1,106
$
1,106
Additional paid-in capital
75,621,294
75,621,294
Statutory reserve
237,486
237,486
Accumulated deficit
(
72,584,621
)
(
78,483,156
)
Accumulated other comprehensive loss
(
3,464,423
)
(
3,262,666
)
XIAO-I CORPORATION shareholders' deficit
(
189,158
)
(
5,885,936
)
Non-controlling interests
(
3,193,503
)
(
3,098,223
)
Total shareholders' deficit
(
3,382,661
)
(
8,984,159
)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
$
47,190,411
$
60,584,144
The accompanying notes are an integral part of
these consolidated financial statements.
F-
3
XIAO-I CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)/INCOME
(In U.S. dollars, except for share and per share data, or otherwise noted)
For the years ended December 31,
2020
2021
2022
Sale of software products
$
5,098,730
$
14,878,256
$
3,547,113
Sale of hardware products
415,723
75,011
46,295
Technology development service
6,404,394
9,246,992
16,419,889
M&S service
1,937,887
2,772,795
2,429,526
Sale of cloud platform products
-
5,550,959
25,742,135
Net revenues (including sales to related parties of $
2,449,560
, $
286,875
and
nil
for the years ended December 31, 2020, 2021 and 2022, respectively)
13,856,734
32,524,013
48,184,958
Cost of revenues
(
7,228,046
)
(
10,885,731
)
(
17,379,144
)
Gross profit
6,628,688
21,638,282
30,805,814
Operating expenses:
Selling expenses
(
4,566,760
)
(
4,620,113
)
(
3,911,818
)
General and administrative expenses
(
5,694,785
)
(
6,657,251
)
(
6,028,637
)
Research and development expenses
(
4,236,723
)
(
5,363,909
)
(
24,001,138
)
Total operating expenses
(
14,498,268
)
(
16,641,273
)
(
33,941,593
)
(Loss)/Income from operations
(
7,869,580
)
4,997,009
(
3,135,779
)
Other income/(loss):
Investment losses
(
207,497
)
(
156,630
)
(
143,181
)
Interest expense
(
1,026,636
)
(
1,866,831
)
(
2,440,815
)
Foreign currency exchange gain/(loss)
41,592
11,252
(
68,902
)
Other income, net
1,770,225
932,557
444,018
Total other income/(loss)
577,684
(
1,079,652
)
(
2,208,880
)
(Loss)/Income before income tax expense
(
7,291,896
)
3,917,357
(
5,344,659
)
Income tax benefit/(expense)
235,854
(
552,355
)
(
660,655
)
Net (loss)/income
$
(
7,056,042
)
$
3,365,002
$
(
6,005,314
)
Net loss attributable to non-controlling interests
(
247,677
)
(
312,811
)
(
106,779
)
Net (loss)/income attributable to XIAO-I CORPORATION shareholders
(
6,808,365
)
3,677,813
(
5,898,535
)
Other comprehensive (loss)/income
Foreign currency translation change, net of nil income taxes
(
357,695
)
(
117,291
)
403,816
Total other comprehensive (loss)/income
(
357,695
)
(
117,291
)
403,816
Total comprehensive (loss)/income
$
(
7,413,737
)
$
3,247,711
$
(
5,601,498
)
Total comprehensive (loss)/income attributable to non-controlling interests
(
386,914
)
(
370,503
)
95,280
Total comprehensive (loss)/income attributable to XIAO-I CORPORATION shareholders
(
7,026,823
)
3,618,214
(
5,696,778
)
(Loss)/Earnings per ordinary share attributable to XIAO-I CORPORATION shareholders
Basic
(
0.31
)
0.17
(
0.27
)
Diluted
(
0.31
)
0.16
(
0.27
)
Weighted average number of ordinary shares outstanding
Basic
22,115,592
22,115,592
22,115,592
Diluted
22,115,592
22,362,552
22,115,592
The accompanying notes are an integral part of
these consolidated financial statements
F-
4
XIAO-I CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
(In U.S. dollars, except for share and per share data, or otherwise noted)
Additional
Accumulated
    other
Total
Non-
Ordinary
    shares*
paid-in
Statutory
Accumulated
comprehensive
shareholder's
controlling
Total
    equity/
Share
Amount
capital
reserve
deficit
loss
equity/(deficit)
interests
(deficit)
Balance
    as of December 31, 2019
22,115,592
$
1,106
$
75,621,294
$
237,486
$
(
69,454,069
)
$
(
3,186,366
)
$
3,219,451
$
(
2,436,086
)
$
783,365
Net
    loss
-
-
-
-
(
6,808,365
)
-
(
6,808,365
)
(
247,677
)
(
7,056,042
)
Foreign
    currency translation adjustment
-
-
-
-
-
(
218,458
)
(
218,458
)
(
139,237
)
(
357,695
)
Balance
    as of December 31, 2020
22,115,592
1,106
75,621,294
237,486
(
76,262,434
)
(
3,404,824
)
(
3,807,372
)
(
2,823,000
)
(
6,630,372
)
Net
    income/(loss)
-
-
-
-
3,677,813
-
3,677,813
(
312,811
)
3,365,002
Foreign
    currency translation adjustment
-
-
-
-
-
(
59,599
)
(
59,599
)
(
57,692
)
(
117,291
)
Balance
    as of December 31, 2021
22,115,592
1,106
75,621,294
237,486
(
72,584,621
)
(
3,464,423
)
(
189,158
)
(
3,193,503
)
(
3,382,661
)
Net
    loss
-
-
-
-
(
5,898,535
)
-
(
5,898,535
)
(
106,779
)
(
6,005,314
)
Foreign
    currency translation adjustment
-
-
-
-
-
201,757
201,757
202,059
403,816
Balance
    as of December 31, 2022
22,115,592
1,106
75,621,294
237,486
(
78,483,156
)
(
3,262,666
)
(
5,885,936
)
(
3,098,223
)
(
8,984,159
)
The accompanying notes are an integral part of
these consolidated financial statements.
F-
5
XIAO-I CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. dollars, except for share and
per share data, or otherwise noted)
For the years ended December 31,
2020
2021
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income
$
(
7,056,042
)
$
3,365,002
$
(
6,005,314
)
Adjustments to reconcile net (loss)/income to net cash used in operating activities:
Allowance for accounts receivable
758,019
270,649
2,149,176
Allowance for prepaid expenses and other current assets
-
1,380,331
-
Allowance for amount due from a related party
-
-
20,887
Return of inventories to a related party
-
-
(
239,330
)
Debt relief offered by a related party
-
-
(
72,819
)
Written-down of inventories
-
-
154,664
Depreciation and amortization
168,795
173,055
182,269
Gain from the disposal of property and equipment
(
33,256
)
(
31,409
)
-
Gain from the disposal of intangible assets
-
(
22,636
)
-
Loss from equity investment
207,497
156,630
143,181
Deferred tax (benefits)/expenses
(
235,854
)
534,668
660,653
Right-of-use assets amortization
1,380,588
1,087,035
712,844
Changes in assets and liabilities
Accounts receivable
(
701,260
)
(
23,393,437
)
(
15,012,712
)
Inventories
256,507
(
495,398
)
(
2,130,389
)
Contract costs
313,541
(
607,850
)
1,434,836
Prepaid expenses and other current assets
957,035
(
11,120
)
(
1,162,117
)
Amount due from related parties
(
4,332
)
(
368,847
)
-
Accounts payable
(
614,200
)
3,394,069
4,123,775
Deferred revenue
(
10,785
)
1,038,149
(
179,177
)
Accrued expenses and other current liabilities
1,019,524
2,693,914
5,163,654
Amount due to related parties
208,249
(
56,030
)
100,315
Income tax payable
(
16,399
)
17,904
(
16,956
)
Lease payment liabilities
(
1,312,365
)
(
1,071,775
)
(
893,276
)
Prepaid expenses and other, non-current assets
(
3,786,999
)
61,130
(
57,510
)
Accrued liabilities, non-current
5,038,643
(
1,156
)
-
Net cash used in operating activities
(
3,463,094
)
(
11,887,122
)
(
10,923,346
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
(
19,932
)
(
18,853
)
(
106,814
)
Proceeds from disposal of property and equipment
15,256
96,112
-
Purchase of intangible assets
(
21,149
)
-
(
308
)
Purchase of equity method investments
-
-
(
2,749,294
)
Net cash (used in)/provided by investing activities
(
25,825
)
77,259
(
2,856,416
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings
10,392,225
11,393,910
21,252,786
Repayments of short-term borrowings
(
11,005,324
)
(
16,470,788
)
(
10,633,055
)
Proceeds from interests-free borrowings from related parties
1,448
16,764,954
2,315,351
Repayments of interests-free borrowings from related parties
-
(
6,893,702
)
(
2,314,311
)
Proceeds from borrowings from third-parties
2,911,271
15,115,236
7,950,661
Repayments of borrowings from third-parties
(
506,938
)
(
7,716,658
)
(
2,065,948
)
Repayment of convertible loans
-
-
(
1,634,715
)
Deferred offering costs
-
-
(
1,364,169
)
Net cash provided by financing activities
1,792,682
12,192,952
13,506,600
Effect of exchange rate changes
(
797,954
)
101,728
(
12,439
)
Net change in cash, cash equivalents and restricted cash
(
2,494,191
)
484,817
(
285,601
)
Cash, cash equivalents and restricted cash, at beginning of year
3,321,220
827,029
1,311,846
Cash, cash equivalents and restricted cash, at end of year
$
827,029
$
1,311,846
$
1,026,245
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid
$
747,529
$
121,666
$
609,451
Income taxes paid/(refund)
52,381
(
36,279
)
2
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Recognition of Right-of-use assets and Lease payment liability
$
3,630,939
$
-
$
467,359
The accompanying notes are an integral part of
these consolidated financial statements.
F-
6
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
XIAO-I CORPORATION. ("Xiao-I",
or the "Company") was incorporated under the laws of the Cayman Islands on August 20, 2018. The Company through its wholly-owned
subsidiaries, variable interest entity ("VIE") and VIE's subsidiaries (collectively, the "Group") primarily
engages in Internet technology development in the People's Republic of China ("PRC" or "China").
As of December 31, 2022, the Company's
major subsidiaries and consolidated VIE are as follows:
Name
Date of
Incorporation
Percentage of
beneficial
ownership for
purposes of
accounting
Principal
Activities
Wholly owned subsidiaries
AI PLUS HOLDING LIMITED ("AI Plus")
August 30, 2018
100
%
Investing holding company
Xiao-i Technology Limited ("Xiao-i Technology")
December 17, 2018
100
%
Investing holding company
Zhizhen Artificial Intelligent Technology (Shanghai) Co. Ltd. ("Zhizhen Technology") ("WFOE")
February, 21, 2020
100
%
WFOE, a holding company
Name
Date of
Incorporation
Percentage of
beneficial
ownership for
purposes of
accounting
Principal
Activities
VIE
Shanghai Xiao-i Robot Technology
Co., Ltd. ("Shanghai Xiao-i")
August 27, 2009
100
%
Internet technology development
Name
Date of
Incorporation
Percentage of
beneficial
ownership for
purposes of
accounting
Principal
Activities
Subsidiaries of VIE
Xiaoi Robot Technology (H.K) Ltd.
("Xiaoi Robot")
June 3, 2016
100
%
Internet technology development
Guizhou Xiao-i Robot Technology Co., Ltd. ("Guizhou Xiao-i")
July 18, 2016
70
%
AI robot development
Reorganization
The Company undertook a reorganization
and became the ultimate holding company of AI PLUS, Xiaoi Robot and WFOE, in which the shareholding percentages and rights of each shareholder
are the same before and after the Reorganization. Effective on March 29, 2019, shareholders of Shanghai Xiao-i and WFOE entered into
a series of contractual arrangements ("VIE Agreements") which are described below.
F-
7
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
(cont.)
The VIE Agreements
The PRC government regulates the telecommunications
and internet industry, including software industry, through strict business licensing requirements and other government regulations. These
laws and regulations also include limitations on foreign ownership of PRC companies that engage in software business. The Company, AI
Plus, Zhizhen Technology, are considered as foreign invested enterprises. To comply with these regulations, the Group conducts the majority
of its activities in PRC through Shanghai Xiao-i (the "VIE"), and the VIE's subsidiaries.
The currently effective contractual arrangements,
as described in more detail below, by and among Zhizhen Technology, the VIE, and 61 of the VIE's shareholders include (i) certain
exclusive call option agreement, proxy agreement and share interest pledge agreement, that enable the Company to exercise operational
control over the VIE, and (ii) exclusive business cooperation agreement, that enable the Company to realize all of the economic risks
and benefits arising from Shanghai Xiao-i and its subsidiaries (excluding non-controlling interests). Therefore, the Group, through its
wholly owned subsidiaries AI Plus and Zhizhen Technology, has been determined to be the primary beneficiary of Shanghai Xiao-i and its
subsidiaries for accounting purposes and has consolidated Shanghai Xiao-i's and its subsidiaries' assets, liabilities, results
of operations, and cash flows in the accompanying consolidated financial statements.
Immediately before and after reorganization,
the Company together with its wholly-owned subsidiaries AI Plus and Zhizhen Technology and its VIE were effectively controlled by the
same shareholders; therefore, the Reorganization is accounted for in a manner similar to a common control transaction because it is determined
that the transfers lack economic substance. The accompanying consolidated financial statements have been prepared as if the current corporate
structure has been in existence throughout the periods presented. The consolidation of the Company and its subsidiaries and VIE has been
accounted for at historical cost as of the beginning of the first period presented in the accompanying financial statements.
Exclusive Call Option Agreement
Pursuant to the Exclusive Call Option
Agreement among Zhizhen Technology, Shanghai Xiao-i and its shareholders, the shareholders irrevocably granted Zhizhen Technology or any
third party designated by Zhizhen Technology an option to purchase all or part of their equity interests in Shanghai Xiao-i at any time
at a price determined at Zhizhen Technology's discretion. According to the Exclusive Call Option Agreement, the purchase price to
be paid by the Company to each shareholder of Shanghai Xiao-i will be the minimum price permitted by applicable PRC Law at the time when
such share transfer occurs. Without Zhizhen Technology's prior written consent, the shareholders and Shanghai Xiao-i agreed not
to, among other things: set encumbrance on, transfer all or part of, or dispose of the equity interests; amend the articles of association
of Shanghai Xiao-i; change the registered capital of Shanghai Xiao-i or holding structure; change Shanghai Xiao-i's business activities;
sell, assign, mortgage or dispose of any legal or beneficial rights to or in any of Shanghai Xiao-i's assets, business, or revenue;
incur, assume or guarantee any debts; enter into any material contract; extend any loan or credit to any party, or provide any guarantee
or assume any obligation of any party; merge or consolidate with any third party or acquire or invest in any third party; or distribute
dividends. The shareholders and Shanghai Xiao-i agreed to manage business and handle financial and commercial affairs prudently and in
accordance with relevant laws and codes of practice. This Agreement will continue with full force and effect until the earlier of the
date on which Zhizhen Technology has acquired all of the Equity Interests in Shanghai Xiao-i, or this Agreement is terminated by the mutual
written consent.
F-
8
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
(cont.)
Exclusive Business Cooperation Agreement
On March 29, 2019, Zhizhen Technology
entered into an Exclusive Business Cooperation Agreement with Shanghai Xiao-i to enable Zhizhen Technology to engage in the development
and operation of the Internet technology development in accordance with applicable laws. Under this Agreement, Zhizhen Technology intends
to use its labor, technology and information advantages to provide exclusive technical services, technical consultation and other services
to Shanghai Xiao-i, and Shanghai Xiao-i agrees to accept such services. The term of the Services provided by Zhizhen Technology shall
be 10 years from the effective date of March 29, 2019, and will be automatically extended after the expiration until when terminated in
writing by Zhizhen Technology. Additionally, Zhizhen Technology has the full and exclusive right to manage and direct all cash flow and
assets of Shanghai Xiao-i and to direct and administrate the financial affairs and daily operation of Shanghai Xiao-i. Shanghai Xiao-i
pays service fees to Zhizhen Technology in an amount determined by Zhizhen Technology in its sole discretion. If Shanghai Xiao-i is unable
to pay the service fees due to the actual managing situation, with the written consent of Zhizhen Technology, the unpaid part of the service
fees in the previous fiscal year can be deferred to the end of the next year and settled together. During the validity term of this agreement,
Zhizhen Technology will bear all the economic benefits and risks arising from the business of Shanghai Xiao-i and its subsidiaries. Zhizhen
Technology will provide financial support to Shanghai Xiao-i or its subsidiaries in the event of a loss or serious operational difficulties.
Power of Attorney Agreement
On March 29, 2019, each shareholder
of Shanghai Xiao-i, signed the Power of Attorney Agreement to irrevocably entrust Zhizhen Technology or any person(s) designated
by Zhizhen Technology to act as its attorney-in-fact to exercise any and all of its rights as a shareholder of Shanghai Xiao-i, including,
but not limited to, the right to convene, attend and present the shareholders' meetings, vote, sign and perform as a shareholder;
transfer, pledge or dispose of all the equity interest of Shanghai Xiao-i held by the shareholder; collect the dividend, and participate
in litigation procedures. This agreement is effective and irrevocable until all of each shareholder's equity interest in Shanghai
Xiao-i has been transferred to Shanghai Xiao-i or the person(s) designated by Zhizhen Technology.
Share Interest Pledge Agreement
Under the Share Interest Pledge Agreement
signed on March 29, 2019 by and among Zhizhen Technology and each shareholder of Shanghai Xiao-i, the shareholders of Shanghai Xiao-i
have agreed to pledge
100
% equity interest in Shanghai Xiao-i to Zhizhen Technology to guarantee the performance obligations of Shanghai
Xiao-i under the Exclusive Business Cooperation Agreement, and the performance obligations of each shareholder under the Exclusive Call
Option Agreement. If Shanghai Xiao-i or its shareholders breach their contractual obligations under these agreements, Zhizhen Technology,
as pledgee, will have the right to exercise the pledge.
The shareholders also agreed that,
without prior written consent of Zhizhen Technology, they will not dispose of the pledged equity interests or create or allow any encumbrance
on the pledged equity interests. The pledge of equity interests in Shanghai Xiao-i has been registered with the relevant office of the
State Administration for Market Regulation in accordance with the Civil Code of the People's Republic of China.
Spousal Commitment Letters
The spouses of each individual shareholder of Shanghai Xiao-i
have each signed Spousal Commitment Letters. Under the Spousal Commitment Letter, the signing spouse unconditionally and irrevocably has
agreed to the execution by his or her spouse of the above-mentioned Exclusive Business Cooperation Agreement, Exclusive Call Option Agreement,
Power of Attorney Agreement and Share Interest Pledge Agreement, and that his or her spouse may perform, amend or terminate such agreements
without his or her consent. In addition, in the event that the spouse obtains any equity interest in Shanghai Xiao-i held by his or her
spouse for any reason, he or she agrees to be bound by and sign any legal documents substantially similar to the contractual arrangements
entered into by his or her spouse, as may be amended from time to time.
F-
9
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
(cont.)
Risks in relation to the VIE structure
The Company believes that the contractual
arrangements with its VIE and their respective shareholders are in compliance with PRC laws and regulations and are legally enforceable.
However, uncertainties in the PRC legal system could limit the Company's ability to enforce the contractual arrangements. If the
legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could, among
others:
●
revoke the business licenses and/or operating licenses of
the Company;
●
discontinue or place restrictions or onerous conditions on
the operations;
●
impose fines, confiscate the income from Zhizhen Technology
or the VIE, or impose other requirements with which the Company or the VIE may not be able to comply;
●
require the Company to restructure the ownership structure
or operations, including terminate the contractual arrangements with the VIE and deregister the equity pledges of the VIE, which in turn
would affect our ability to consolidate, derive economic interests from, or exert operational control over the VIE, or impose restrictions
on the Company's right to collect revenues;
●
impose additional conditions or requirements with which the
Company may not be able to comply;
●
require the Company to restructure the operations in such
a way as to compel the Company to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and
assets; or
●
restrict or prohibiting the Company use of the proceeds of
overseas offering to finance the business and operations in China.
The revenue producing assets that are
held by the VIE and the VIE's subsidiaries primarily comprise of leasehold improvements, electronic equipment, office equipment
and software. Substantially all of such assets are recognized in the Group's consolidated financial statements, except for certain
Internet Content Provider Licenses, internally developed software, trademarks and patent applications which were not recorded in the Company's
consolidated balance sheets as they do not meet all the capitalization criteria. The Internet content provision and other licenses are
required under relevant PRC laws, rules and regulations for the operation of Internet businesses in the PRC, and therefore are integral
to the Company's operations. The Internet content provision licenses require that core PRC trademark registrations and domain names
are held by the VIE and the VIE's subsidiaries that provide the relevant services. The VIE and the VIE's subsidiaries also
hire assembled work force on sales, research and development and operations whose costs are expensed as incurred.
The Company's ability to conduct
its business may be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, The
Company may not be able to consolidate its VIE in its consolidated financial statements as it may lose the ability to exert operational
control over the VIE and their respective shareholders and it may lose the ability to receive economic benefits from the VIE. The Company,
however, does not believe such actions would result in the liquidation or dissolution of the Company, its PRC subsidiaries and VIE.
The interests of the shareholders of
VIE may diverge from that of the Company and that may potentially increase the risk that they would seek to act contrary to the contractual
terms, for example by influencing VIE not to pay the service fees when required to do so. The Company cannot assure that when conflicts
of interest arise, shareholders of VIE will act in the best interests of the Company or that conflicts of interests will be resolved in
the Company's favor. The Company believes the shareholders of VIE will not act contrary to any of the contractual arrangements and
the exclusive option agreements provide the Company with a mechanism to remove the current shareholders of VIE should they act to the
detriment of the Company. The Company relies on certain current shareholders of VIE to fulfill their fiduciary duties and abide by laws
of the PRC and act in the best interest of the Company. If the Company cannot resolve any conflicts of interest or disputes between the
Company and the shareholders of VIE, the Company would have to rely on legal proceedings, which could result in disruption of its business,
and there is substantial uncertainty as to the outcome of any such legal proceedings.
F-
10
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
(cont.)
The following financial statement amounts and balances of
the VIE and its subsidiaries were included in the accompanying consolidated financial statements after elimination of intercompany transactions:
Consolidated Balance Sheets Information
As of December 31,
2021
2022
Assets
Current assets:
Cash and cash equivalents
$
1,310,737
$
1,025,141
Accounts receivable, net
31,184,779
41,362,705
Amounts due from related parties
391,919
346,517
Inventories
768,762
768,216
Contract costs
1,669,519
2,012,309
Advance to suppliers
90,350
1,115,672
Deferred offering costs
-
1,330,902
Prepaid expenses and other current assets, net
388,844
460,850
Total current assets
35,804,910
48,422,312
Non-current assets:
Property and equipment, net
207,989
219,470
Intangible assets, net
798,459
637,114
Long-term investment
335,448
204,899
Right of use assets
1,194,859
865,399
Deferred tax assets, net
4,906,287
3,888,574
Prepaid expenses and other, non-current assets
3,941,346
3,697,675
Total non-current assets
11,384,388
9,513,131
TOTAL ASSETS
$
47,189,298
$
57,935,443
Liabilities
Current liabilities:
Short-term borrowings
$
9,117,158
$
18,784,459
Accounts payable
5,581,879
9,180,532
Amount due to related parties-current
1,558,642
896,431
Deferred revenue
2,953,238
2,553,808
Accrued expenses and other current liabilities
10,316,428
17,006,680
Convertible loans
5,717,737
3,754,269
Lease liabilities, current
800,658
435,462
Income tax payable
17,904
-
Total current liabilities
36,063,644
52,611,641
Non-current liabilities:
Amount due to related parties-non current
8,905,313
8,581,743
Accrued liabilities, non-current
5,157,971
5,391,664
Lease liabilities, non-current
446,140
300,974
Total non-current liabilities
14,509,424
14,274,381
TOTAL LIABILITIES
$
50,573,068
$
66,886,022
F-
11
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
ORGANIZATION AND PRINCIPAL ACTIVITIES
(cont.)
Consolidated Statements of Operations
and Comprehensive (loss)/Income
For the years ended December 31,
2020
2021
2022
Net Revenue
$
13,856,734
$
32,524,013
$
48,184,958
Net (loss)/income
$
(
7,056,042
)
$
3,365,002
$
(
5,969,762
)
Consolidated Cash Flows Information
For the years ended December 31,
2020
2021
2022
Net cash used in operating activities
$
(
3,463,094
)
$
(
11,887,122
)
$
(
10,923,345
)
Net cash (used in)/provided by investing activities
(
25,825
)
77,259
(
107,122
)
Net cash provided by financing activities
1,792,682
12,192,952
10,757,306
Effect of exchange rate changes
(
797,954
)
101,728
(
12,435
)
Net change in cash, cash equivalents and restricted cash
$
(
2,494,191
)
$
484,817
$
(
285,596
)
As of December 31, 2020, 2021
and 2022, there were no pledge or collateralization of the VIE's assets that can only be used to settle obligations of the VIE. The
amount of the net liabilities of the VIE was $
3,383,770
and $
8,950,579
as of December 31, 2021 and 2022, respectively. The creditors
of the VIE's third party liabilities did not have recourse to the general credit of the Company in normal course of business. Currently
there is a contractual arrangement that would require the Company or its subsidiaries to provide financial support to the VIE. Under the
Exclusive Business Cooperation Agreement signed on March 29, 2019 between WFOE and the VIE, WFOE will provide financial support to the
VIE or the VIE's subsidiaries in the event of a loss or serious operational difficulties during the validity term of this agreement.
F-
12
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a).
Basis of presentation
The accompanying consolidated financial
statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").
The accompanying consolidated financial
statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The realization
of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Group's
ability to operate profitably, to generate cash flows from operations, and its ability to attract investors and to borrow funds on reasonable
economic terms.
(b).
Principles of consolidation
The consolidated financial statements
include the financial statements of the Company, its subsidiaries, the VIE in which the Company, through its WFOE, has a controlling financial
interest, and the VIE's subsidiaries.
Subsidiaries are those entities in which
the Company, directly or indirectly, controls more than one half of the voting power or has the power to govern the financial and operating
policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of
directors. A VIE is an entity in which the Company, or its WFOE, through contractual arrangements, is fully and exclusively responsible
for the management of the entity, absorbs all risk of losses of the entity (excluding non-controlling interests), receives the benefits
of the entity that could be significant to the entity (excluding non-controlling interests), and has the exclusive right to exercise all
voting rights of the entity, and therefore the Company or its WFOE is the primary beneficiary of the entity for accounting purposes. However,
the contractual arrangements with the VIE and its shareholders may not be as effective as equity ownership in providing operational control.
All intercompany transactions and balances
among the Company, its subsidiaries, the VIE, and the VIE's subsidiaries have been eliminated upon consolidation.
(c).
Use of estimates
The preparation of the consolidated financial
statements in accordance with US 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 periods in the consolidated financial statements and accompanying notes. Significant accounting estimates include,
but not limited to, the allowance for doubtful accounts, net realizable value of inventories, depreciable lives and recoverability of
property and equipment, the realization of deferred income tax assets and other equity investments, transaction price allocation between
software income and maintenance service income. Changes in facts and circumstances may result in revised estimates. Actual results could
differ from those estimates, and as such, differences may be material to the consolidated financial statements.
(d).
Cash and cash equivalents
Cash and cash equivalents consist of
cash on hand, the Group's demand deposit placed with financial institutions, which have original maturities of less than three months
and unrestricted as to withdrawal and use.
(e).
Restricted cash
Restricted cash represented a time deposit
pledged for bank loan facilities within one-year maturities.
F-
13
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(f).
Accounts receivable, net
Accounts receivable, net are stated at
the original amount less an allowance for doubtful accounts. Accounts receivable are recognized in the period when the Group has provided
services to its customers and when its right to consideration is unconditional. The Group reviews the accounts receivable on a periodic
basis and makes specific allowances when there is doubt as to the collectability of individual balances. The Group considers many factors
in assessing the collectability of its receivables, such as the age of the amounts due, the customer's payment history, credit-worthiness
and other specific circumstances related to the accounts. An allowance for doubtful accounts is recorded in the period in which a loss
is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted.
(g).
Contract costs
Contract costs represented the costs
directly related to a contract with a customer including labor costs and direct materials used in fulfilling the contract and other allocations
of costs that relate directly to the contract or to contract activities. The contract costs are determined principally by the specific
identification method, and recognize as cost of revenues on a systematic basis that is consistent with the transfer to the customer of
the related services.
(h).
Inventories
Inventories, primarily consisting of
robot, displayer, server and software, are stated at the lower of cost or net realizable value, with net realized value represented by
estimated selling prices in the ordinary course of business, less reasonably predictable costs of disposal and transportation. Cost of
inventory is determined using the specific identification method. Adjustments are recorded to write down the cost of inventory to the
estimated net realizable value due to slow-moving merchandise and damaged products, which is dependent upon factors such as historical
and forecasted consumer demand. There was
nil
,
nil
and $
154,664
of inventory write-down for the year ended December 31, 2020, 2021
and 2022.
(i).
Property and equipment, net
Property and equipment are stated at
cost less accumulated depreciation and impairment, if any, and depreciated on a straight-line basis over the estimated useful lives of
the assets. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its intended use. Estimated
useful lives are as follows:
Category
Estimated useful lives
Electronic equipment
5
years
Office equipment
5
years
Leasehold improvement
Shorter of the lease term or the estimated useful life of the assets
Repair and maintenance costs are charged
to expenses as incurred, whereas the cost of renewals and betterment that extends the useful lives of property and equipment are capitalized
as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the costs, accumulated depreciation
and impairment with any resulting gain or loss recognized in the consolidated statements of (loss)/income.
F-
14
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(j).
Intangible assets, net
Intangible assets are carried at cost
less accumulated amortization and any recorded impairment. Intangible assets are amortized using the straight-line approach over the estimated
economic useful lives of the assets as follows:
Category
Estimated useful lives
Software
5
years
(k).
Impairment of long-lived assets
The Group reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable.
When these events occur, the Group measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted
future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted
cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss, which is the excess of carrying
amount over the fair value of the assets, using the expected future discounted cash flows. There was no impairment of long-lived assets
for the years ended December 31, 2020, 2021 and 2022.
(l).
Long-term investments
For an investee over which the Group
holds less than
20
% voting interest and has no ability to exercise significant influence, the investments are accounted for under the
cost method.
For an investee over which the Group
has the ability to exercise significant influence, but does not own a majority equity interest or otherwise control, the Group accounted
for those using the equity method. Significant influence is generally considered to exist when the Group has an ownership interest in
the voting stock of the investee between
20
% and
50
%. Other factors, such as representation on the investee's board of directors,
voting rights and the impact of commercial arrangements, are also considered in determining whether the equity method of accounting is
appropriate. Under the equity method of accounting, the Group's share of the investee's results of operations is reported
as share of losses of equity method investments in the consolidated statements of comprehensive (loss)/income.
The process of assessing and determining
whether impairment on an investment is other than temporary requires a significant amount of judgment. To determine whether an impairment
is other than temporary, management considers whether it has the ability and intent to hold the investment until recovery and whether
evidence indicating the carrying value of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this
assessment includes the reasons for the impairment, the severity and duration of the decline in value, any change in value subsequent
to the period end, and forecasted performance of the investee. As of December 31, 2020, 2021 and 2022, management believes no impairment
charge is necessary.
(m).
Fair value measurement
Accounting guidance defines fair value
as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded
at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that
market participants would use when pricing the asset or liability.
F-
15
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(m)
Fair value measurement (cont.)
Accounting guidance establishes a fair
value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring
fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that
is significant to the fair value measurement. The three levels of inputs are:
(a)
Level 1 — Observable inputs that reflect quoted
prices (unadjusted) for identical assets or liabilities in active markets.
(b)
Level 2 — Include other inputs that are directly
or indirectly observable in the marketplace.
(c)
Level 3 — Unobservable inputs which are supported
by little or no market activity.
Accounting guidance also describes three
main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost
approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable
assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement
is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that
would currently be required to replace an asset.
Financial assets and liabilities of the
Group primarily consist of cash and cash equivalents, accounts receivable, amounts due from related parties, other receivables included
in prepayments and other current assets, equity investment, short-term borrowings, accounts payable, amounts due to related parties, other
payables included in accrued expenses and other current liabilities. The Group's non-financial assets, such as property and equipment
as well as intangible assets, would be measured at fair value only if they were determined to be impaired.
(n).
Commitments and contingencies
In the normal course of business, the
Group is subject to commitments and contingencies, including operating lease commitments, legal proceedings and claims arising out of
its business that relate to a wide range of matters, such as government investigations and tax matters. The Group recognizes a liability
for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Group
may consider many factors in making these assessments on liability for contingencies, including historical and the specific facts and
circumstances of each matter.
(o).
Revenue recognition
The Group's revenues are mainly
generated from (1) sale of software products; (2) sale of hardware products; (3) technology development services; (4) maintenance and
support service, and (5) sale of cloud platform products, etc.
The Group recognizes revenue pursuant
to ASC 606,
Revenue from Contracts with Customers
("ASC 606"). In accordance with ASC 606, revenues
from contracts with customers are recognized when control of the promised goods or services is transferred to the Group's customers,
in an amount that reflects the consideration the Group expects to be entitled to in exchange for those goods or services, reduced by Value
Added Tax ("VAT"). To achieve the core principle of this standard, we applied the following five steps:
1.
Identification of the contract, or contracts, with the customer;
2.
Identification of the performance obligations in the contract;
3.
Determination of the transaction price;
4.
Allocation of the transaction price to the performance obligations
in the contract; and
5.
Recognition of the revenue when, or as, a performance obligation
is satisfied.
F-
16
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(o)
Revenue recognition
(cont.)
The Group enters into
two
major kinds
of revenue arrangements with customers. The first kind of contract can include various combinations of software products, hardware products
and maintenance and support service which are generally distinct and accounted for as separate performance obligations. The other kind
of contract is sale of cloud platform products, which include software products and cloud platform service as
two
separate performance
obligations. As a result, the Group's contracts may contain multiple performance obligations. The Group determines whether arrangements
are distinct based on whether the customer can benefit from the product or service on its own or together with other resources that are
readily available and whether our commitment to transfer the product or service to the customer is separately identifiable from other
obligations in the contract.
Sale of software products
The Group's software products sold
to customers comprising customized software products for specific needs. The software products sold by the Group are intended to provide
the customer with full control of software, which means that revenues from the sale of such products are recognized at the point-in-time
at which the control over the products is transferred to the customer upon the acceptance. Typically, the software delivery period is
less than six months from the date of signing the contract. Payments are made by the customers in multiple instalments according to the
payment schedule determined in the contract.
Sale of hardware products
Hardware products sold to customers comprising
the hardware designed for specific needs. Revenue is recognized at the point-in-time when the customer is able to use and benefit from
the hardware products, which is generally upon delivery to the customer.
Technology development services
The technology development service provided
to customers comprises customized technology development services for specific needs. Revenue is recognized at the point-in-time when
the service is completed and the customer can benefit from it upon acceptance. Payments are made by the customers in multiple installments
according to the payment schedule determined in the contract.
Maintenance and support service
Maintenance and support ("M&S")
service is provided for software products contracts and consists of unspecified future software updates, upgrades, and enhancements as
well as technical product support services, and the provision of unspecified updates and upgrades on a when-and-if-available basis. Maintenance
and support services are renewable, generally on an annual basis, at the option of the customer. Maintenance represents stand-ready obligations
for which revenue is recognized ratably over the term of the arrangement.
Sale of cloud platform products
Cloud platform products sold to customers
comprising software products uploaded in the cloud platform. The Group does not provide any cancellation and refund provisions to customers.
Pursuant to contract terms, customers can benefit from the software products and cloud platform from each on its own, meanwhile the Group
fulfils its promise by transferring software products and cloud platform services independently. Therefore, the software products and
the cloud platform services are distinct performance obligations. The transaction prices for
two
performance obligations were determined
separately in the contract, which also reflects their stand-alone selling price ("SSP") respectively. Since customers continuously
consume the benefits from both software products and cloud platform, the Group recognizes revenue from sale of cloud platform products
over time when the Group provides the customer a right to access the Group's intellectual property throughout the service period.
The timing and pattern of transfer the right to access software products and cloud platform is the same. The service period is usually
1
year and customer made quarterly payment after usage.
F-
17
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(o)
Revenue recognition
(cont.)
Contracts with multiple performance
obligations
Most contracts with customers contain
multiple performance obligations that are distinct and are accounted for separately. The transaction price is allocated to the separate
performance obligations on a relative SSP basis. The Group determines SSP for all performance obligations using observable inputs, such
as standalone sales and historical contract pricing. SSP is consistent with the Group's overall pricing objectives, taking into
consideration the type of software products, maintenance and support services, and professional services purchased by the customer. SSP
also reflects the amount the Group would charge for that performance obligation if it were sold separately in a standalone sale, and the
price the Group would sell to similar customers in similar circumstances.
The following table disaggregates the
Group's revenue for the year ended December 31, 2020, 2021 and 2022:
For the years ended December 31,
2020
2021
2022
By revenue type
Sale of software products
$
5,098,730
$
14,878,256
$
3,547,113
Sale of hardware products
415,723
75,011
46,295
Technology development service
6,404,394
9,246,992
16,419,889
M&S service
1,937,887
2,772,795
2,429,526
Sale of cloud platform products
-
5,550,959
25,742,135
Total
$
13,856,734
$
32,524,013
$
48,184,958
Remaining performance obligations
Remaining performance obligations represent the transaction price of
orders meeting the definition of a contract in the new revenue standard for which work has not been performed or has been partially performed
and excludes unexercised contract options. The Company has elected to apply the practical expedient, which allows companies to exclude
remaining performance obligations with an original expected duration of one year or less. The aggregate amount of the transaction price
allocated to remaining performance obligations for such contracts with a duration of more than one year was approximately $
4,176,929
at
December 31, 2022. The Company expects to recognize revenue on approximately $
4,129,513
and $
47,416
of the remaining performance obligations
over the next 12 and 24 months, respectively.
Contract balances
When the Group begins to deliver the
products or services pursuant to the performance obligations in the contract, the Group presents the contract in the consolidated balance
sheet as a contract asset or a contract liability, depending on the relationship between the Group's performance and the customer's
payment. The contract assets consist of accounts receivable and contract costs. Accounts receivable represent revenue recognized for the
amounts invoiced and/or prior to invoicing when the Group has satisfied its performance obligation and has unconditional right to the
payment. Contract costs are deferred for the contract preparation and will be recognized as cost of revenues when goods or services are
transferred to customers. During the years ended December 31, 2020, 2021 and 2022, the Group recognized $
7,228,046
, $
10,885,731
and $
17,379,144
of contract costs as cost of revenues.
The contract liabilities consist of deferred
revenue, which represent the billings or cash received for services in advance of revenue recognition and is recognized as revenue when
all of the Group's revenue recognition criteria are met. The Group's deferred revenue amounted to $
2,953,238
and $
2,553,808
as of December 31, 2021 and 2022, respectively. During the years ended December 31, 2020, 2021 and 2022, the Group recognized $
1,201,576
,
$
900,686
and $
1,545,866
revenue that was included in deferred revenue balance at January 1, 2020,2021 and 2022, respectively.
F-
18
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(p).
Cost of revenues
Cost of revenues consists primarily
of (i) purchased software, (ii) payroll, (iii) cloud hosting service fees, and (iv) depreciation and other costs related
to the business operation.
(q).
Research and development expenses
Research and development costs are
expensed as incurred in accordance with ASC 730. Software development costs required to be capitalized under ASC 985-20. The Company determined
that technology feasibility for the software product is not reached. There is no software development costs capitalized for the years
ended December 31, 2020, 2021 and 2022. Research and development expenses consist primarily of (i) Software development costs, (ii) payroll
and related expenses for research and development professionals, and (iii) depreciation and rental related to technology and development
functions. Research and development expenses are expensed as incurred.
(r).
Selling and marketing expenses
Selling and marketing expenses mainly
consist of (i) staff cost, rental and depreciation related to selling and marketing functions, and (ii) advertising costs and
market promotion expenses. Advertising costs, which consist primarily of online advertisements, are expensed as incurred.
(s).
General and administrative expenses
General and administrative expenses
mainly consist of (i) staff cost, rental and depreciation related to general and administrative personnel, (ii) professional
service fees, and (iii) other corporate expenses.
(t).
Government grants
Government grant is recognized when
there is reasonable assurance that the Group will comply with the conditions attached to it and the grant will be received. Government
grant for the purpose of giving immediate financial support to the Group with no future related costs or obligation is recognized in the
Group's consolidated statements of comprehensive (loss)/income when the grant becomes receivable. The Group recognized government
grants $
1,699,231
, $
853,011
and $
216,893
in other income, net for the years ended December 31, 2020, 2021 and 2022, respectively.
(u).
Employee benefits
The Group's subsidiaries and
VIE and the VIE's subsidiary in PRC participate in a government mandated, multiemployer, defined contribution plan, pursuant to
which certain retirement, medical, housing and other welfare benefits are provided to employees. PRC labor laws require the entities incorporated
in the PRC to pay to the local labor bureau a monthly contribution calculated at a stated contribution rate on the monthly basic compensation
of qualified employees. The Group has no further commitments beyond its monthly contribution.
(v).
Leases
On January 1, 2020, the Group
adopted Accounting Standards Update ("ASU") 2016-02, Lease (FASB ASC Topic 842). The adoption of Topic 842
resulted in the presentation of operating lease right-of-use ("ROU") assets and operating lease liabilities on the consolidated
balance sheet. The Group has elected the package of practical expedients, which allows the Group not to reassess (1) whether any
expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing
leases as of the adoption date and (3) initial direct costs for any expired or existing leases as of the adoption date. Lastly, the
Group elected the short-term lease exemption for all contracts with lease terms of 12 months or less.
At inception of a contract, the Group
assesses whether a contract is, or contains, a lease. A contract is or contains a lease if it conveys the right to control the use of
an identified asset for a period of time in exchange of a consideration. To assess whether a contract is or contains a lease, the Group
assess whether the contract involves the use of an identified asset, whether it has the right to obtain substantially all the economic
benefits from the use of the asset and whether it has the right to control the use of the asset.
F-
19
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(v)
Leases
(cont.)
The right-of-use assets and related lease
liabilities are recognized at the lease commencement date. The Group recognizes operating lease expenses on a straight-line basis over
the lease term.
Operating lease right-of-use of
assets
The right-of-use of asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and less any lease incentive received.
Operating lease liabilities
Lease liability is initially measured
at the present value of the outstanding lease payments at the commencement date, discounted using the Group's incremental borrowing
rate. Lease payments included in the measurement of the lease liability comprise fixed lease payments, variable lease payments that depend
on an index or a rate, amounts expected to be payable under a residual value guarantee and any exercise price under a purchase option
that the Group is reasonably certain to exercise.
Lease liability is measured at amortized
cost using the effective interest rate method. It is re-measured when there is a change in future lease payments, if there is a change
in the estimate of the amount expected to be payable under a residual value guarantee, or if there is any change in the Group assessment
of option purchases, contract extensions or termination options.
(w).
Income taxes
The Group accounts for income taxes
under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
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. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
The provisions of ASC 740-10-25, "Accounting
for Uncertainty in Income Taxes," prescribe a more-likely-than-not threshold for consolidated financial statement recognition and
measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition
of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest
and penalties associated with tax positions, and related disclosures. The Group's operating subsidiaries in PRC are subject to examination
by the relevant tax authorities. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years
if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations
is extended to five years under special circumstances, where the underpayment of taxes is more than RMB
100,000
($
14,537
). In the case
of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. Penalties
and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.
The Group did not accrue any liability,
interest or penalties related to uncertain tax positions in its provision for income taxes line of its consolidated statements of income
for the years ended December 31, 2020, 2021 and 2022, respectively. The Group does not expect that its assessment regarding unrecognized
tax positions will materially change over the next 12 months.
F-
20
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(x).
Value added tax ("VAT")
The Group is subject to VAT and related
surcharges on revenue generated from sales of products, facilitation services and platform services. The Group records revenue net of
VAT. This VAT may be offset by qualified input VAT paid by the Group to suppliers. Net VAT balance between input VAT and output VAT
is recorded in the line item of other current assets on the consolidated balance sheets.
The VAT rate is
13
% for taxpayers selling
consumer products. For revenue generated from services, the VAT rate is
6
% depending on whether the entity is a general tax payer, and
related surcharges on revenue generated from providing services. Entities that are VAT general taxpayers are allowed to offset qualified
input VAT, paid to suppliers against their output VAT liabilities.
(y).
Foreign currency translation
The consolidated financial statements
are presented in United States dollars ("USD'' or "$''). The functional currency
of certain of PRC subsidiaries is the Renminbi ("RMB'').
Assets and liabilities are translated
at the exchange rates as of balance sheet date. Income and expenditures are translated at the average exchange rate of the reporting period.
Capital accounts of the consolidated financial statements are translated into USD from RMB at their historical exchange rates when the
capital transactions occurred. Transaction gains and losses are recorded in foreign currency exchange gain/(loss) in the consolidated
statements of operations and comprehensive (loss)/income. The rates are obtained from H.10 statistical release of the U.S. Federal
Reserve Board.
As of December 31,
2021
2022
Period end RMB: USD exchange rate
6.3726
6.8972
For the years ended December 31,
2020
2021
2022
Average RMB: USD exchange rate
6.9042
6.4508
6.7290
(z).
Non-controlling interest
For the Group's majority-owned
subsidiaries of VIE, a non-controlling interest is recognized to reflect the portion of their equity which is not attributable, directly
or indirectly, to the Group's consolidated net (loss)/income on the consolidated statements of operation and comprehensive (loss)/income
includes the net (loss)/income attributable to non-controlling interests. The cumulative results of operations attributable to non-controlling
interests, are recorded as non-controlling interests in the Group's consolidated balance sheets.
(aa).
Statutory reserves
In accordance with the PRC Company Laws,
the Group's PRC subsidiaries, VIE and the VIE's subsidiary must make appropriations from their after-tax profits as determined
under the generally accepted accounting principles in the PRC ("PRC GAAP") to non-distributable reserve funds including statutory
surplus fund and discretionary surplus fund. The appropriation to the statutory surplus fund must be
10
% of the after-tax profits as determined
under PRC GAAP. Appropriation is not required if the statutory surplus fund has reached
50
% of the registered capital of the PRC
companies. Appropriation to the discretionary surplus fund is made at the discretion of the PRC companies.
The statutory surplus fund and discretionary
surplus fund are restricted for use. They may only be applied to offset losses or increase the registered capital of the respective companies.
These reserves are not allowed to be transferred to the Company by way of cash dividends, loans or advances, nor can they be distributed
except for liquidation.
F-
21
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(aa)
Statutory reserves
(cont.)
As of December 31, 2022, none of
the Group's PRC subsidiaries and VIE entities had a general reserve that reached the
50
% of their registered capital threshold.
The profit arrived at must be set off against any accumulated losses sustained by the Company in prior years, before allocation is
made to the statutory reserve. Therefore, no appropriations from after tax profits were recognized for the years ended December 31,
2021 and 2022.
(bb).
(Loss)/Earnings per share
Basic (loss)/earnings per share is computed
by dividing net (loss)/earnings attributable to ordinary shareholders, taking into consideration the deemed dividends to preferred shareholders
(if any), by the weighted average number of ordinary shares outstanding during the year using the two-class method. Under the two-class
method, net (loss)/income is allocated between ordinary shares and other participating securities based on their participating rights.
Shares issuable for little to no consideration upon the satisfaction of certain conditions are considered as outstanding shares and included
in the computation of basic loss per share as of the date that all necessary conditions have been satisfied. Net losses are not allocated
to other participating securities if based on their contractual terms they are not obligated to share the losses.
Diluted earnings per share is calculated
by dividing net loss attributable to ordinary shareholders, as adjusted for the effect of dilutive ordinary equivalent shares, if any,
by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the year. Ordinary equivalent shares
consist of ordinary shares issuable upon the conversion of the preferred shares, using the if-converted method, and shares issuable upon
the exercise of share options using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted
loss per share calculation when inclusion of such share would be anti-dilutive.
(cc).
Segment reporting
The Group uses the management approach
in determining its operating segments. The Group's chief operating decision maker ("CODM") identified as the Group's
Chief Executive Officer, relies upon the consolidated results of operations as a whole when making decisions about allocating resources
and assessing the performance of the Group. As a result of the assessment made by CODM, the Group has only
one
reportable segment. The
Group does not distinguish between markets or segments for the purpose of internal reporting. As the Group's long-lived assets are
substantially located in the PRC, no geographical segments are presented.
(dd).
Risks and uncertainties
After the initial outbreak of a novel
strain of coronavirus ("COVID-19"), from time to time, some instances of COVID-19 infections have emerged in various regions
of China, including infections caused by Omicron variants in early 2022. A wave of infections caused by the Omicron variants emerged in
Shanghai in early 2022, and a series of restrictions and quarantines were implemented to contain the spread. The COVID-19 outbreak in
China made adverse impact on the Group's financial condition and results of operations. However, in December 2022, Chinese government
declared to treat COVID-19 as Category B disease, and authorities dropped quarantine measures against people infected with COVID-19 and
stopped designating high-risk and low-risk areas. Hence, the management believed that the adverse impact due to the pandemic was temporary.
In February 2022, the Russian Federation
and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United
States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on the Company's
financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
F-
22
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(cont.)
(ee).
Recent accounting pronouncements
The Group is an "emerging growth
company" ("EGC") as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act").
Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until
such time as those standards apply to private companies. The Group does not opt out of extended transition period for complying with any
new or revised financial accounting standards. Therefore, the Group's financial statements may not be comparable to companies that
comply with public company effective dates.
In June 2016, the FASB issued ASU
No. 2016-13, "Financial Instruments — Credit Losses (Topic 326)", which will require the measurement
of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and
reasonable and supportable forecasts. Subsequently, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326,
to clarify that receivables arising from operating leases are within the scope of lease accounting standards. Further, the FASB issued
ASU No. 2020-04, ASU 2020-05, ASU 2020-10, ASU 2020-11 and ASU 2021-02 to provide additional guidance on the
credit losses standard. For all other entities, the amendments for ASU 2016-13 are effective for fiscal years beginning after
December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. Adoption of the ASUs
is on a modified retrospective basis. The Group will adopt ASU 2016-13 from January 1, 2023. The Group considers the effect
of adoption of this ASU was immaterial.
Other accounting standards that have
been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption. The Group does not discuss recent standards that are not anticipated to have an impact on or are unrelated to
its consolidated financial condition, results of operations, cash flows or disclosures.
F-
23
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3.
ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consisted
of the following:
As of December 31,
2021
2022
Accounts receivable
33,747,099
45,826,900
Allowance for doubtful accounts
(
2,562,320
)
(
4,464,195
)
$
31,184,779
$
41,362,705
The Group recorded bad debt expense of $
758,019
,
$
270,649
and $
2,149,176
for the years ended December 31, 2020, 2021 and 2022, respectively.
4.
PREPAID EXPENSES AND OTHER ASSETS
Prepayments and other assets consisted of the following:
As of December 31,
2021
2022
Prepaid expenses and other current assets
：
Receivables from third parties
(1)
2,479,412
359,994
Rent deposits
211,224
13,629
Bid security
70,767
-
Others
10,119
87,231
Prepaid expenses and other current assets, gross
2,771,522
460,854
Bad debt provisions
(1)
(
2,382,674
)
-
Prepaid expenses and other current assets, net
$
388,848
$
460,854
Prepaid expenses and other non-current assets
：
Prepaid case acceptance fee
(2)
$
3,931,033
$
3,632,039
Others
10,313
65,636
Prepaid expenses and other non-current assets
3,941,346
3,697,675
Total
$
4,330,194
$
4,158,529
(1)
Receivables from third parties mainly includes funds lent
to third parties. The Group established business partnership with these third parties and provided funds to support their business operation.
Due to the third parties deteriorated financial position affected by COVID -19, the Group recorded bad debt expense for receivables from
third parties of
nil
, $
1,380,331
and $
nil
for the years ended December 31, 2020, 2021 and 2022, respectively, and wrote off
the receivables and bad debt provision in 2022.
(2)
Prepaid case acceptance fee is the expense paid by the plaintiff
in advance according to PRC law when the court decides to accept civil cases, economic dispute cases, maritime cases and administrative
cases. The court charged the case acceptance fee of US$
3.6
million in proportion to the claim amount of the lawsuit between the Group
and Apple. The claim amount was RMB
10
billion, approximately US$
1,450
million. The lawsuit is not expected to close within
the
one
year and the amount is recognized in non-current portion of prepaid expenses.
As of December 31, 2021 and 2022, the
Group wrote off the other current assets of
nil
and US$
2,201,448
, respectively.
F-
24
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5.
PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following:
As of December 31,
2021
2022
Electronic equipment
$
147,406
$
168,937
Office equipment
194,241
240,788
Leasehold improvement
55,857
63,683
Construction in progress
2,088
-
Less: accumulated depreciation
(
191,603
)
(
253,938
)
Property and equipment, net
$
207,989
$
219,470
Depreciation expense was $
68,514
, $
65,160
and $
78,831
for
the years ended December 31, 2020, 2021 and 2022, respectively.
6.
INTANGIBLE ASSETS, NET
As of December 31,
2021
2022
Software
$
1,092,197
$
1,009,425
Less: accumulated amortization
(
293,738
)
(
372,311
)
Intangible asset, net
$
798,459
$
637,114
For the years ended December 31, 2020,
2021 and 2022, amortization expense amounted to $
100,281
, $
107,895
and $
103,438
, respectively. Future estimated amortization expense of
intangible assets is as follows:
2023
$
100,942
2024
100,942
2025
100,942
2026
100,942
2027
100,942
Thereafter
132,404
Total
$
637,114
F-
25
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7.
LONG-TERM INVESTMENT
Long-term investment consists of investments
in privately held companies. In September 2015, the Group signed an investment agreement to acquire
20
% of the shares of Shanghai
Shenghan Information Technology Co., Ltd ("Shanghai Shenghan") for RMB
5
million, of which the registered capital of
RMB
125,000
was subscribed. In January 2018, with the addition of new investors to the investee, Xiao-i's shareholding percentage
in Shanghai Shenghan was diluted to
17.6
%. In June 2020, with the capital injection of Wuxi Zhixin Integrated Circuit Investment
Center (Limited Partnership), Xiao-i's shareholding in Shanghai Shenghan was once again diluted to
16.56
%. According to the investment
agreement, Shanghai Shenghan's board of directors consists of 3 directors, one of whom is appointed by the Group. Therefore, the
Group recognized it as long-term equity investment and measured in equity method since investor had the ability to exercise significant
influence over Shanghai Shenghan.
In February 2022, the Group entered into
agreements with third parties to establish Zhizhen Guorui (Shanghai) Information Technology Development Co., Ltd. ("Zhizhen Guorui")
with a total consideration of $
2.9
million. According to the investment agreement, Zhizhen Guorui's board of directors consists
of 5 directors, two of whom is appointed by the Group. Therefore, the Group recognized it as long-term equity investment and measured
in equity method since investor had the ability to exercise significant influence over Zhizhen Guorui.
The following table sets forth the changes
in the Group's long-term investment:
As of December 31, 2021
As of December 31, 2022
USD
Interest %
USD
Interest %
Equity method investments
Zhizhen Guorui
-
-
%
2,647,593
37
%
Shanghai Shenghan
335,448
16.56
%
204,899
16.56
%
Total
335,448
2,852,492
The Group recognized its share of loss
of $
207,497
, $
156,630
, and $
143,181
for the years ended December 31, 2020, 2021 and 2022, respectively.
F-
26
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8.
SHORT-TERM BORROWINGS
As of December 31, 2021 and 2022, the bank borrowings were
for working capital and capital expenditure purposes. Short-term borrowings consisted of the following:
Annual
Interest Rate
Maturity (Months)
Principal
As of December 31, 2021
As of December 31, 2022
USD
USD
USD
Short-term borrowings:
Agricultura Bank of China
3.45
%
April, 2023
2,029,809
-
2,029,809
Agricultura Bank of China
2.70
%
May, 2023
1,449,864
-
1,449,864
Agricultura Bank of China
3.45
%
June, 2023
1,449,864
-
1,449,864
Bank of Jiangsu
4.60
%
October, 2023
1,449,864
-
1,449,864
CHINA CITIC BANK
4.65
%
August, 2023
1,448,414
-
1,448,414
CHINA CITIC BANK
4.65
%
September, 2023
1,448,414
-
1,448,414
Shanghai Bank
5.20
%
January, 2023
1,304,877
-
1,304,877
Shanghai Bank
4.65
%
October, 2023
1,304,877
-
1,304,877
Agricultura Bank of China
4.00
%
March, 2023
1,159,891
-
1,159,891
Agricultura Bank of China
2.70
%
May, 2023
1,159,891
-
1,159,891
Shanghai Bank
4.65
%
November, 2023
869,918
-
869,918
Shanghai Bank
4.65
%
November, 2023
724,932
-
724,932
Bank of Nanjing *
5.50
%
June, 2023
724,932
-
724,932
Bank of Nanjing *
5.50
%
July, 2023
724,932
-
724,932
Bank of Ningbo
5.35
%
June, 2023
724,932
-
724,932
China Merchants Bank *
5.05
%
August, 2023
704,634
-
664,062
Shanghai Bank
5.20
%
January, 2023
144,986
-
144,986
China Merchants Bank *
5.05
%
August, 2022
1,004,300
1,004,300
-
China Merchants Bank *
5.05
%
September, 2022
1,035,684
1,035,684
-
Bank of Communications
5.31
%
February, 2022
627,687
627,687
-
Xiamen International Bank
6.80
%
April, 2022
784,609
784,609
-
Shanghai Pudong Development Bank*
5.22
%
March, 2022
1,114,145
1,114,145
-
Shanghai Rural Commercial Bank
5.20
%
May, 2022
1,412,296
1,412,296
-
Shanghai Bank
5.20
%
November, 2021
784,609
784,609
-
Shanghai Bank
5.20
%
October, 2022
1,412,296
1,412,296
-
Shanghai Bank
5.20
%
November, 2022
941,531
941,532
-
Total
9,117,158
18,784,459
*
These borrowings are guaranteed by Guizhou Xiao-I.
The interest expense of short-term borrowings
were $
744,761
, $
625,176
and $
651,287
for the years ended December 31, 2020, 2021 and 2022, respectively. The weighted average interest
rates of short-term loans outstanding were
4.67
%,
5.52
% and
4.73
% per annum as of December 31, 2020, 2021 and 2022, respectively.
F-
27
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9.
CONVERTIBLE LOANS
From May to September 2021, the VIE
entered into loan agreements with third parties, pursuant to which the VIE has the option to deliver either ordinary shares or cash to
pay the debt upon the closing of an Initial Public Offering ("IPO").
Annual
Interest
Rate
Convertible
shares
Maturity
(Months)
As of
December 31,
2021
As of
December 31,
2022
USD
USD
Convertible loans:
Fumei Shi
(1)
15.00
%
73,719
December, 2022
1,569,218
1,449,863
Guoqiang Chen
(2)
12.00
%
22,116
September, 2023
941,531
869,918
SUNNY CONCORD INTERNATIONAL LTD
(3)
15.00
%
36,860
December, 2022
774,699
782,049
Senbiao Hu
(4)
15.00
%
18,430
November, 2022
392,305
362,466
Jun Xu
(5)
15.00
%
14,744
May, 2023
313,844
289,973
Jinzhi Li
(6)
14.40
%
73,719
August, 2022
1,569,218
-
Chunhui Li
(7)
15.00
%
7,372
November, 2022
156,922
-
Total
246,960
5,717,737
3,754,269
(1)
The loan was extended in January, 2023. Pursuant to the extension
agreement, the loan would be settled in cash without the conversion option (Note 17). The principal and interest of the loan were repaid
in April, 2023.
(2)
The loan was originally matured before September, 2022 and
extended in September 2022. In April 2023, the loan was extended to May 31, 2023 with annual interest rate of
12
% (Note 17).
(3)
The loan was extended in January, 2023. Pursuant to the extension
agreement, the loan would be settled in cash without the conversion option. In April, 2023, the maturity date of the loan was changed
to May 31, 2023 with annual interest rate of
15
% (Note 17).
(4)
The loan was extended in February, 2023. Pursuant to the
extension agreement, the loan would be settled in cash without the conversion option. The principal and interest of the loan were repaid
in March, 2023 (Note 17).
(5)
The loan was originally matured before May 2022 and extended
in In August, 2022. In April, 2023, the loan was further extended to May 31, 2023.
(6)
The principal and interest of the loan were repaid in 2022.
(7)
The principal and interest of the loan were repaid in 2022.
Pursuant to the terms of
agreements, the VIE or a subsidiary of the VIE is required to repay principal and interest of the loans if (i) either an affiliate
of the VIE, including Xiao-I, is unable to consummate an Initial Public Offering ("IPO") before the maturity of loans,
or (ii) even if IPO is consummated before the maturity of loans, the enterprise market value does not equal or exceed $
435
million (RMB
3
billion) upon closing of the IPO. If such affiliate of the VIE completes an IPO before the maturity of
convertible loans with enterprise market value above $
435
million, the convertible loan can be paid by the VIE or a subsidiary of
the VIE, at the VIE's option, by delivering either ordinary shares of such affiliate or an equivalent amount in cash.
Accordingly, upon completion of an IPO pursuant to the relevant loan agreements, the shares to be issued if such loans
were converted would be ordinary shares of Xiao-I Corporation should the VIE decided to convert shares. Whether the loans are paid
for in cash within
ten
working days after completion of the listing or in ordinary shares of Xiao-I Corporation is at the option of
the VIE.
Loans can be extended with both parties'
consensus. Since the conversion is only exercisable upon closing of the IPO, the Group has determined that the conversion feature embedded
in the convertible loans should not be bifurcated, and accounted the convertible loans as a liability until the contingency event is resolved.
The interest expenses of convertible
loans were
nil
, $
405,316
and $
686,022
for the years ended December 31, 2020, 2021 and 2022, respectively. The aggregate number of shares
that would be issued in a hypothetical conversion of the total loans outstanding at December 31, 2022 was
165,869
.
In March, 2023, the Company completed
its initial public offering and was listed on the Nasdaq Global Market while the enterprise market value did not meet the agreed criteria.
In March and April, 2023, the VIE made repayment of the loans and interest of convertible loans of Senbiao Hu and Fumei Shi.
F-
28
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10.
ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities
consisted of the following:
As of December 31,
2021
2022
Accrued expenses and other current liabilities:
Loan from third parties
(1)
$
4,381,136
$
6,485,125
Payroll payable
1,591,662
4,722,793
Other tax payable
2,777,187
2,852,728
Interest payable
1,053,854
2,054,136
Others
512,593
891,931
Accrued expenses and other current liabilities
$
10,316,432
$
17,006,713
Accrued liabilities, non-current
：
Long-term loan from third parties
(2)
-
3,303,986
Litigation related payable
(3)
5,157,971
4,769,926
Accrued liabilities, non-current
5,157,971
8,073,912
TOTAL
$
15,474,403
$
25,080,625
(1)
Loan from third parties mainly consisted of the unsecured borrowings
from third parties for ordinary business operation. For the borrowings, the interest rates range from
3.8
% to
25.55
% and the interest
expenses were $
216,020
$
815,994
and $
1,013,209
for the years ended December 31, 2020, 2021 and 2022. The borrowings are payable
on demand. In April, 2023, the Group made the repayment of principal amounted to $
3,133,371
to the third parties.
(2)
Long-term loan from a third party was primarily consisted of:
(i) Long-term loan for the purpose
of investing in Zhizhen Guorui in February 2022, amounted to $
2,682,248
as of December 31, 2022 (Note 7), with free interest rate in the
first
three years
. The loan is due in
five years
, and if Zhizhen Guorui declares any cash dividend to the Group, the cash dividend would
become the source to repay the loan in the first priority.
(ii) In October 2022, the Group entered
into an exclusive license agreement with a third party, under which the term of exclusive license was
2
years, and the third party should
pay the license fee of $
1,449,864
(RMB
10
million) to the Group upon the effective of the agreement. Meanwhile, the same party entered
into the agreement to grant the exclusive right to use these patents to the Group for 2 years at the consideration of $
63,608
per month,
aggregately $
1,526,581
(RMB
10.5
million). The patents under the agreements were pledged to the third party. The transaction was substantially
loan from the third party with the patents pledged. The Group accounted for $
1,449,864
(RMB
10
million) as the principal of the loan from
the third party, and the interests were calculated under effective interest method. In November 2022, the Group entered into another exclusive
license agreement with the same party in the similar form to obtain another $
1,449,864
(RMB
10
million) loan, which was received subsequently
in 2023.
(3)
Litigation related payable mainly consisted of the litigation
fee of the lawsuit between the Group and Apple paid by the third parties on behalf of the Group.
11.
TAXATION
Cayman Islands
The Company is incorporated in the
Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to income or capital gains taxes. In addition,
dividend payments are not subject to withholdings tax in the Cayman Islands.
Hong Kong
In accordance with the relevant tax
laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the
applicable tax rate on taxable income. In March 2018, the Hong Kong Government introduced a two-tiered profit tax rate regime
by enacting the Inland Revenue (Amendment) (No.3) Ordinance 2018 (the "Ordinance"). Under the two-tiered profits tax rate
regime, the first HK dollar
2
million of assessable profits of qualifying corporations is taxed at
8.25
% and the remaining assessable
profits at
16.5
%. The Ordinance is effective from the year of assessment 2018-2019. According to the policy, if no election has been
made, the whole of the taxpaying entity's assessable profits will be chargeable to Profits Tax at the rate of
16.5
% or
15
%, as applicable.
Because the preferential tax treatment is not elected by the Group, all the subsidiaries registered in Hong Kong are subject to income
tax at a rate of
16.5
%. Payments of dividends by the subsidiary to the Company are not subject to withholding tax in Hong Kong.
F-
29
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11.
TAXATION
(cont.)
PRC
Generally, the Group's WFOE,
VIE and subsidiaries of VIE, which are considered PRC resident enterprises under PRC tax law, 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
%.
In accordance with the implementation
rules of EIT Laws, a qualified "High and New Technology Enterprise" ("HNTE") is eligible for a preferential tax
rate of
15
%. The HNTE certificate is effective for a period of
three
years. An entity could re-apply for the HNTE certificate when
the prior certificate expires. The Company's subsidiary, Shanghai Zhizhen, is eligible to enjoy a preferential tax rate of
15
% from
2020 to 2022 to the extent it has taxable income under the EIT Law.
Guizhou Xiao-I was qualified as an
eligible software enterprise before the income tax year-end final settlement in 2017. As a result of this qualification, it is entitled
to a tax holiday of a full exemption for the years ended December 31, 2017 and 2018, in which its taxable income is greater
than zero, followed by a three-year
50
% exemption. In 2022, the tax holiday has expired and Guizhou Xiao-I applied qualification of HNTE,
which allows Guizhou Xiao-i to enjoy a preferential tax rate of
15
% from 2022 to 2024.
The benefit of the preferred tax treatment
on net income per share (basic and diluted) was $
0.02
for the year ended December 31, 2021. No benefit of preferred tax treatment on net
loss per share (basic and diluted) for the years ended December 31, 2020 and 2022.
In general, the PRC tax authority has
up to
five
years to conduct examinations of the Company's tax filings. Accordingly, the PRC subsidiaries' and the VIE
and subsidiaries of the VIE's tax years 2016 through 2021 remain open to examination by the taxing jurisdictions. According
to PRC tax regulations, the PRC net operating loss can generally carry forward for no longer than
five
years starting from the
year
subsequent to the year in which the loss was incurred, and that of high-tech enterprises is no more than
10
years. Carryback of losses
is not permitted.
The income tax provision consists of
the following components:
For the years ended December 31,
2020
2021
2022
Current income tax expenses
$
-
$
17,687
$
2
Deferred income tax (benefits) expenses
(
235,854
)
534,668
660,653
Total income tax (benefits) expenses
$
(
235,854
)
$
552,355
$
660,655
A reconciliation between the Group's
actual provision for income taxes and the provision at the PRC, mainland statutory rate is as follows:
For the years ended December 31,
2020
2021
2022
(Loss)/income before income tax
$
(
7,291,896
)
$
3,917,357
$
(
5,344,659
)
(Loss)/Income tax expense at statutory tax rate
(
1,822,974
)
979,339
(
1,336,164
)
Additional deduction for R&D expenses
(
343,193
)
(
1,005,733
)
(
1,087,622
)
Investment loss
51,874
39,158
35,795
Non-deductible expenses
33,392
41,679
278,277
Tax effect of tax rate in a different jurisdiction
13,058
134,570
51,119
Effect of preferential tax rates
157,236
(
356,448
)
5,259
Deferred tax effect of tax rate change
-
-
538,660
Change in valuation allowance
459,885
719,790
1,697,503
Write-off of NOL
1,214,868
-
477,828
Income tax (benefit) expense
$
(
235,854
)
$
552,355
$
660,655
F-
30
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11.
TAXATION
(cont.)
The significant components of the net
deferred tax assets are summarized below:
As of December 31,
2021
2022
Deferred tax assets:
Tax losses
$
6,239,757
$
4,475,379
Allowance for doubtful accounts
773,701
1,053,028
Accrued expenses
257,966
716,673
Impairment
310,430
301,150
Non-deductible education expense
818
756
Lease liabilities
191,758
112,203
Amortization of intangible assets
-
972,696
Valuation allowance
(
2,685,373
)
(
3,611,707
)
Total deferred tax assets
$
5,089,057
$
4,020,178
Deferred tax liabilities:
Right-of-use assets
(
182,770
)
(
131,604
)
Deferred tax assets, net
$
4,906,287
$
3,888,574
As of December 31, 2021 and 2022, the Group had net operating
loss carryforwards of approximately $
36,288,770
and $
28,198,108
, respectively, which arose from the Group's subsidiaries, the VIE
and the VIE's subsidiaries established in the PRC and Hong Kong. As of December 31, 2021 and 2022, deferred tax assets
from the net operating loss carryforwards amounted to $
6,239,757
and $
4,475,379
, respectively. Due to the Group's history of recurrent
losses, the management did not expect the subsidiaries of VIE will generate enough profit to utilize the deferred tax assets in the future.
The Group has recognized an increase to the valuation allowance of $
570,253
, $
810,159
and $
1,723,347
for the years ended December 31,
2020, 2021 and 2022, respectively.
Changes in valuation allowance are as
follows:
As of December 31,
2021
2022
Balance at the beginning of the year
$
1,911,048
$
2,685,373
Current year addition
810,159
1,723,347
Current year reduction
(
90,370
)
(
25,844
)
Deferred tax effect of tax rate change
-
(
538,660
)
Exchange rate effect
54,536
(
232,509
)
Balance at the end of the year
$
2,685,373
$
3,611,707
As of December 31, 2022, net operating
loss carryforwards from PRC will expire, if unused, in the following amounts:
2023
$
322,766
2024
897,460
2025
380,244
2026
407,436
2027
913,779
Thereafter
21,417,987
Total
$
24,339,672
As of December 31, 2022, net operating
loss from HK will carry forward indefinitely, in the following amounts:
Net operating loss carryforwards indefinitely
3,858,436
Total
$
3,858,436
F-
31
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12.
LEASES
Effective on January 1, 2020, the
Company adopted Topic 842. At the inception of a contract, the Group determines if the arrangement is, or contains, a lease. ROU
assets represent the Group's right to use an underlying asset for the lease term and lease liabilities represent its obligation
to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on
the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term.
Supplemental balance sheet information
related to operating lease was as follows:
As of December 31,
2021
2022
Right-of-use Assets
$
1,194,859
$
865,399
Lease payment liabilities-current
(
800,658
)
(
435,462
)
Lease payment liabilities- non-current
(
446,140
)
(
300,974
)
Total
$
(
1,246,798
)
$
(
736,436
)
The weighted-average discount rate for
the operating lease was
4.75
%,
4.75
% and
4.83
% as of December 31, 2020, 2021 and 2022. The amortization expenses of right-of-use assets
were $
1,380,588
, $
1,087,035
and $
712,844
for the years ended December 31, 2020, 2021 and 2022.
For the years ended December 31,
2020, 2021 and 2022, the lease expense was as follows:
For the years ended December 31,
2020
2021
2022
Operating leases cost excluding short-term rental expense
$
1,567,532
$
1,207,920
$
739,582
Short-term lease cost
17,714
8,991
51,274
Total
$
1,585,246
$
1,216,911
$
790,856
The following is a schedule of future
minimum payments under our operating leases:
For the year ended December 31,
Operating Leases
2023
$
509,152
2024
200,912
2025
60,749
Total lease payments
770,813
Less: imputed interest
(
34,377
)
Total
$
736,436
F-
32
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13.
RESTRICTED NET ASSETS
A significant portion of the Group's
operations are conducted through its PRC (excluding Hong Kong) VIE, the Group's ability to pay dividends is primarily dependent
on receiving distributions of funds from its VIE and VIE's subsidiaries. Relevant PRC statutory laws and regulations permit payments
of dividends by its VIE and VIE's subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC
accounting standards and regulations, and after it has met the PRC requirements for appropriation to statutory reserves. Paid in capital
of the VIE and VIE's subsidiaries included in the Group's consolidated net assets are also non-distributable for dividend
purposes.
In accordance with the PRC regulations
on Enterprises with Foreign Investment, a WFOE established in the PRC is required to provide certain statutory reserves, namely general
reserve fund, the enterprise expansion fund and staff welfare and bonus fund which are appropriated from net profit as reported in the
enterprise's PRC statutory accounts. A WFOE is required to allocate at least
10
% of its annual after-tax profit to the general reserve
until such reserve has reached
50
% of its registered capital based on the enterprise's PRC statutory accounts. Appropriations to
the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the board of directors. The aforementioned reserves
can only be used for specific purposes and are not distributable as cash dividends. WFOE is subject to the above mandated restrictions
on distributable profits.
Additionally, in accordance with the
Company Law of the PRC, a domestic enterprise is required to provide a statutory common reserve of at least
10
% of its annual after-tax
profit until such reserve has reached
50
% of its registered capital based on the enterprise's PRC statutory accounts. A domestic
enterprise is also required to provide for a discretionary surplus reserve, at the discretion of the board of directors. The aforementioned
reserves can only be used for specific purposes and are not distributable as cash dividends. All of the Group's PRC consolidated
VIE and VIE's subsidiaries are subject to the above mandated restrictions on distributable profits.
As a result of these PRC laws and regulations,
the Group'
s VIE and VIE's subsidiaries are restricted in their ability
to transfer a portion of their net assets to the Company. As of December 31, 2021 and 2022, net assets restricted in the aggregate,
which include paid-in capital and statutory reserve funds of the Group's VIE and VIE's subsidiaries, that are included in
the Group's consolidated net assets were approximately $
75,858,780
and $
75,858,780
, respectively.
14.    RELATED
PARTY TRANSACTIONS
Related parties
The following is a list of related parties
which the Group has transactions with:
No.
Name of Related Parties
Relationship
1
Zhejiang Baiqianyin Network Technology Co., Ltd ("Zhejiang Baiqianyin")
An entity which has a common director of the Board of Directors with the Group
2
Shanghai Shenghan
An entity which the Group holds 16.56% equity interests
3
Shanghai Aoshu Enterprise Management Partnership (Limited Partnership) ("Shanghai Aoshu")
An entity which is the Group's employee stock ownership platform, and has a common director of the Board of Directors with the Group
4
Shanghai Machinemind Intelligent Technology Co., Ltd.
An entity which the Company holds 18% equity interests
5
Jiaxing Sound Core Intelligent Technology Co., LTD
An entity which Shanghai Shenghan holds 20% equity interests
6
Hui Yuan
Chairman of the board, one of the major shareholders holding 14.73% equity interests of the Company
7
Weng Wei
CFO of the Company
8
Tianjin Haiyin Equity Investment Fund Partnership (Limited Partnership) ("Tianjin Haiyin")
A significant shareholder holding 5.18% equity interests of the Company
9
Jiaxing Chiyu Investment Partnership (limited Partnership)
A significant shareholder holding 5.44% equity interests of the Company
10
Haiyin Capital Investment (International) Limited
A subsidiary of Tianjin Haiyin
11
Zhizhen Guorui
An entity which the Group holds 37% equity interests
F-
33
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14.    RELATED
PARTY TRANSACTIONS
(cont.)
Amounts due from related parties
Amounts due from related parties consisted
of the following for the periods indicated:
As of December 31,
2021
2022
Accounts receivable
$
$
Zhejiang Baiqianyin (a)
52,883
48,860
Other receivables
Zhejiang Baiqianyin (b)
316,981
297,657
Shanghai Aoshu (c)
22,055
20,377
Bad debt provisions
-
(
20,377
)
Total
$
391,919
$
346,517
(a).
In April, 2023, the Group collected accounts receivable from
Zhejiang Baiqianyin;
(b).
Other receivable from Zhejiang Baiqianyin consists of the interest-free
borrowings for ordinary business. In April, 2023, the Group collected other receivables from Zhejiang Baiqianyin;
(c).
Other receivable from Shanghai Aoshu was the payment to an employee
on behalf of Shanghai Aoshu. For the year ended December 31, the Group made fully provisions of receivables from Shanghai Aoshu.
Amounts due to related parties
Amount due to related parties consisted
of the following for the periods indicated:
As of December 31,
2021
2022
Due to related parties-current
Accounts payable
Shanghai Shenghan
$
470,765
$
201,465
Shanghai Machinemind Intelligent Technology Co., Ltd.
76,892
-
Jiaxing Sound Core Intelligent Technology Co., LTD
98,076
32,622
Zhizhen Guorui (Shanghai) Information Technology Development Co., Ltd.
-
97,868
Interest-free loans (c)
Jiaxing Chiyu Investment Partnership (limited Partnership)
$
784,610
$
434,959
Haiyin Capital Investment (International) Limited
128,299
129,517
Subtotal-due to related parties-current
1,558,642
896,431
Due to related parties-non current
Interest-free loans (c)
Hui Yuan
$
8,905,313
$
8,581,743
Subtotal-due to related parties-non current
8,905,313
8,581,743
Total
$
10,463,955
$
9,478,174
(c)
The balance represents the advance funds from related parties
for daily operational purposes. The funds are interest-free, unsecured and repayable on demand.
Loans
from Hui Yuan are not required to be settled within one year.
F-
34
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14.
RELATED PARTY TRANSACTIONS
(cont.)
Significant transactions with related parties
For the years ended December 31,
Nature
2020
2021
2022
Software and service income
Zhejiang Baiqianyin
$
2,449,560
$
286,875
$
-
Technology service fee payable
Shanghai Shenghan
$
130,356
$
465,058
$
-
Zhizhen Guorui (Shanghai) Information Technology Development Co., Ltd.
-
-
100,315
Interest-free loans from related parties
Zhejiang Baiqianyin
$
1,448
$
5,782,216
$
1,783,326
Hui Yuan
-
9,696,450
532,026
Haiyin Capital Investment (International) Limited
-
126,744
-
Jiaxing Chiyu Investment Partnership (limited Partnership)
-
775,097
-
Tianjin Haiyin
-
310,038
-
Weng Wei
-
74,409
-
Interest-free loans repayment to related parties
Zhejiang Baiqianyin
$
-
$
5,470,627
$
1,788,230
Jiaxing Chiyu Investment Partnership (limited Partnership)
-
-
297,221
Hui Yuan
-
899,111
169,416
Jiaxing Sound Core Intelligent Technology Co., LTD
-
-
59,444
Shanghai Shenghan
-
139,517
-
Weng Wei
-
74,409
-
Tianjin Haiyin
-
310,038
-
Return of inventories to a related party
Shanghai Shenghan
$
-
$
-
$
239,330
Debt relief
Shanghai Machinemind Intelligent Technology Co., Ltd.
$
-
$
-
$
72,819
F-
35
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially
expose the Group to concentrations of credit risk consist primarily of accounts receivable. The Group conducts credit evaluations of its
customers, and generally does not require collateral or other security from them. The Group evaluates its collection experience and long
outstanding balances to determine the need for an allowance for doubtful accounts. The Group conducts periodic reviews of the financial
condition and payment practices of its customers to minimize collection risk on accounts receivable.
The following table sets forth a summary
of single customers who represent
10
% or more of the Group's total revenue.
For the Years ended December 31,
2020
2021
2022
Percentage of the Group's total revenue
Amount
%
Amount
%
Amount
%
Customer A
-
-
3,363,631
10.3
%
9,824,275
20.4
%
Customer B
-
-
13,384,613
41.2
%
5,364,265
11.1
%
Customer C
-
-
-
-
4,980,628
10.3
%
Customer D
2,449,557
17.70
%
-
-
-
-
Customer E
1,780,014
12.80
%
-
-
-
-
The following table sets forth a summary
of single customers who represent
10
% or more of the Group's total accounts receivable:
As of December 31,
2021
2022
Percentage of the Group's accounts receivable
Amount
%
Amount
%
Customer B
15,203,371
48.8
%
12,801,742
30.9
%
Customer A
3,138,436
10.1
%
5,279,171
12.8
%
Customer C
-
-
4,175,607
10.1
%
Customer F
-
-
4,523,575
10.9
%
The following table sets forth a summary
of single suppliers who represent
10
% or more of the Group's total purchases:
For the Years ended December 31,
2020
2021
2022
Percentage of the Group's total purchase
Amount
%
Amount
%
Amount
%
Supplier A
-
-
3,756,094
73.8
%
11,475,851
34.6
%
Supplier B
-
-
-
-
7,281,914
21.9
%
Supplier C
-
-
-
-
3,402,612
10.3
%
Supplier D
139,040
10.0
%
-
-
-
-
Supplier E
181,046
13.0
%
-
-
-
-
Supplier F
550,496
39.5
%
-
-
-
-
F-
36
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16.
COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Group leases offices for operation
under operating leases. Future minimum lease payments under non-cancellable operating leases with initial terms in excess of one year
was included in Note 12.
Contingencies
In the ordinary course of business, the
Group may be subject to legal proceedings regarding contractual and employment relationships and a variety of other matters. The Group
records contingent liabilities resulting from such claims, when a loss is assessed to be probable and the amount of the loss is reasonably
estimable.
On August 3, 2020, Shanghai Xiao-i
filed a lawsuit with the High People's Court of Shanghai in China, against Apple Computer Trading (Shanghai) Co., Ltd., Apple, Inc.,
and Apple Computer Trading (Shanghai) Co., Ltd. (together, "Apple"), demanding that Apple cease its infringement of Shanghai
Xiao-i's intelligent assistant patent (ZL200410053749.9 invention patent) by its Siri (intelligent assistant) (the "Patent
Infringement Case"). The lawsuit seeks various remedies, including but not limited to, requiring Apple to stop manufacturing, using,
offering to sell, selling or importing products that infringe Shanghai Xiao-i's patent, and a temporary claim amount of 10 billion
yuan (RMB). On August 10, 2020, the High People's Court of Shanghai formally accepted the Patent Infringement Case filed by Shanghai
Xiao-i against Apple. On September 4, 2021, Shanghai Xiao-i filed a behavior preservation application (injunction) with the Shanghai High
People's Court, demanding Apple to immediately stop the patent infringement involving Siri, including but not limited to stopping
the production, selling, offering to sell, importing or using of iPhone products that infringe Shanghai Xiao-i's patent. As of the
date of this annual report, the Patent Infringement Case is pending in the High People's Court of Shanghai.
In the opinion of management, there
were no other pending or threatened claims and litigation as of December 31, 2022 and through the issuance date of these consolidated
financial statements.
17.
SUBSEQUENT EVENTS
Extension and settlement of convertible
loans
From January to April, 2023, Fumei
Shi, Sunny Concord International Ltd., Senbiao Hu, Guoqiang Chen and Jun Xu entered into a series of extension agreements with the VIE.
In the latest extension agreement in April 2023, Guoqiang Chen, Sunny Concord International Ltd. and Jun Xu extended the maturity date
of convertible loans to
May 31, 2023
with annual interest rate of
12
%,
15
% and
15
%, respectively. Pursuant to the extension agreements,
the loans would be settled in cash without conversion options.
In March, 2023, the VIE has repaid
principal and interest of the convertible loans to Senbiao Hu, in amount of US$
0.46
million. In April, 2023, the VIE has repaid principal
and interest of the convertible loans to Fumei Shi, in amount of US$
1.77
million.
List on Nasdaq Global Market
In March, 2023, the Company
completed its initial public offering and was listed on the Nasdaq Global Market under the symbol "AIXI".
5,700,000
American depositary shares (each, an "ADS", collectively, "ADSs"), each represents one-third of an ordinary
shares, were issued at a price of $
6.8
per share for net proceeds of approximately $
35.44
million, after deducting underwriting
discounts, commissions and other offering expense of $
3.32
million. After the initial public offering, there were
24,015,592
ordinary shares outstanding, with par value of $
0.00005
.
Collection of accounts receivable
The Group has collected accounts receivable
subsequent to December 31, 2022 amounted to $
26,275,295
.
Repayments and proceeds of loans
From January to April, 2023, The Group has repaid principle of loans from banks and third parties accounted for $
2,882,633
and $
3,133,371
.
In January, 2023, The Group received a short-term loan $
724,932
(RMB
5
million) from bank with interest rate
5.50
%.
From February to March,
2023, The Group has pledged patents to obtain short-term borrowings from banks accounted for $
6,234,414
(RMB
43
million) with interest
rates range from
3.45
% to
4.65
%.
In January, 2023, The Group received a loan $
1,449,864
(RMB
10
million) from a third party.
The Group has
evaluated subsequent events through April 28th, 2023, the date of issuance of the revised consolidated financial statements, and noted
that there are no other subsequent events.
F-
37
XIAO-I CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18.
CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
The Group performed a test on the restricted
net assets of consolidated subsidiary in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3),
"General Notes to Financial Statements" and concluded that it was applicable for the Group to disclose the financial statements
for the parent Company.
PARENT COMPANY BALANCE SHEETS
As of December 31,
2021
2022
ASSETS
Cash and cash equivalents
$
1,105
$
1,104
Investment income in subsidiaries
-
-
Prepaid expenses and other current assets, net
4
2
TOTAL ASSETS
$
1,109
$
1,106
LIABILITIES
Investment deficit in subsidiaries
190,267
5,887,042
TOTAL LIABILITIES
$
190,267
$
5,887,042
Shareholders' deficit
Ordinary shares (par value of $
0.00005
per share;
1,000,000,000
shares authorized as of December 31, 2021 and December 31, 2022, respectively;
22,115,592
shares issued and outstanding as of December 31,2021 and December 31, 2022, respectively)
1,106
1,106
Additional paid-in capital
75,621,294
75,621,294
Statutory reserve
237,486
237,486
Accumulated deficit
(
72,584,621
)
(
78,483,156
)
Accumulated other comprehensive loss
(
3,464,423
)
(
3,262,666
)
Total shareholders' deficit
$
(
189,158
)
$
(
5,885,936
)
*
The shares and per share information are presented on a retroactive
basis to reflect the reorganization completed on March 29, 2019.
PARENT COMPANY STATEMENTS OF OPERATIONS
AND COMPREHENSIVE (LOSS)/INCOME
Years ended December 31,
2020
2021
2022
Revenue
$
-
$
-
$
-
Cost of revenue
-
-
-
Gross profit
-
-
-
Operating expenses:
Share of (loss)/income in subsidiaries and VIEs
$
(
6,808,365
)
$
3,677,813
$
(
5,898,535
)
(Loss)/Income before income tax provision
(
6,808,365
)
3,677,813
(
5,898,535
)
Provision for income tax
-
-
-
Net (loss)/income
$
(
6,808,365
)
$
3,677,813
$
(
5,898,535
)
PARENT COMPANY STATEMENTS OF CASH
FLOW
Years ended December 31,
2020
2021
2022
Net cash used in operating activities
$
-
$
-
$
(
1
)
Net cash used in investing activities
-
-
-
Net cash provided by financing activities
-
-
-
Net cash inflow
$
-
$
-
$
(
1
)
F-38