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

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</div><p style="font: 1pt 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: 7pt Times New Roman, Times, Serif; margin: 0pt 0"></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"><b>UNITED
STATES</b></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"><b>SECURITIES
AND EXCHANGE COMMISSION</b></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"><b>WASHINGTON,
D.C. 20549</b></span></p><div>

</div><p style="font: 7pt 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">&#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"><b>FORM&#160;<ix:nonNumeric contextRef="c0" name="dei:DocumentType">20-F</ix:nonNumeric></b></span></p><div>

</div><p style="font: 7pt 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">&#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"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement">&#9744;</ix:nonNumeric>
<b>REGISTRATION STATEMENT PURSUANT TO SECTION&#160;12(b)&#160;OR (g)&#160;OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>

</div><p style="font: 7pt 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">&#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"><b>OR</b></span></p><div>

</div><p style="font: 7pt 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">&#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"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport">&#9746;</ix:nonNumeric>&#160;<b>ANNUAL
REPORT PURSUANT TO SECTION&#160;13 OR 15(d)&#160;OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>

</div><p style="font: 7pt 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">&#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"><b>For
the fiscal year ended <ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-year-en" name="dei:DocumentPeriodEndDate"><ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-en" name="dei:CurrentFiscalYearEndDate">December&#160;31</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:DocumentFiscalYearFocus">2022</ix:nonNumeric></ix:nonNumeric></b></span></p><div>

</div><p style="font: 7pt 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">&#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"><b>OR</b></span></p><div>

</div><p style="font: 7pt 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">&#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"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport">&#9744;</ix:nonNumeric>&#160;<b>TRANSITION
REPORT PURSUANT TO SECTION&#160;13 OR 15(d)&#160;OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>

</div><p style="font: 7pt 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">&#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"><b>OR</b></span></p><div>

</div><p style="margin-left: -0.25in; font: 7pt 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">&#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"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentShellCompanyReport">&#9744;</ix:nonNumeric>&#160;<b>SHELL
COMPANY REPORT PURSUANT TO SECTION&#160;13 OR 15(d)&#160;OF THE SECURITIES EXCHANGE ACT OF 1934</b></span></p><div>

</div><p style="font: 7pt 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">&#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">Date
of event requiring this shell company report</span></p><div>

</div><p style="font: 7pt 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">&#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"><b>For
the transition period from&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;to</b> &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</span></p><div>

</div><p style="font: 7pt 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">&#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">Commission
file number: <ix:nonNumeric contextRef="c0" name="dei:EntityFileNumber">001-41674</ix:nonNumeric></span></p><div>

</div><p style="font: 7pt 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">&#160;&#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"><b><span style="-sec-ix-hidden: hidden-fact-0">Shengfeng
Development Limited</span></b></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">(Exact
name of Registrant as specified in its charter)</span></p><div>

</div><p style="font: 7pt 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">&#160;&#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"><b>N/A</b></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">(Translation
of Registrant&#8217;s name into English)</span></p><div>

</div><p style="font: 7pt 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">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt-sec:edgarprovcountryen" name="dei:EntityIncorporationStateCountryCode"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Cayman
Islands</b></span></ix:nonNumeric></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">(Jurisdiction
of incorporation or organization)</span></p><div>

</div><p style="font: 7pt 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">&#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">&#160;<b><ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine1">Shengfeng
Building</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine2">No. 478 Fuxin East Road<br/>
Jin&#8217;an District</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:EntityAddressCityOrTown">Fuzhou City</ix:nonNumeric><br/>
Fujian Province, People&#8217;s Republic of <ix:nonNumeric contextRef="c1" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry"><ix:nonNumeric contextRef="c0" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">China</ix:nonNumeric></ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:EntityAddressPostalZipCode">350001</ix:nonNumeric><br/>
+86-591-83619860</b></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">(Address
of principal executive offices)</span></p><div>

</div><p style="font: 7pt 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">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelName"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Guoping
Zheng, Chief Financial Officer</b></span></ix:nonNumeric></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"><b>Telephone:
<ix:nonNumeric contextRef="c1" name="dei:CityAreaCode">+86</ix:nonNumeric>-<ix:nonNumeric contextRef="c1" name="dei:LocalPhoneNumber">591-83619860</ix:nonNumeric></b></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"><b>Email:
guoping.zheng@sfwl.com.cn</b></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"><b>At
the address of the Company set forth above</b></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">(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)</span></p><div>

</div><p style="font: 7pt 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>Securities
registered or to be registered pursuant to Section&#160;12(b)&#160;of the Act.</b></span></p><div>

</div><p style="font: 7pt 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: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="width: 32%; border-bottom: black 1.5pt solid; 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="width: 2%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Trading Symbol(s)</b></span></td> <td style="width: 2%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name of each exchange on <br/>
which registered</b></span></td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: top; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:Security12bTitle"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Class A Ordinary Shares</b></span></ix:nonNumeric></td> <td style="vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="vertical-align: top; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:TradingSymbol"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SFWL</b></span></ix:nonNumeric></td> <td style="vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>The <ix:nonNumeric contextRef="c0" format="ixt-sec:exchnameen" name="dei:SecurityExchangeName">Nasdaq</ix:nonNumeric> Capital Market</b></span></td></tr> </table><div>
</div><p style="font: 7pt 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">Securities
registered or to be registered pursuant to Section&#160;12(g)&#160;of the Act.</span></p><div>

</div><p style="font: 7pt 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: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>None</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">(Title
of Class)</span></p><div>

</div><p style="font: 7pt 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: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Securities
for which there is a reporting obligation pursuant to Section&#160;15(d)&#160;of the Act.</span></p><div>

</div><p style="font: 7pt 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: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>None</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">(Title
of Class)</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>

</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>
    </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"></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">Indicate
the number of outstanding shares of each of the issuer&#8217;s classes of capital or common stock as of the close of the period covered
by the annual report.</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">An aggregate of <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">40,520,000</ix:nonFraction> Class A ordinary shares, par value $0.0001
per share, and <ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">41,880,000</ix:nonFraction> Class B ordinary shares, par value $0.0001 per share, as of the date of this annual report.</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"><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&#160;405 of the Securities Act.</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: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yes&#160;&#9744;&#160;&#160;<ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric>&#160;&#9746;</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">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&#160;13
or 15(d)&#160;of the Securities Exchange Act of 1934.</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: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yes
&#9744;&#160;<ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric>&#160;&#9746;</span></p><div>

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

</div><p style="font: 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)&#160;has filed all reports required to be filed by Section&#160;13 or 15(d)&#160;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)&#160;has been subject to such filing requirements for the past 90 days.</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: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric>&#160;&#9746;&#160;No&#160;&#9744;</span></p><div>

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

</div><p style="font: 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&#160;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).</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: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric>&#160;&#9746;&#160;No&#160;&#9744;</span></p><div>

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

</div><p style="font: 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 definition of &#8220;large accelerated filer,&#8221; &#8220;accelerated filer,&#8221; and &#8220;emerging growth company&#8221;
in Rule&#160;12b-2 of the Exchange Act.</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><table cellpadding="0" cellspacing="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 20%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large accelerated filer</span></td> <td style="width: 10%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td> <td style="width: 35%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td> <td style="width: 25%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accelerated filer</span></td> <td style="width: 10%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td></tr> <tr style="vertical-align: top"> <td><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-accelerated filer</span></ix:nonNumeric></td> <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</span></td> <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">Emerging&#160;growth&#160;company</span></td> <td><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntityEmergingGrowthCompany"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</span></ix:nonNumeric></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 provided pursuant
to Section&#160;13(a)&#160;of the Exchange Act. <ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntityExTransitionPeriod">&#9746;</ix:nonNumeric></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">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&#160;404(b)&#160;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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 15%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:DocumentAccountingStandard">U.S. GAAP</ix:nonNumeric>&#160;&#9746;</span></td> <td style="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 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&#160;&#9744;</span></p></td> <td style="width: 15%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other&#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><table cellpadding="0" cellspacing="0" style="font: 12pt 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-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="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&#160;&#9744;&#160; Item 18 &#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
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule&#160;12b-2 of the Exchange
Act). Yes&#160;&#9744;&#160;No <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany">&#9746;</ix:nonNumeric></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: 1pt Times New Roman, Times, Serif; margin: 0pt 0"></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: 1pt Times New Roman, Times, Serif; margin: 0pt 0"></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>

</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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;&#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>TABLE
OF CONTENTS</b></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><table cellpadding="0" cellspacing="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="background-color: #CCEEFF">
    <td colspan="2" style="vertical-align: top"><a href="#a_001"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">INTRODUCTION</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ii</span></td></tr>
  <tr>
    <td colspan="2"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td colspan="2" style="vertical-align: top"><a href="#a_002"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART&#160;I</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr>
    <td style="width: 10%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 80%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom; width: 10%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 1.</span></td>
    <td style="vertical-align: bottom"><a href="#a_003"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">IDENTITY OF DIRECTORS,
    SENIOR MANAGEMENT AND ADVISERS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr>
    <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: center; vertical-align: bottom"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 2.</span></td>
    <td style="vertical-align: bottom"><a href="#a_004"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">OFFER STATISTICS AND
    EXPECTED TIMETABLE</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 3.</span></td>
    <td style="vertical-align: bottom"><a href="#a_005"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">KEY INFORMATION</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 4.</span></td>
    <td style="vertical-align: bottom"><a href="#a_006"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">INFORMATION ON THE COMPANY</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">57</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 4A.</span></td>
    <td style="vertical-align: bottom"><a href="#a_007"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">UNRESOLVED STAFF COMMENTS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">98</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 5.</span></td>
    <td style="vertical-align: bottom"><a href="#a_008"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">OPERATING AND FINANCIAL
    REVIEW AND PROSPECTS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">98</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 6.</span></td>
    <td style="vertical-align: bottom"><a href="#a_009"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DIRECTORS, SENIOR MANAGEMENT
    AND EMPLOYEES</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">111</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 7.</span></td>
    <td style="vertical-align: bottom"><a href="#a_010"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">MAJOR SHAREHOLDERS AND
    RELATED PARTY TRANSACTIONS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">119</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 8.</span></td>
    <td style="vertical-align: bottom"><a href="#a_011"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FINANCIAL INFORMATION</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">121</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 9.</span></td>
    <td style="vertical-align: bottom"><a href="#a_012"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THE OFFER AND LISTING</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">121</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 10.</span></td>
    <td style="vertical-align: bottom"><a href="#a_013"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ADDITIONAL INFORMATION</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">121</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 11.</span></td>
    <td style="vertical-align: bottom"><a href="#a_014"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">QUANTITATIVE AND QUALITATIVE
    DISCLOSURES ABOUT MARKET RISK</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">130</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 12.</span></td>
    <td style="vertical-align: bottom"><a href="#a_015"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DESCRIPTION OF SECURITIES
    OTHER THAN EQUITY SECURITIES</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">132</span></td></tr>
  <tr>
    <td colspan="2"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td colspan="2" style="vertical-align: top"><a href="#a_016"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART&#160;II</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">133</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 13.</span></td>
    <td style="vertical-align: bottom"><a href="#a_017"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DEFAULTS, DIVIDEND ARREARAGES
    AND DELINQUENCIES</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">133</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 14.</span></td>
    <td style="vertical-align: bottom"><a href="#a_018"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">133</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 15.</span></td>
    <td style="vertical-align: bottom"><a href="#a_019"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CONTROLS AND PROCEDURES</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">133</span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16.</span></td>
    <td style="vertical-align: bottom"><a href="#a_020"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">RESERVED</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">134</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16A.</span></td>
    <td style="vertical-align: bottom"><a href="#a_021"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">AUDIT COMMITTEE FINANCIAL
    EXPERT</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">134</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16B.</span></td>
    <td style="vertical-align: bottom"><a href="#a_022"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CODE OF ETHICS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">134</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16C.</span></td>
    <td style="vertical-align: bottom"><a href="#a_023"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PRINCIPAL ACCOUNTANT
    FEES AND SERVICES</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">134</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16D.</span></td>
    <td style="vertical-align: bottom"><a href="#a_024"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">EXEMPTIONS FROM THE
    LISTING STANDARDS FOR AUDIT COMMITTEES</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">135</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16E.</span></td>
    <td style="vertical-align: bottom"><a href="#a_025"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PURCHASES OF EQUITY
    SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">135</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16F.</span></td>
    <td style="vertical-align: bottom"><a href="#a_026"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CHANGE IN REGISTRANT&#8217;S
    CERTIFYING ACCOUNTANT</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">135</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16G.</span></td>
    <td style="vertical-align: bottom"><a href="#a_027"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CORPORATE GOVERNANCE</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">135</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16H.</span></td>
    <td style="vertical-align: bottom"><a href="#a_028"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">MINE SAFETY DISCLOSURE</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">135</span></td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 16I.</span></td>
    <td style="vertical-align: bottom"><a href="#a_029"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DISCLOSURE REGARDING
    FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">135</span></td></tr>
  <tr>
    <td colspan="2"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td colspan="2" style="vertical-align: top"><a href="#a_030"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">PART&#160;III</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">136</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 17.</span></td>
    <td style="vertical-align: bottom"><a href="#a_031"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FINANCIAL STATEMENTS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">136</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 18.</span></td>
    <td style="vertical-align: bottom"><a href="#a_032"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FINANCIAL STATEMENTS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">136</span></td></tr>
  <tr>
    <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="vertical-align: bottom; text-align: center"></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ITEM 19.</span></td>
    <td style="vertical-align: bottom"><a href="#a_033"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">EXHIBITS</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">136</span></td></tr>
  </table><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>

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

</div><!-- Field: Page; Sequence: 3; 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: LowerRoman; Name: PageNo -->i<!-- 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"><b>&#160;</b></span></p><div>

</div><div><a id="a_001"></a></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>INTRODUCTION</b></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;&#160;</span></p><div>

</div><p style="font: 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
this annual report on Form 20-F, unless the context otherwise requires, references to:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-indent: -18pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify; 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">&#8220;Affiliated
    Entities&#8221; are to our subsidiaries and Shengfeng Logistics (defined below) and the VIE&#8217;s subsidiaries (defined below);&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="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, and &#8220;mainland China&#8221;, unless otherwise specified herein, are to the People&#8217;s Republic of China excluding,
for the purpose of this annual report only, Taiwan, the Hong Kong Special Administrative Region, and the Macau Administrative Region;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Class
    A Ordinary Shares&#8221; are to Class A ordinary shares of Shengfeng Cayman (defined below), par value $0.0001 per share;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Class
    B Ordinary Shares&#8221; are to Class B ordinary shares of Shengfeng Cayman, par value $0.0001 per share;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Our
    subsidiaries&#8221; are to Shengfeng HK (defined below) and Tianyu (defined below), each a subsidiary of Shengfeng Cayman;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;RMB&#8221;
    are to the legal currency of China;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Shengfeng
    HK&#8221; are to our wholly owned subsidiary, Shengfeng Holding Limited, a Hong Kong corporation;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Shengfeng
    Logistics&#8221; or &#8220;the VIE&#8221; are to Shengfeng Logistics Group Co., Ltd., a limited liability company organized under
    the laws of the PRC, which we control via a series of contractual arrangements among Tianyu (defined below), Shengfeng Logistics,
    and shareholders of Shengfeng Logistics;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;Shengfeng
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    liability company organized under the laws of the PRC, which is wholly owned by Shengfeng HK;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;U.S.
    dollars,&#8221; &#8220;$,&#8221; and &#8220;dollars&#8221; are to the legal currency of the United States;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;VIE&#8217;s subsidiaries&#8221; are to the 32 subsidiaries of
Shengfeng Logistics as listed in &#8220;Item 3. Key Information&#8212;Our Corporate Structure;&#8221;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;we,&#8221;
    &#8220;us,&#8221; &#8220;our,&#8221; &#8220;Shengfeng Cayman,&#8221; &#8220;our Company,&#8221; or the &#8220;Company&#8221; are
    to Shengfeng Development Limited, an exempted company with limited liability incorporated under the laws of Cayman Islands; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#8220;WFOE&#8221;
    are to wholly foreign-owned enterprise.</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">The functional currency of Shengfeng Logistics, the VIE in the PRC,
and the VIE&#8217;s subsidiaries and branch offices, is Renminbi (&#8220;RMB&#8221;), the currency of China. Our consolidated financial
statements are presented in U.S. dollars. In this annual report, we refer to assets, obligations, commitments, and liabilities in our
consolidated financial statements in U.S. dollars. These dollar references are based on the exchange rate of RMB to U.S. dollars, determined
as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of our obligations and the value of
our assets in terms of U.S. dollars which may result in an increase or decrease in the amount of our obligations (expressed in dollars)
and the value of our assets, including accounts receivable (expressed in dollars).</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;<b>&#160;</b></span></p><div>

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

</div><!-- Field: Page; Sequence: 4; 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: LowerRoman; Name: PageNo -->ii<!-- 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"><b>&#160;</b></span></p><div>

</div><div><a id="a_002"></a></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>Part&#160;I</b></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_003"></a></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>Item
1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</b></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"><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_004"></a></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>Item
2. OFFER STATISTICS AND EXPECTED TIMETABLE</b></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"><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_005"></a></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>Item
3. KEY INFORMATION</b></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"><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"><b>Our
Corporate History</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 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
began our operations in 2001 through Shengfeng Logistics, a limited liability company established pursuant to PRC laws. Shengfeng Logistics
formed or controlled 30 majority owned/wholly owned subsidiaries pursuant to PRC 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">In
connection with this offering, we have undertaken a reorganization of our corporate structure (the &#8220;Reorganization&#8221;) in the
following steps:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, 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: 12pt Times New Roman, Times, Serif; width: 100%">
  <tr>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top; 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">on July 16,
    2020, we incorporated Shengfeng Cayman under the laws of the Cayman Islands;</span></td></tr>
  <tr>
    <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>
  <tr>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top"><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">on August 18, 2020, we
    incorporated Shengfeng HK in Hong Kong as a wholly owned subsidiary of Shengfeng Cayman;</span></td></tr>
  <tr>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top"><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>
  <tr>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top"><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">on December 16, 2020, we
    incorporated Tianyu pursuant to PRC laws as a WFOE and a wholly owned subsidiary of Shengfeng HK;</span></td></tr>
  <tr>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top"><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>
  <tr>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top"><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">on December 18, 2020, our Company and our shareholders undertook a
series of corporate actions, including an amendment and a subdivision of our share capital, among others. See &#8220;<i>&#8212;</i>History
of Share Issuances&#8221; below; and</span></td></tr>
  <tr>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top"><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>
  <tr>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="vertical-align: top"><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">On January 7, 2021, Tianyu
    entered into a series of contractual arrangements with Shengfeng Logistics and its shareholders, through which Tianyu has gained
    full control over the management and receives the economic benefits of Shengfeng Logistics. For more details, see &#8220;&#8212;Our
    VIE Agreements.&#8221;</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">Our
shares and per share data as of December 31, 2022 and 2021 have been presented on a retroactive basis to reflect the Reorganization.</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"><b>&#160;</b></span></p><div>

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

</div><!-- Field: Page; Sequence: 5; 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: 0pt 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"><b>History of Share Issuances</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">The following is a summary of our share issuances
since incorporation.</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 July 16, 2020, Quality Corporate Services Ltd.,
the subscriber to our memorandum of association, had initially taken up 1 ordinary share, par value $1.00 per share, which it subsequently
transferred to Shengfeng International Limited on the same date. Also on July 16, 2020, we issued 49,999 ordinary shares, par value $1.00
per share, to Shengfeng International Limited, of which 6,000 ordinary shares were transferred to Everbright International Development
Limited on September 29, 2020.</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 December 18, 2020 we undertook the following
corporate actions:</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><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">a repurchase of 43,999 ordinary shares held by Shengfeng International Limited and 6,000 ordinary shares held by Everbright International Development Limited;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td><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">an amendment of our share capital from $50,000 divided into 50,000 ordinary shares of $1.00 par value per share to $50,000 divided into 40,000 Class A Ordinary Shares of $1.00 par value per share and 10,000 Class B Ordinary Shares of $1.00 par value per share;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td><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">a re-designation of one issued ordinary share held by Shengfeng International Limited into one Class B Ordinary Share; and</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iv)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a subdivision of our share capital from $50,000 divided into 40,000 Class A Ordinary Shares of $1.00 par value per share and 10,000 Class B Ordinary Shares of $1.00 par value per share to US$50,000 divided into 400,000,000 Class A Ordinary Shares of $0.0001 par value per share and 100,000,000 Class B Ordinary Shares of $0.0001 par value per share.</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">On December 18, 2020, we issued an aggregate of
38,120,000 Class A Ordinary Shares to 12 investors for an aggregate consideration of $3,812.</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 December 18, 2020, we issued 41,870,000 Class
B Ordinary Shares to Shengfeng International Limited for a consideration of $4,187. After such issuance and as of the date of this annual
report, Shengfeng International Limited holds an aggregate of 41,880,000 of our Class B Ordinary Shares.</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 April 4, 2023, the Company completed its initial public offering
(&#8220;IPO&#8221;) of 2,400,000 Class A Ordinary Shares at a public offering price of $4.00 per share. The net proceeds raised from the
IPO were approximately $8.5 million after deducting underwriting discounts and the offering expenses payable by the Company.</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>&#160;</b></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"><b>Our
Corporate Structure</b></span></p><div>

</div><p style="font: 4pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shengfeng Development Limited is a holding company incorporated in
the Cayman Islands and it is not a Chinese operating company. As a holding company with no material operations of its own, its operations
have been conducted in China by its subsidiaries and through certain contractual arrangements (&#8220;the VIE Agreements&#8221;) with
a VIE, Shengfeng Logistics and the VIE&#8217;s subsidiaries. For accounting purposes, we control and receive the economic benefits of
the VIE and the VIE&#8217;s subsidiaries&#8217; business operations through the VIE Agreements, which enables us to consolidate the financial
results of the VIE and the VIE&#8217;s subsidiaries in our consolidated financial statement under U.S. GAAP. Neither we nor our subsidiaries
own any equity interests in the VIE or the VIE&#8217;s subsidiaries.</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: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 6; 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: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 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 our corporate structure, including our subsidiaries and the VIE and the VIE&#8217;s subsidiaries,&#160;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><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; 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: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Notes:
All percentages reflect the voting ownership interests instead of the equity interests held by each of our shareholders given that each
holder of Class B Ordinary Shares will be entitled to 10 votes per one Class B Ordinary Share and each holder of Class A Ordinary Shares
will be entitled to one vote per one Class A Ordinary 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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr>
    <td style="vertical-align: top; width: 24px"><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">Represents 41,880,000 Class
B Ordinary Shares indirectly held by Yongxu Liu, the 100% owner of Shengfeng International Limited as of the date of this annual report.</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Represents an aggregate of 38,120,000 Class A Ordinary Shares held by 12 shareholders, each one of which holds less than 5% of our voting ownership interests, as of the date of this annual report.</span></td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="vertical-align: top"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As of the date of this annual report, Shengfeng Logistics is held by Fujian Yunlian Shengfeng Industry Co., Ltd., which is 90% owned by Yongxu Liu, who is our chief executive officer, chairman of the board and president, as to 54.58%, Yongxu Liu directly as to 30.99%, Zhoushan Zhongxin Equity Investment Partnership (Limited Partnership) as to 1.5%, Zhoushan Guancheng Equity Investment Partnership (Limited Partnership) as to 2%, Daqiu Tang as to 0.85%, Yelie Song as to 0.97%, Zhiping Yang as to 1.58%, Chaoxin Yang as to 0.96%, Guangsheng Lin as to 0.85%, Zhuangyuan Lin as to 2.59%, Zhongdeng Pan as to 2.13% and Yufan Chen as to 1%, who collectively hold 100% of the shares of Shengfeng Logistics. We refer to the above shareholders of Shengfeng Logistics as the &#8220;Shengfeng Logistics Shareholders.&#8221;</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"></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="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: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For details of our principal shareholders&#8217; ownership, please
refer to the beneficial ownership table in the section captioned &#8220;Item 6. Directors, Senior Management and Employees&#8212;E. Share
Ownership.&#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: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Significant
subsidiaries of Shengfeng Logistics, as that term is defined under Section 1-02 of Regulation S-X under the Securities Act, consist of
the following entities:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, 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: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr>
    <td style="border-bottom: black 1.5pt solid; text-align: left; vertical-align: bottom; width: 5%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>No.</b></span></td>
    <td style="vertical-align: top; width: 1%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; width: 30%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name
    of subsidiaries</b></span></td>
    <td style="text-align: center; vertical-align: bottom; 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; vertical-align: bottom; width: 14%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Place
    of<br/>
    incorporation</b></span></td>
    <td style="text-align: center; vertical-align: bottom; 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; vertical-align: bottom; width: 15%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Date
    of<br/>
    incorporation<br/>
    or acquisition</b></span></td>
    <td style="text-align: center; vertical-align: bottom; 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; vertical-align: bottom; width: 12%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Percentage<br/>
    of direct or<br/>
    indirect</b></span></td>
    <td style="text-align: center; vertical-align: bottom; 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; vertical-align: bottom; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Principal<br/>
    activities</b></span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <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="white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center; white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="white-space: nowrap"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1</b></span></td>
    <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">Shengfeng Holding Limited<br/>
 (&#8220;Shengfeng HK&#8221;)</span></td>
    <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">Hong Kong</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 18, 2020</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Investment holding of Tianyu</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2</b></span></td>
    <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">Fujian Tianyu Shengfeng Logistics Co., Ltd. (&#8220;Tianyu&#8221;)</span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 16, 2020</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Investment holding of Shengfeng VIE</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>3</b></span></td>
    <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">Shengfeng Logistics Group Co., Ltd. (&#8220;Shengfeng
    VIE&#8221; or <b>&#8220;</b>Shengfeng Logistics<b>&#8221;</b>)</span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 7, 2001</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>4</b></span></td>
    <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">Fuqing Shengfeng Logistics Co., Ltd.</span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 15, 2011</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>5</b></span></td>
    <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">Xiamen Shengfeng Logistics Co., Ltd.</span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 22, 2011</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>6</b></span></td>
    <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">Guangdong Shengfeng Logistics Co., Ltd.</span></td>
    <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">Guangdong, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 30, 2011</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>7</b></span></td>
    <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">Hainan Shengfeng Supply Chain Management Co., Ltd.</span></td>
    <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">Hainan, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 18, 2020</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>8</b></span></td>
    <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">Beijing Tianyushengfeng e-commerce Technology Co., Ltd.</span></td>
    <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">Beijing, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">January 9, 2004</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9</b></span></td>
    <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">Beijing Shengfeng Supply Chain Management Co., Ltd.</span></td>
    <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">Beijing, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 13, 2016</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10</b></span></td>
    <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">Shengfeng Logistics (Guizhou) Co., Ltd.</span></td>
    <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">Guizhou, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 15, 2017</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>11</b></span></td>
    <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">Shengfeng Logistics (Tianjin) Co., Ltd.</span></td>
    <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">Tianjin, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">March 8, 2016</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>12</b></span></td>
    <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">Shengfeng Logistics (Shandong) Co., Ltd.</span></td>
    <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">Shandong, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">March 15, 2016</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>13</b></span></td>
    <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">Shengfeng Logistics Hebei Co., Ltd.</span></td>
    <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">Hebei, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">February 17, 2016</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>14</b></span></td>
    <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">Shengfeng Logistics (Henan) Co., Ltd.</span></td>
    <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">Henan, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">March 28, 2016</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>15</b></span></td>
    <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">Shengfeng Logistics (Liaoning) Co., Ltd.</span></td>
    <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">Liaoning, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">March 2, 2016</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>16</b></span></td>
    <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">Fuzhou Shengfeng New Material Technology Co., Ltd.
    <sup>(a)</sup></span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 13, 2019</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0%</span></td>
    <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">Packaging material manufacturing</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><!-- Field: Page; Sequence: 8; 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: 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: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td style="width: 5%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>17</b></span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 30%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shengfeng Logistics (Yunnan) Co.,
    Ltd.</span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 14%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yunnan, the PRC</span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center; width: 15%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">January 25, 2016</span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 12%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <td style="width: 1%"><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">Transportation and warehouse storage
    management service</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>18</b></span></td>
    <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">Shengfeng Logistics (Guangxi) Co., Ltd.</span></td>
    <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">Guangxi, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">February 1, 2016</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>19</b></span></td>
    <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">Hubei Shengfeng Logistics Co., Ltd.</span></td>
    <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">Hubei, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 15, 2010</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>20</b></span></td>
    <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">Shengfeng Logistics Group (Shanghai) Supply Chain Management
    Co., Ltd.</span></td>
    <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">Shanghai, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 26, 2015</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>21</b></span></td>
    <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">Shanghai Shengxu Logistics Co., Ltd.</span></td>
    <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">Shanghai, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">June 4, 2003</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>22</b></span></td>
    <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">Hangzhou Shengfeng Logistics Co., Ltd.</span></td>
    <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">Zhejiang, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">June 10, 2010</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>23</b></span></td>
    <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">Nanjing Shengfeng Logistics Co., Ltd.</span></td>
    <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">Jiangsu, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 30, 2011</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>24</b></span></td>
    <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">Suzhou Shengfeng Logistics Co., Ltd.</span></td>
    <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">Jiangsu, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">January 14, 2005</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">90%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><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>25</b></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">&#160;</span></p></td>
    <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">Suzhou Shengfeng Supply Chain Management Co., Ltd.
    <sup>(b)</sup></span></td>
    <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">Jiangsu, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 9, 2019</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>26</b></span></td>
    <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">Shengfeng Supply Chain Management Co., Ltd.</span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">June 19, 2014</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>27</b></span></td>
    <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">Fuzhou Shengfeng Transportation Co., Ltd.</span></td>
    <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;&#160;Fujian,&#160;&#160;the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 18, 2019</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>28</b></span></td>
    <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">Diaobingshan Hengde Logistics Co., Ltd. <sup>(c)</sup></span></td>
    <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">Liaoning, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 23, 2018</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>29</b></span></td>
    <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">Sichuan Shengfeng Logistics Co., Ltd.</span></td>
    <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">Sichuan, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">June 27, 2019</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>30</b></span></td>
    <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">Fujian Shengfeng Logistics Co., Ltd.</span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 2, 2020</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>31</b></span></td>
    <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">Fujian Dafengche Information Technology Co. Ltd. </span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 26, 2020</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Software engineering</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>32</b></span></td>
    <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">Ningde Shengfeng Logistics Co. Ltd.<sup>(d)</sup></span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">November 12, 2018</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">51%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>33</b></span></td>
    <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">Fujian Fengche Logistics Co., Ltd.</span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">October 28, 2020</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation service</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>34</b></span></td>
    <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">Fujian Hangfeng Logistics Technology Co., Ltd.<sup>(e)</sup></span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">October 13, 2020</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">0%</span></td>
    <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">Online service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>35</b></span></td>
    <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">Shengfeng Logistics (Zhejiang) Co., Ltd</span></td>
    <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">Zhejiang, the PRC&#160;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">February 1, 2021</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: white">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>36</b></span></td>
    <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">Chengdu Shengfeng Supply Chain Management Co., Ltd</span></td>
    <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">Chengdu, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">October 12, 2021</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Supply chain service</span></td></tr>
</table><div>

</div><p style="margin: 0"></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>

</div><!-- Field: Page; Sequence: 9; 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: 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><table cellpadding="0" cellspacing="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td style="width: 5%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>37</b></span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 30%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shengfeng Logistics Group (Ningde) Supply Chain Management
    Co., Ltd.&#160;<sup>(f)</sup></span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="width: 14%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fujian, the PRC</span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center; width: 15%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">September&#160;23,&#160;2022</span></td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right; width: 12%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <td style="width: 1%"><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">Supply chain service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td style="background-color: White"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>38</b></span></td>
    <td style="background-color: White"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="background-color: White"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yichun Shengfeng Logistics
    Co., Ltd.</span></td>
    <td style="background-color: White"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="background-color: White"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Jiangxi, the PRC</span></td>
    <td style="background-color: White"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="background-color: White; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 1, 2022</span></td>
    <td style="background-color: White"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="background-color: White; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <td style="background-color: White"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="background-color: White"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Transportation and warehouse storage management service</span></td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>39</b></span></td>
    <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">Fujian Shengfeng Smart Technology Co., Ltd.<sup>(g)</sup></span></td>
    <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">Fujian, the PRC</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 20,2023</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">100%</span></td>
    <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">Property service</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: 12pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)</span></td>
    <td><p style="font: 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
        July 14, 2021, Shengfeng Logistics entered into a share transfer agreement with Dongguan Suxing New Material Co., Ltd (&#8220;Dongguan
        Suxing&#8221;), a related party, to transfer its 51% equity interest in Fuzhou Shengfeng New Material Technology Co., Ltd. (&#8220;New
        Material Technology&#8221;) to Dongguan Suxing for a consideration of $468,973 (RMB3,060,000). The aforementioned transaction
        was completed during the year ended December 31, 2021. The Company has continued to operate the transportation business through
        the VIE&#8217;s other subsidiaries. Since New Material Technology&#8217;s operating revenue was less than 1% of the Company&#8217;s
        consolidated revenue, the transfer did not constitute a strategic shift that would have a major effect on the Company&#8217;s
        operations and financial results. The results of operations for New Material Technology were not reported as discontinued operations
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p></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: 12pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(b)</span></td>
    <td><p style="font: 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
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(c)</span></td>
    <td><p style="font: 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 20, 2021, Shengfeng Logistics entered into a share transfer agreement with Mr. Sun Mingyang, an unrelated third party,
        among others, to transfer its 51% equity interest in Diaobingshan Hengde Logistics Co., Ltd. to Mr. Sun Mingyang for a consideration
        of approximately $0.3 million. The aforementioned transaction was completed during the year ended December 31, 2021. The Company
        has continued to operate the transportation business through the VIE&#8217;s other subsidiaries. Since Diaobingshan Hengde Logistics
        Co., Ltd.&#8217;s operating revenue was less than 1% of the Company&#8217;s consolidated revenue, the transfer did not constitute
        a strategic shift that would have a major effect on the Company&#8217;s operations and financial results. The results of operations
        for Diaobingshan Hengde Logistics Co., Ltd. were not reported as discontinued operations in the consolidated financial statements.</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(d)</span></td>
    <td><p style="font: 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
        January 5, 2022, Shengfeng Logistics entered into a share transfer agreement with Fuzhou Puhui Technology Co., Ltd. (&#8220;Fuzhou
        Puhui&#8221;), an unrelated third party, to transfer its 49% equity interest in Ningde Shengfeng Logistics Co., Ltd. (&#8220;Ningde
        Shengfeng&#8221;) to Fuzhou Puhui. According to the share transfer agreement, instead of paying any cash consideration to Shengfeng
        Logistics, Fuzhou Puhui was required to make a capital contribution to fulfill the required registered capital (approximately
        $15.5 million or RMB100 million) based on its 49% ownership interest (approximately $7.6 million or RMB49 million). The aforementioned
        transaction has been completed. After the transaction, the Company owned a 51% equity interest in Ningde Shengfeng.</span></p>
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  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(e)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On March 16, 2022, Fujian
    Hangfeng Logistics Technology Co., Ltd. was deregistered, as it has not commenced business operations and the Company has cancelled
    the future plans for such entity.</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 style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(f)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On September 23, 2022, Shengfeng Logistics Group (Ningde) Supply Chain
Management Co., Ltd.&#160;was set up in Fujian, China. This entity is fully owned by Shengfeng Logistics Group Co., Ltd. and provides
supply chain service in the future.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">(g)</p></td>
    <td style="text-align: justify"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">On April 20, 2023, Fujian Shengfeng Smart Technology Co., Ltd was set
up in Fujian, China. This entity is fully owned by Fujian Tianyu Shengfeng Logistics Co., Ltd. and will provide property service in the
future.</p></td></tr>
  </table><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>

</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 -->6<!-- 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"><b>Our VIE Agreements</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">Neither we nor our subsidiaries own any share
in Shengfeng Logistics or the VIE&#8217;s subsidiaries. Instead, for accounting purposes, we control and receive the economic benefits
of Shengfeng Logistics&#8217; business operation through the VIE Agreements entered into by and among WFOE, Shengfeng Logistics and its
shareholders on January 7, 2021, which enables us to consolidate the financial results of the VIE and the VIE&#8217;s subsidiaries in
our consolidated financial statement under U.S. GAAP. The VIE Agreements are designed to provide Tianyu with the power, rights, and obligations
to Shengfeng Logistics, including control rights and the rights to the assets, property, and revenue of Shengfeng Logistics, as set forth
under the VIE Agreements. The VIE Agreements have not been tested in a court of law in China as of the date of this annual report and
may not be effective in providing control over the VIE. We are, therefore, subject to risks due to the uncertainty of the interpretation
and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure, including, but not limited to, regulatory
review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangements
with the VIE.</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 evaluated the guidance in FASB ASC 810
and determined that we are regarded as the primary beneficiary of the VIE, for accounting purposes, as a result of our direct ownership
in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat the VIE and the VIE&#8217;s subsidiaries as our consolidated
entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE&#8217;s subsidiaries in our consolidated financial
statements in accordance with U.S. GAAP.</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">Although we took every precaution available to
effectively enforce the contractual and corporate relationship, the VIE structure has its inherent risks that may affect your investment,
including less effectiveness and certainties than direct ownership and potential substantial costs to enforce the terms of the VIE Agreements.
For example, Shengfeng Logistics and the Shengfeng Logistics 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 direct ownership of Shengfeng Logistics, we would be able to exercise our rights as a shareholder to effect changes in the board
of directors of Shengfeng Logistics, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management
and operational level. However, under the current VIE Agreements, we rely on the performance by Shengfeng Logistics and the Shengfeng
Logistics Shareholders of their respective obligations under the contracts to exercise control over Shengfeng Logistics. The Shengfeng
Logistics Shareholders may not act in the best interests of our Company or may not perform their obligations under these contracts. Such
risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements with Shengfeng
Logistics. Furthermore, failure of the VIE shareholders to perform certain obligations could compel the Company to rely on legal remedies
available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective.
Additionally, if any disputes relating to these contracts remain 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 and the Company may incur substantial costs to enforce the terms of the VIE Agreements. We, as a Cayman Islands
holding company, may have difficulty in enforcing any rights we may have under the VIE Agreements with the VIE, its founders and owners,
in PRC because all of our VIE Agreements are governed by the PRC laws and provide for the resolution of disputes through arbitration in
the PRC, where legal environment in the PRC is not as developed as in the United States. Also, these VIE Agreements may not be enforceable
in China if PRC government authorities or courts take a view that such VIE Agreements contravene PRC laws and regulations or are otherwise
not enforceable for public policy reasons. In the event we are unable to enforce these VIE Agreements, we may not be able to exert effective
control over Shengfeng Logistics, and our ability to conduct our business may be materially and adversely affected. In addition, there
is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us
or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. See &#8220;Item
3. Key Information&#8212;D. Risk Factors&#8212;Risks Relating to Our Corporate Structure&#8221; and &#8220;&#8212;D. Risk Factors&#8212;Risks
Relating to Doing Business in the PRC&#8221; for more information. In particular, see &#8220;&#8212;D. Risk Factors&#8212;Risks Relating
to Our Corporate Structure&#8212;Our VIE Agreements with Shengfeng Logistics and the Shengfeng Logistics Shareholders may not be effective
in providing control over Shengfeng Logistics,&#8221; &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Our Corporate Structure&#8212;The
Shengfeng Logistics Shareholders have potential conflicts of interest with our Company which may adversely affect our business and financial
condition,&#8221; &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Our Corporate Structure&#8212;Our VIE Agreements are governed
by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements&#8221; and
&#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;We may be required to obtain permission from Chinese
authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE&#8217;s operations,
and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered
may substantially decline in value and become worthless.&#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>

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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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each of the VIE Agreements is described in detail below:</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; text-align: justify"><i><span style="text-decoration:underline">Exclusive Technical Consultation and Service
Agreement</span></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">Pursuant to the Technical Consultation and Service
Agreement between Shengfeng Logistics and Tianyu, Tianyu provides Shengfeng Logistics with consultation and services in the areas of funding,
human, technology and intellectual properties, including, but not limited to, training and technical support, marketing consultation services,
general advice and assistance relating to management and operation of Shengfeng Logistics&#8217; business, and other consultation and
services which are necessary for Shengfeng Logistics&#8217; business, on an exclusive basis, utilizing its resources. For services rendered
to Shengfeng Logistics by Tianyu under the Technical Consultation and Service Agreement, Tianyu is entitled to collect a service fee,
or the &#8220;Service Fee.&#8221; The Service Fees are composed of the basic annual fee, which is equal to 50% of the after-tax income
of Shengfeng Logistics, and a floating fee, which shall not exceed the after-tax income after deducting paid basic annual fees. The floating
fees shall be determined by both parties based on several factors including the number and the qualifications of the employees used by
Tianyu, the time Tianyu spent on providing the services, the costs being paid for providing the services and the content, the value of
the services provided and the operation revenue of Shengfeng Logistics.&#160;&#160;</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 Technical Consultation and Service Agreement
became effective on January 7, 2021 and will remain effective for 20 years. Such agreement can be extended if Tianyu provides its notice
of extension to Shengfeng Logistics unilaterally prior to the expiration date of this agreement. Shengfeng Logistics shall use its best
efforts to renew its business license and extend its operation term until and unless otherwise instructed by Tianyu.</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 Technical Consultation and Service Agreement
does not prohibit related party transactions. Upon the establishment of the audit committee at the consummation of this offering, the
Company&#8217;s audit committee will be required to review and approve in advance any related party transactions, including transactions
involving Tianyu or Shengfeng Logistics.</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><span style="text-decoration:underline">Equity Pledge Agreement</span></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 Equity Pledge Agreement by and among
Tianyu, Shengfeng Logistics and the Shengfeng Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, the
Shengfeng Logistics Shareholders pledged their shares in Shengfeng Logistics to Tianyu to guarantee the performance of Shengfeng Logistics
and/or Shengfeng Logistics Shareholders&#8217; obligations under the Technical Consultation and Service Agreement. Under the terms of
the Equity Pledge Agreement, in the event that Shengfeng Logistics or the Shengfeng Logistics Shareholders breach their respective contractual
obligations under the Technical Consultation and Service Agreement, Tianyu, as pledgee, will be entitled to certain rights, including,
but not limited to, the right to collect dividends generated by the pledged shares. The Shengfeng Logistics Shareholders also agreed that
upon occurrence of any event of default, as set forth in the Equity Pledge Agreement, Tianyu is entitled to dispose of the pledged shares
in accordance with applicable PRC laws. The Shengfeng Logistics Shareholders further agreed not to assign the pledged shares prior to
the full payment of the service fees.</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 Equity Pledge Agreement is effective until
the full payment of the service fees under the Technical Consultation and Service Agreement and upon termination of Shengfeng Logistics&#8217;
obligations under the Technical Consultation and Service Agreement, or upon the transfer of shares of the Shengfeng Logistics Shareholders.</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 purposes of the Equity Pledge Agreement are
to (1) guarantee the performance of Shengfeng Logistics&#8217; obligations under the Technical Consultation and Service Agreement, (2)
make sure the Shengfeng Logistics Shareholders do not transfer or assign the pledged shares, or create or allow any encumbrance that would
prejudice Tianyu&#8217;s interests without Tianyu&#8217;s prior written consent, and (3) provide Tianyu control over Shengfeng Logistics
under certain circumstances. In the event Shengfeng Logistics breaches its contractual obligations under the Technical Consultation and
Service Agreement, Tianyu will be entitled to dispose of the pledged shares in accordance with relevant PRC laws.</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 the date of this annual report, the share
pledges under the Equity Pledge Agreement have been registered with the competent PRC regulatory authority.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i><span style="text-decoration:underline">Exclusive Call Option Agreement</span></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 Call Option Agreement, the Shengfeng
Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, irrevocably granted Tianyu (or its designee) an exclusive
option to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, part or all of their shares in Shengfeng
Logistics in consideration of the payment of RMB1. The purchase price shall be the lowest price allowed by the laws of China.</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 Call Option Agreement, Tianyu may at
any time under any circumstances, purchase or have its designee purchase, at its discretion, to the extent permitted under PRC law, all
or part of the Shengfeng Logistics Shareholders&#8217; shares in Shengfeng Logistics. The Call Option Agreement, together with the Equity
Pledge Agreement, the Technical Consultation and Service Agreement, the Voting Rights Proxy Agreement, and the Shareholders&#8217; Powers
of Attorney, enable Tianyu to exercise effective control over Shengfeng Logistics.</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 Call Option Agreement remains effective until
all the equity of Shengfeng Logistics is legally transferred under the name of Tianyu and/or other entity or individual designated by
it.</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><span style="text-decoration:underline">Shareholders&#8217; Powers of Attorney</span></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 each of the Powers of Attorney, the Shengfeng
Logistics Shareholders authorized Tianyu to act on their behalf as their exclusive agent and attorney with respect to all rights as shareholders,
including, but not limited to: (a) attending shareholders&#8217; meetings; (b) exercising all the shareholder&#8217;s rights, including
voting, that shareholders are entitled to under the laws of China and the Articles of Association, including, but not limited to, the
sale or transfer or pledge or disposition of shares in part or in whole; and (c) designating and appointing on behalf of shareholders
the legal representative, the executive director, supervisor, the chief executive officer, and other senior management members of Shengfeng
Logistics.</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 Powers of Attorney is irrevocable and continuously
valid from the date of execution of the Powers of Attorney, so long as the Shengfeng Logistics Shareholders are shareholders of Shengfeng
Logistics.</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><span style="text-decoration:underline">Voting Rights Proxy Agreement</span></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">Pursuant to the Voting Rights Proxy Agreements,
the Shengfeng Logistics Shareholders unconditionally and irrevocably entrust Tianyu or Tianyu&#8217;s designee to exercise all their rights
as shareholders of Shengfeng Logistics under the articles of association of Shengfeng Logistics, including without limitation to: (a)
propose to hold a shareholders&#8217; meeting in accordance with the articles of association of Shengfeng Logistics and attend shareholders&#8217;
meeting of Shengfeng Logistics as the agent and attorney of such shareholders; (b) exercise all shareholders&#8217; voting rights with
respect to all matters to be discussed and voted in the shareholders&#8217; meeting of Shengfeng Logistics, including, but not limited
to, the right to designate and appoint the director, the chief executive officer and other senior management members of Shengfeng Logistics;
(c) exercise other voting rights the shareholders are entitled to under the laws of China promulgated from time to time; and (d) exercise
other voting rights the shareholders are entitled to under the articles of associations of Shengfeng Logistics from time to time.</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 Voting Rights Proxy Agreement became effective
on January 7, 2021 and will remain effective for 20 years. Such agreement can be extended if Tianyu provides its notice of extension unilaterally
prior to the expiration date of this agreement. All other parties shall agree with such extension without reserve.</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"><i><span style="text-decoration:underline">Spousal Consent Letters</span></i></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">The spouses of certain of the Shengfeng Logistics
Shareholders agreed, via a spousal consent letter, to the execution of certain of the VIE Agreements, including: (a) the Equity Pledge
Agreement entered into with Tianyu and Shengfeng Logistics; (b) the Call Option Agreement entered into with Tianyu and Shengfeng Logistics;
and (c) the Voting Rights Proxy Agreement entered into with Tianyu and Shengfeng Logistics, and the disposal of the shares of Shengfeng
Logistics held by the Shengfeng Logistics Shareholders and registered in their names.</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 spouses of certain of the Shengfeng Logistics
Shareholders have further undertaken to not to make any assertions in connection with the shares of Shengfeng Logistics which are held
by the Shengfeng Logistics Shareholders. The spouses of certain of the Shengfeng Logistics Shareholders have confirmed in spousal consent
letters that the Shengfeng Logistics Shareholders can perform, amend, or terminate certain VIE Agreements without their authorization
or consent and have agreed to execute all necessary documents and take all necessary actions to ensure appropriate performance of such
VIE Agreements.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times 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"><b><i>Risks
Associated with our Corporate Structure and the VIE Agreements</i></b></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">Because
we do not directly hold equity interests in the VIEs, we are subject to risks and uncertainties of the interpretations and applications
of PRC laws and regulations, including but not limited to, regulatory review of overseas listing of PRC companies through special purpose
vehicles and the validity and enforcement of the VIE Agreements. We are also subject to the risks and uncertainties about any future
actions of the PRC government in this regard that could disallow the VIE structure, which would likely result in a material change in
our operations, and the value of our Class A Ordinary Shares may depreciate significantly or become worthless. The VIE Agreements have
not been tested in a court of law in China as of the date of this annual report. See &#8220;&#8212;D. Risk Factors&#8212;Risks Relating
to Our Corporate Structure,&#8221; &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC,&#8221; and &#8220;&#8212;D.
Risk Factors&#8212;Risks Relating to Our Class A Ordinary Shares and the Trading Market.&#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><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">The VIE Agreements may not be as effective as direct ownership in providing
operational control. For instance, the VIE and the VIE&#8217;s subsidiaries 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.
The VIE and the VIE&#8217;s subsidiaries may not act in the best interests of our Company or may not perform their obligations under these
contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements.
In the event that the VIE or the VIE&#8217;s subsidiaries fail to perform their respective obligations under the VIE Agreements, we may
have to incur substantial costs and expend additional resources to enforce such arrangements. In addition, even if legal actions are taken
to enforce such arrangements, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts
against us or such persons predicated upon the civil liability provisions of the securities laws of the U.S. or any state. See &#8220;&#8212;D.
Risk Factors&#8212;Risks Relating to Our Corporate Structure&#8212;Our VIE Agreements with Shengfeng Logistics and the Shengfeng Logistics
Shareholders may not be effective in providing control over Shengfeng Logistics,&#8221; &#8220;&#8212;D. Risk Factors&#8212;Risks Relating
to Our Corporate Structure&#8212;The Shengfeng Logistics Shareholders have potential conflicts of interest with our Company which may
adversely affect our business and financial condition,&#8221; &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Our Corporate Structure&#8212;Our
VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual
arrangements&#8221; and &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;We may be required to obtain
permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the
VIE&#8217;s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities
currently being offered may substantially decline in value and become worthless.&#8221;</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"><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"><b><i>Risks
Associated with being based in the PRC</i></b><i>&#160;</i></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">We are subject to certain legal and operational risks associated with
having the majority of our operations in China, which could cause the value of our securities to significantly decline or become worthless.
PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and as a result these risks may
result in material changes in the operations of the VIE and the VIE&#8217;s subsidiaries, significant depreciation or a complete loss
of the value of our Class A Ordinary Shares, or a complete hindrance of our ability to offer, or continue to offer, our securities to
investors. Recently, the PRC government adopted a series of regulatory actions and issued statements to regulate business operations in
China with little advance notice, including cracking down on illegal activities in the securities market, adopting new measures to extend
the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. As of the date of this annual report, we,
our PRC subsidiary, and VIE and the VIE&#8217;s subsidiaries have not been involved in any investigations on cybersecurity review initiated
by any PRC regulatory authority, nor has any of them received any inquiry, notice, or sanction. As confirmed by our PRC counsel, AllBright
Law Offices, or &#8220;AllBright,&#8221; we are not subject to cybersecurity review with the Cyberspace Administration of China (the &#8220;CAC&#8221;)
under the Cybersecurity Review Measures that became effective on February 15, 2022, given that: (i) we presently possesses personal information
of less than one (1) million individual users in our business operations, as of the date of this annual report&#894; and (ii) data processed
in our business is less likely to have a bearing on national security, thus it may not be classified as core or important data by the
authorities; we are also not subject to network data security review by the CAC if the Draft Regulations on the Network Data Security
Administration (Draft for Comments) (the &#8220;Security Administration Draft&#8221;) is enacted as proposed, since we currently do not
have over one million users&#8217; personal information and do not collect data that affects or may affect national security and we do
not anticipate that we will be collecting over one million users&#8217; personal information or data that affects or may affect national
security in the foreseeable future, which we understand might otherwise subject us to the Security Administration Draft. See &#8220;&#8212;D.
Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;Our business generates and processes a large quantity of data, and
improper handling of or unauthorized access to such data may adversely affect our business. In light of recent events indicating greater
oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign
exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply
with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition,
results of operations, and the offering..&#8221;</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
2021, the Chinese government has strengthened its anti-monopoly supervision, mainly in three aspects: (i) establishing the National Anti-Monopoly
Bureau; (ii) revising and promulgating anti-monopoly laws and regulations, including: the Anti-Monopoly Law of the PRC (amended on June
24, 2022 and effective on August 1, 2022), the anti-monopoly guidelines for various industries, and the Detailed Rules for the Implementation
of the Fair Competition Review System; and (iii) expanding the anti-monopoly law enforcement targeting Internet companies and large enterprises.
As of the date of this annual report, the Chinese government&#8217;s recent statements and regulatory actions related to anti-monopoly
concerns have not impacted our or the PRC operating entities&#8217; ability to conduct business or our ability to accept foreign investments
or issue our securities to foreign investors because neither we and our subsidiaries, nor the VIE and the VIE&#8217;s subsidiaries engage
in monopolistic behaviors that are subject to these statements or regulatory actions.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 17, 2023, the China Securities Regulatory Commission (the
&#8220;CSRC&#8221;) promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the
&#8220;Trial Measures&#8221;) and five supporting guidelines, which came into effect on March 31, 2023. See &#8220;&#8212;D. Risk Factors&#8212;Risks
Relating to Doing Business in the PRC&#8212;We may be required to obtain permission from Chinese authorities (i) to issue our Class A
Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE&#8217;s operations, and if either or both are required and
we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value
and become worthless..&#8221; Other than the foregoing, as of the date of this annual report, according to AllBright, no relevant PRC
laws or regulations in effect require that we obtain permission from any PRC authorities to issue securities to foreign investors, and
we have not received any inquiry, notice, warning, sanction, or any regulatory objection to our offerings from the CSRC, the CAC, or any
other PRC authorities that have jurisdiction over our operations. Since these statements and regulatory actions are newly published, however,
official guidance and related implementation rules have not been issued. It is highly uncertain what the potential impact such modified
or new laws and regulations will have on the daily business operations of the VIE and the VIE&#8217;s subsidiaries, our ability to accept
foreign investments, and our listing on a U.S. exchange. The Standing Committee of the National People&#8217;s Congress (the &#8220;SCNPC&#8221;)
or PRC regulatory authorities may in the future promulgate additional laws, regulations, or implementing rules that require us, our subsidiaries,
or the VIE and the VIE&#8217;s subsidiaries to obtain regulatory approval from Chinese authorities before listing in the U.S. If we do
not receive or maintain such approval, or inadvertently conclude that such approval is not required, or applicable laws, regulations,
or interpretations change such that we are required to obtain approval in the future, we may be subject to an investigation by competent
regulators, fines or penalties, or an order prohibiting us from conducting an offering, and these risks could result in a material adverse
change in our operations and the value of our Class A Ordinary Shares, significantly limit or completely hinder our ability to offer or
continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.</p><div>

</div><p style="font: 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">In addition, our Class A Ordinary Shares may be prohibited from trading
on a national exchange or over-the-counter under the Holding Foreign Companies Accountable Act (the &#8220;HFCA Act&#8221;) if the Public
Company Accounting Oversight Board (United States) (the &#8220;PCAOB&#8221;) is unable to inspect our auditors for three consecutive years
beginning in 2021. As of the date of the annual report, the Company&#8217;s auditor prior to November 11, 2022, Friedman LLP (&#8220;Friedman&#8221;),
headquartered in New York, New York, has been inspected by the PCAOB on a regular basis, with the last inspection in October 2020. Our
current auditor, Marcum Asia CPAs LLP (&#8220;Marcum Asia&#8221;), has been inspected by the PCAOB on a regular basis, with the last inspection
in 2020. Neither Friedman nor Marcum Asia is subject to the determinations announced by the PCAOB on December 16, 2021. If trading in
our Class A Ordinary Shares is prohibited under the HFCA Act in the future because the PCAOB determines that it cannot inspect or fully
investigate our auditor at such future time, Nasdaq may determine to delist our Class A Ordinary Shares and trading in our Class A Ordinary
Shares could be prohibited. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on
December 29, 2022, legislation entitled &#8220;Consolidated Appropriations Act, 2023&#8221; (the &#8220;Consolidated Appropriations Act&#8221;)
was signed into law by President Biden, which contained, among other things, an identical provision to the Accelerating Holding Foreign
Companies Accountable Act and amended the HFCA Act by requiring the U.S. Securities and Exchange Commission (the &#8220;SEC&#8221;) to
prohibit an issuer&#8217;s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for
two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. On August 26, 2022, the
CSRC, the Ministry of Finance of the PRC (the &#8220;MOF&#8221;), and the PCAOB signed a Statement of Protocol (the &#8220;Protocol&#8221;)
governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access
for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. 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 has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board
determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered
in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct
or otherwise fail to facilitate the PCAOB&#8217;s access in the future, the PCAOB Board will consider the need to issue a new determination.
See &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;Recent joint statement by the SEC and the Public
Company Accounting Oversight Board (United States), or the &#8220;PCAOB,&#8221; rule changes by Nasdaq, and an act 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.&#8221;</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>Permissions
Required from the PRC Authorities for The VIE&#8217;s Operations and the Company&#8217;s Issuance of Securities to Foreign Investors</i></b></span></p><div>

</div><p style="font: 8pt Times New Roman, Times, Serif; margin: 0pt 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: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
are currently not required to obtain permission from any of the PRC authorities to operate and issue our Class A Ordinary Shares to
foreign investors. In addition, neither we, our subsidiaries, the VIE nor the VIE&#8217;s subsidiaries are required to obtain
permission or approval from the PRC authorities including the CSRC and CAC for the VIE&#8217;s operation, nor have we, our
subsidiaries, the VIE nor the VIE&#8217;s subsidiaries received any denial for the VIE&#8217;s operations. However, 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 &#8220;Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,&#8221; or the
&#8220;Opinions,&#8221; which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the
administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese
companies. Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to deal with the
risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and
similar matters. On December 24, 2021, the CSRC promulgated the draft of State Council Administration Rules in respect of Overseas
Securities Offering and Listing of Domestic Enterprise and the draft Recording Administrative Rules of Overseas Securities Offering
and Listing of Domestic Enterprise, or the &#8220;New Overseas Listing Rules,&#8221; for public comments. The New Overseas Listing
Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information
under certain circumstances, such as, a) an issuer making an application for initial public offering and listing in an overseas
market&#894; b) an issuer making an overseas securities offering after having been listed on an overseas market&#894; c) an issuer
offering securities on an overseas market to purchase assets after having been listed overseas&#894; and d) a domestic company
seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of
shares or other means. On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering
and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023.
The Trial Measures and its supporting guidelines, reiterate the basic principles of the New Overseas Listing Rules and impose
substantially the same requirements for the overseas securities offering and listing by domestic enterprises. Pursuant to the Trial
Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing
procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of
initial public offerings or listing application. If a domestic company fails to complete required filing procedures or conceals any
material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative
penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly
in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.</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 the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies
from the CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Overseas
Listing Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers (the &#8220;Existing Issuers&#8221;). Existing Issuers
are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges
(for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their indirect
overseas offering and listing prior 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 to September 30, 2023. Those that complete their indirect 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 indirect overseas offerings
and listings. Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance
and listing, they shall complete the filing procedures with 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">On
February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National
Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities
Offering and Listing, which were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration
of China in 2009, or the Provisions. The revised Provisions were issued under the title the &#8220;Provisions on Strengthening Confidentiality
and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies&#8221;, and came into effect on March 31,
2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect
overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including, but not limited
to, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide
to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents
and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities
according to law, and file with the secrecy administrative department at the same level&#894; and (b) domestic company that plans to,
either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including
securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be
detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As of the date of this annual report, the revised Provisions have come
into effect, and any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to comply with the above confidentiality
and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities
being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected
of committing a crime. See &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulations&#8212;Regulations on
Mergers &amp; Acquisitions and Overseas Listings.&#8221; The Opinions, the Trial Measures, the revised Provisions and any related implementing
rules to be enacted may subject us to compliance requirement in the future. Given the current regulatory environment in the PRC, we are
still subject to the uncertainty of different interpretation and enforcement of the rules and regulations in the PRC adverse to us, which
may take place quickly with little advance notice. Notwithstanding the foregoing, as of the date of this annual report, we are not aware
of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors,
and we have not received any inquiry, notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or
any other Chinese authorities that have jurisdiction over our operations. If we inadvertently conclude that we are not required to obtain
any permission or approval from any of the PRC authorities for the VIE&#8217;s operations and/or our issuance of securities to foreign,
or applicable laws, regulations, or interpretations change and we are required to obtain such permission or approval in the future, we
may be subject to investigations by competent regulators, fines, or penalties, ordered to suspend our relevant operations and rectify
any non-compliance, prohibited from engaging in relevant business or conducting any offering, or incur additional costs to procure such
approval or permission, and there is no guarantee that we can successfully obtain such approval or permission. These risks could result
in a material adverse change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities
to investors, or cause such securities to significantly decline in value or become worthless. See &#8220;&#8212;D. Risk Factors&#8212;Risks
Relating to Our Corporate Structure&#8221; and &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8221;
for more information. In particular, see &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;PRC laws
and regulations governing our current business operations are sometimes vague and uncertain. Uncertainties in the interpretation and enforcement
of PRC laws and regulations could limit the legal protection available to you and us. Any changes in such laws and regulations may impair
our ability to operate profitably,&#8221; &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;The Chinese
government exerts substantial influence over the manner in which we must conduct our business activities. Any actions by the Chinese government,
including any decision to intervene or influence our operations or to exert control over any offering of securities conducted overseas
and/or foreign investment in China-based issuers, may cause us to make material changes to our operation, may limit or completely hinder
our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline
or be worthless&#8221; and &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;We may be required to
obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii)
for the VIE&#8217;s operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the
securities currently being offered may substantially decline in value and become worthless.&#8221;</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Dividend
Distributions, Cash Transfer, and Tax Consequences </b></span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shengfeng
Cayman transfers cash to its wholly-owned Hong Kong subsidiary, Shengfeng HK, by making capital contributions or providing loans, and
the Hong Kong subsidiary transfers cash to the subsidiary in China by making capital contributions or providing loans to it. Because
Shengfeng Cayman consolidates the financial statements of the VIE under the U.S. GAAP in reliance upon contractual arrangements and is
regarded as the primary beneficiary of the VIE for accounting purposes, Shengfeng Cayman&#8217;s subsidiaries are not able to make direct
capital contributions to the VIE and their subsidiaries. However, Shengfeng Cayman&#8217;s subsidiaries may transfer cash to the VIEs
by making loans or payments to the VIEs for inter-group transactions. As of the date of this annual report, no inter-company cash transfers
or transfers of other assets have occurred among Shengfeng Cayman, Shengfeng HK, WFOE, the VIE and the VIE&#8217;s subsidiaries for the
fiscal years ended December 31, 2022 and 2021.&#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 intend to keep any future earnings to finance the expansion of our
business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Our board of directors has complete
discretion on whether to distribute dividends, subject to applicable laws. See &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to this
Offering and the Trading Market&#8212;We do not intend to pay dividends for the foreseeable future.&#8221; As of the date of this annual
report, none of our subsidiaries, nor the consolidated VIE and VIE&#8217;s subsidiaries have made any dividends or distributions to our
Company. Additionally, no dividends or distributions have been made to U.S. investors as of the date of this annual report.</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 Cayman Islands company may pay a dividend on its shares out of either profit or share premium amounts, provided
that in no circumstance may a dividend be paid if such payment would result in the company being unable to pay its debts 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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 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 determine to pay dividends on any of our Class A Ordinary Shares or Class B Ordinary Shares in the future, in the absence of available
profits or share premium, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary, Shengfeng HK.</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Current
PRC regulations permit our PRC subsidiary to pay dividends to Shengfeng HK only out of its accumulated profits, if any, determined in
accordance with Chinese accounting standards and regulations. In addition, each of our Affiliated Entities in China is required to set
aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered
capital. Each of such entities in China is also required to further set aside a portion of its after-tax profits to fund the employee
welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory
reserves can be used, among other things, to increase the registered capital and eliminate future losses in excess of retained earnings
of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.</span></p><div>

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

</div><p style="font: 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 also imposes controls on the conversion of RMB into
foreign currencies and the remittance of currencies out of the PRC. For instance, the Circular on Promoting the Reform of Foreign Exchange
Management and Improving Authenticity and Compliance Review, or &#8220;SAFE Circular 3,&#8221; issued on January 26, 2017, provides that
banks shall, when dealing with dividend remittance transactions from a domestic enterprise to its offshore shareholders of more than $50,000,
review the relevant board resolutions, original tax filing form, and audited financial statements of such domestic enterprise based on
the principal of genuine transaction. Furthermore, if our Affiliated Entities in the PRC incur debt on their own in the future, the instruments
governing the debt may restrict their ability to pay dividends or make other payments. If we or our PRC subsidiary is unable to receive
all of the revenue from the operations of the VIE and the VIE&#8217;s subsidiaries, we may be unable to pay dividends on our Class A Ordinary
Shares or Class B Ordinary Shares, should we desire to do so in the future. See &#8220;&#8212;D. Risk Factors&#8212;Risk Relating to Doing
Business in the PRC&#8212;Governmental control of currency conversion may affect the value of your investment and our payment of dividends.&#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">Cash dividends, if any, on our Class A Ordinary Shares or Class B Ordinary
Shares would be paid in U.S. dollars. Shengfeng HK may be considered a non-resident enterprise for tax purposes, so that any dividends
Tianyu pays to Shengfeng HK may be regarded as China-sourced income and, as a result, may be subject to PRC withholding tax at a rate
of up to 10%. See &#8220;Item 10. Additional Information&#8212;E. Taxation&#8212;People&#8217;s Republic of China Enterprise Taxation
(for the purpose of this paragraph, PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau)<i>.</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: 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 for us to pay dividends to our shareholders, we will rely on payments made from Shengfeng Logistics to Tianyu, pursuant to contractual
arrangements between such parties, and the distribution of such payments to Shengfeng HK as dividends from Tianyu. Certain payments from
Shengfeng Logistics to Tianyu are subject to PRC taxes, including Value-Added Tax. If Shengfeng Logistics or the VIE&#8217;s subsidiaries
incur debt on their own behalf in the future, the instruments governing the debt may restrict any such party&#8217;s ability to pay dividends
or make other distributions to us.</span></p><div>

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</div><p style="font: 12pt 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 Mainland China and the Hong Kong
Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement,
the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC entity. The 5% withholding
tax rate, however, does not automatically apply and certain requirements must be satisfied, including, without limitation, the requirement
that (a) the Hong Kong entity must be the beneficial owner of the relevant dividends; and (b) the Hong Kong entity must directly hold
no less than 25% share ownership in the PRC entity during the 12 consecutive months preceding its receipt of the dividends. In current
practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding
tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that
we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding
tax rate of 5% under the Double Taxation Arrangement with respect to any dividends paid by our PRC subsidiary to its immediate holding
company, Shengfeng HK. As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong
Kong tax authority. Shengfeng HK intends to apply for the tax resident certificate if and when Tianyu plans to declare and pay dividends
to Shengfeng HK. See <i>&#8220;</i>&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;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;&#160;</i>Subject to certain contractual, legal
and regulatory restrictions, cash and capital contributions may be transferred among our Cayman Islands holding company and our subsidiaries.
U.S. investors will not be subject to Cayman Islands, mainland China, or Hong Kong taxation on dividend distributions, and no withholding
will be required on the payment of dividends or distributions to them, while they may be subject to U.S. federal income tax for receiving
dividends, to the extent that the distribution is paid out of our current or accumulated earnings and profits, as determined under U.S.
federal income tax principles. See &#8220;Item 10. Additional Information&#8212;E. Taxation.&#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">We conduct substantially all of our business in China through the VIE,
Shengfeng Logistics, and the VIE&#8217;s subsidiaries. Substantially all of Shengfeng Development Limited&#8217;s revenues, costs and
net income in China are directly or indirectly generated through the VIE and the VIE&#8217;s subsidiaries. We maintain our bank accounts
and balances primarily in licensed banks in Mainland China. In addition, cash transfers from our Cayman Islands holding company are subject
to applicable PRC laws and regulations on loans and direct investment. For details, see &#8220;&#8212;D. Risk Factors&#8212;Risk Relating
to Doing Business in the PRC &#8212; PRC regulation of parent/subsidiary loans and direct investment by offshore holding companies to
PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our
PRC subsidiary and to make loans to Shengfeng Logistics, which could materially and adversely affect our liquidity and our ability to
fund and expand our business.&#8221;</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: 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 transfers from our Cayman Islands holding company are subject
to applicable PRC laws and regulations on loans and direct investment. For example, any loans from Shengfeng Cayman to our wholly owned
subsidiary in the PRC, Tianyu, to finance its activities cannot exceed statutory limits and must be registered with the local counterpart
of SAFE, or filed with SAFE in its information system. Pursuant to relevant PRC regulations, we may provide loans to Tianyu up to the
larger amount of (i) the balance between the registered total investment amount and registered capital of Tianyu, or (ii) twice the amount
of the net assets of Tianyu calculated in accordance with the Circular on Full-Coverage Macro-Prudent Management of Cross-Border Financing,
or the &#8220;PBOC Circular 9.&#8221; Moreover, any medium or long-term loan to be provided by us to Tianyu or other domestic PRC entities
must also be filed and registered with National Development and Reform Commission, or the &#8220;NDRC.&#8221; We may also decide to finance
Tianyu by means of capital contributions. These capital contributions are subject to registration with the State Administration for Market
Regulation or its local branch, reporting of foreign investment information with MOFCOM, or registration with other governmental authorities
in China. Due to the restrictions imposed on loans in foreign currencies extended to PRC domestic companies, we are not likely to make
such loans to Shengfeng Logistics, which is a PRC domestic company. Further, we are not likely to finance the activities of Shengfeng
Logistics and the VIE&#8217;s subsidiaries by means of capital contributions, due to regulatory restrictions relating to foreign investment
in PRC domestic enterprises, which may be engaged in certain businesses, such as&#160;the Foreign Investment Law, which provides that
foreign investors shall not invest in any field with investment prohibited by the negative list for foreign investment access. Additionally,
the PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of
currency out of China. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our
foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders. For a more detailed description
of the restrictions and limitations on our ability to transfer cash or distribute earnings to our Cayman Islands holding company and the
investors, see &#8220;&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;PRC regulation of parent/subsidiary
loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering
to make loans or additional capital contributions to our PRC subsidiary and to make loans to Shengfeng Logistics, which could materially
and adversely affect our liquidity and our ability to fund and expand our business<i>,</i>&#8221; &#8220;&#8212;D. Risk Factors&#8212;
Risks Relating to Doing Business in the PRC&#8212;Governmental control of currency conversion may affect the value of your investment
and our payment of dividends<i>,</i>&#8221; and &#8220;Item 14. Material Modifications to the Rights of Security Holders and Use of Proceed<i>s</i>.&#8221;
In addition, current PRC regulations permit our PRC subsidiary to pay dividends to its shareholders only out of its accumulated profits,
if any, determined in accordance with PRC accounting standards and regulations. For details, see &#8220;&#8212;D. Risk Factors&#8212;Risks
Relating to Doing Business in the PRC&#8212;Our PRC subsidiary is subject to restrictions on paying dividends or making other payments
to us, which may have a material adverse effect on our ability to conduct our business.&#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">If needed, cash can be transferred between our holding company and
subsidiaries through intercompany fund advances, and there are currently no restrictions on transferring funds between our Cayman Islands
holding company and subsidiaries in Hong Kong and mainland China, other than certain restrictions and limitations imposed by the PRC government.
Currently, there are no restrictions or limitations imposed by the Hong Kong government on the transfer of capital within, into and out
of Hong Kong (including funds from Hong Kong to the PRC), except for transfer of funds involving money laundering and criminal activities.
Additionally, under existing PRC foreign exchange regulations, payment of current account items, such as profit distributions and trade
and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the SAFE, by complying
with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in foreign currencies to us without prior
approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures
under PRC foreign exchange regulations, such as the overseas investment registrations by our shareholders or the ultimate shareholders
of our corporate shareholders who are PRC residents. Approval from, or registration with, appropriate government authorities is, however,
required where the RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment
of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies
for current account transactions. Current PRC regulations permit our PRC subsidiary to pay dividends to shareholders only out of its accumulated
profits, if any, determined in accordance with Chinese accounting standards and regulations. See &#8220;&#8212;D. Risk Factors&#8212;Governmental
control of currency conversion may affect the value of your investment and our payment of dividends&#8221; and &#8220;&#8212;D. Risk Factors
&#8212; Risks Relating to Doing Business in the PRC &#8212; Our PRC subsidiary is subject to restrictions on paying dividends or making
other payments to us, which may have a material adverse effect on our ability to conduct our business.&#8221; As of the date of this annual
report, no cash transfers, dividends, or distributions have occurred among our Company, our subsidiaries, and the VIE for the fiscal years
ended December 31, 2022 and 2021. As of the date of this annual report, none of our subsidiaries or the VIE have made any dividends or
distributions to our Company and our Company has not made any dividends or distributions to our shareholders.</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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;&#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>Selected Condensed Consolidating Financial
Schedule of Shengfeng Cayman and Its Subsidiaries and the VIEs</b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 7pt 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; background-color: white">On December 18, 2020, the Company completed a reorganization of entities
under common control of its then existing shareholders, who collectively owned all of the equity of the Company prior to the reorganization.
The Company and Shengfeng HK were each established as the holding companies of Shengfeng WFOE. Through Shengfeng WFOE, the Company entered
into the VIE agreements with the VIE. Pursuant to the VIE agreements, the Company was established as the primary beneficiary of the VIE
and its subsidiaries to transfer the economic benefits from the VIE to the Company and to direct the activities of the VIE.</p><div>

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

</div><p style="font: 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
conduct substantially all of our business in China through the VIE, and the VIE&#8217;s subsidiaries. Substantially all of the Company&#8217;s
revenues, costs and net income in China are directly or indirectly generated through the VIE and the VIE&#8217;s 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: 12pt 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 tables present selected condensed consolidating financial data of Shengfeng Cayman and its subsidiaries, the VIE, and the VIE&#8217;s
subsidiaries for the fiscal years ended December 31, 2022 and 2021, and balance sheet data as of December 31, 2022 and 2021, which have
been derived from our unaudited condensed consolidated interim financial statements for the period and our audited consolidated financial
statements for those years.&#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; 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"></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"><b>&#160;</b></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"><b>As
of and for the year ended December 31, 2022</b></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"><b>&#160;</b></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="white-space: nowrap">&#160;</td><td style="white-space: nowrap; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="white-space: nowrap; border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Shengfeng<br/>
 Development<br/>
 Limited<br/>
 (Shengfeng<br/>
 Cayman)</td><td style="white-space: nowrap; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="white-space: nowrap; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="white-space: nowrap; border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Shengfeng&#160;HK<br/>
&#160;(100%&#160;owned&#160;by<br/>
 Shengfeng<br/>
 Cayman)</td><td style="white-space: nowrap; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="white-space: nowrap; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="white-space: nowrap; border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Fujian&#160;Tianyu<br/>
 Shengfeng<br/>
 Logistics<br/>

    Co.,&#160;Ltd. <br/>
(WFOE)<br/>
 (100%&#160;owned by<br/>
Shengfeng&#160;HK)</td><td style="white-space: nowrap; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="white-space: nowrap; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="white-space: nowrap; border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Shengfeng<br/>
 Logistics&#160;<br/>
Group&#160;Co., Ltd.<br/>
 and&#160;its<br/>
 subsidiaries<br/>
 (VIE)</td><td style="white-space: nowrap; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="white-space: nowrap; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="white-space: nowrap; border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Eliminations</td><td style="white-space: nowrap; padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="white-space: nowrap; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="white-space: nowrap; border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Consolidated<br/>
 Total</td><td style="white-space: nowrap; 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="22" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">$ in thousands</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; text-indent: -9pt; padding-left: 9pt">Condensed Consolidating Schedule &#8211; Balance Sheet</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><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><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>Assets:</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><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><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: 28%; text-align: left; text-indent: -9pt; padding-left: 9pt">Current assets</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">47</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</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: White">
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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">91,695</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">(91,695</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: 9pt">Investments in subsidiaries</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(183,390</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">91,776</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">109,481</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(275,085</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">109,562</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Total assets</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,823</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">245,131</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(275,085</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">245,259</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -9pt; padding-left: 9pt">Liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Current liabilities</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">600</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">130,196</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">130,796</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Payable to WFOE</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(91,695</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: 9pt">Non-current liabilities</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">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">111,072</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(91,695</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">19,377</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Total liabilities</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">600</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">241,268</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(91,695</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">150,173</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: 9pt">Total shareholders&#8217; equity</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,223</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">3,863</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(183,390</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">95,086</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Total liabilities and shareholders&#8217; equity</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,823</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,695</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">245,131</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(275,085</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">245,259</td><td style="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">&#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: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Condensed Consolidating Schedule &#8211; Statement of Operations</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="text-indent: -9pt; padding-left: 9pt">Revenues</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">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">370,325</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">370,325</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -9pt; padding-left: 9pt">Cost of revenues</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">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(328,793</td><td style="text-align: left">)</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">(328,793</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: 9pt">Gross profit</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">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">41,532</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">41,532</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Operating expenses</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(472</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</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">(31,214</td><td style="text-align: left">)</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">(31,686</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: 9pt">Technical service income from VIE and its subsidiaries (1)</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">$</td><td style="text-align: right">8,298</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(8,298</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Technical Service expense in WFOE (1)</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">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(8,298</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">8,298</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <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><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: White">
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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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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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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: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">4,403</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">18,918</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; background-color: White">
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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">-</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>
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  </table><div>


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</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 -->17<!-- 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"><b>As
of and for the year ended December 31, 2021</b></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"><b>&#160;</b></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="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Shengfeng<br/>
 Development<br/>
 Limited<br/>
 (Shengfeng<br/>
 Cayman)</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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 (100%&#160;owned by<br/>
 Shengfeng<br/>
 Cayman)</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">Fujian&#160;Tianyu<br/>
 Shengfeng<br/>
 Logistics <br/>
Co.,&#160;Ltd.<br/>
 (WFOE)<br/>
 (100%&#160;owned&#160;by<br/>
 Shengfeng<br/>
 HK)</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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 Logistics&#160;<br/>
Group Co.,&#160;Ltd. and&#160;its<br/>
 subsidiaries<br/>
 (VIE)</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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 Total</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>
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  <tr style="vertical-align: bottom">
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    <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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    <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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    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(183,186</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">122,511</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(274,779</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">122,511</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">244,209</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(274,779</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">244,209</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Current liabilities</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">125,352</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">125,352</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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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">-</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">91,953</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(91,953</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Non-current liabilities</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">114,552</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(91,953</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">22,959</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">239,904</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(91,953</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">148,311</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Total shareholders&#8217; equity</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">4,305</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(183,186</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">95,898</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">91,953</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">91,593</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">244,209</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(274,779</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">244,209</td><td style="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">&#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: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Condensed Consolidating Schedule &#8211; Statement of Operations</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="text-indent: -9pt; padding-left: 9pt">Revenues</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">346,699</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">346,699</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -9pt; padding-left: 9pt">Cost of revenues</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(305,345</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(305,345</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Gross profit</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">41,345</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">41,345</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Operating expenses</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(32,758</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(32,758</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Technical service income from VIE and its subsidiaries (1)</td><td>&#160;</td>
    <td style="text-align: left">$</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">6,644</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">(6,644</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Technical Service expense in WFOE (1)</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(6,644</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,644</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Income&#160;for equity method investments</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,644</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,644</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(13,288</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net income</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,644</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,644</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,644</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">(13,288</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,644</td><td style="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">&#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: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Condensed Consolidating Schedule &#8211; Statement of Cash Flows</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="text-align: left; text-indent: -9pt; padding-left: 9pt">Net cash provided by operating activities</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">16,592</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">16,592</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(23,869</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(23,869</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net cash used in financing activities</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(2,127</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">538</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">538</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</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">$</td><td style="text-align: right">(8,866</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">27,784</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">27,784</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">18,918</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">18,918</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</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">-</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 22; 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 -->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>
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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"><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"><b>As
of and for the year ended December 31, 2020</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><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="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Shengfeng<br/>
 Development<br/>
 Limited<br/>
 (Shengfeng<br/>
 Cayman)</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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HK (100%<br/> owned by <br/>
Shengfeng<br/>
Cayman)</p></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"><p style="margin-top: 0; margin-bottom: 0">Fujian&#160;Tianyu<br/> Shengfeng<br/> Logistics Co.,</p>
                                                                                <p style="margin-top: 0; margin-bottom: 0">Ltd. (WFOE)</p>
                                                                                <p style="margin-top: 0; margin-bottom: 0">(100% owned <br/>
by Shengfeng<br/>
 HK)</p></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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                                                                                <p style="margin-top: 0; margin-bottom: 0">Group Co.,<br/>
Ltd. and its<br/>
 subsidiaries<br/>
(VIE)</p></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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 Total</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="22" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">$ in thousands</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <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>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#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><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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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,623</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">(82,623</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,623</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(165,246</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">104,039</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(247,869</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">104,039</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">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">232,182</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(247,869</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">232,182</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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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">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">129,016</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">129,016</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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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">-</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">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(82,623</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">101,410</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(82,623</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">18,787</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">230,426</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(82,623</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">147,803</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,756</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(165,246</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">84,379</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,623</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">232,182</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(247,869</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">232,182</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">Condensed Consolidating Schedule &#8211; Statement of Operations</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: White">
    <td style="text-indent: -9pt; padding-left: 9pt">Revenues</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">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">287,464</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">$</td><td style="text-align: right">287,464</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">Cost of revenues</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(251,489</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(251,489</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Gross profit</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">35,975</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">35,975</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Operating expenses</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(29,771</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(29,771</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Technical service income from VIE and its subsidiaries (1)</td><td>&#160;</td>
    <td style="text-align: left">$</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">6,043</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">(6,043</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Technical Service expense in VIE (1)</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(6,043</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,043</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Income&#160;for equity method investments</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,043</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,043</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(12,086</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net income</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,043</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,043</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,043</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">(12,086</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">6,043</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <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><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-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><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: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Condensed Consolidating Schedule &#8211; Statement of Cash Flows</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="text-align: left; text-indent: -9pt; padding-left: 9pt">Net cash provided by operating activities</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">2,332</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">2,332</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net cash used in investing activities</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(7,821</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(7,821</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net cash provided by financing activities</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">13,144</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">13,144</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Effects of exchange rate changes on cash and restricted cash</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,714</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,714</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net increase in cash and restricted cash</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">9,369</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">9,369</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Cash and restricted cash, beginning of year</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">18,415</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">18,415</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Cash and restricted cash, end of year</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">27,784</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">27,784</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Inter-company cash transfers (2)</td><td>&#160;</td>
    <td style="text-align: left">$</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">-</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">-</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></tr>
  </table><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: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>&#160;</b></span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><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">Represents technical service fee,
    including the basic annual fee and the floating fee, which equals to 100% of the VIE&#8217;s income net of tax, pursuant to the Exclusive
    Technical Consultation and Service Agreements.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">There were no inter-company cash transfers among Shengfeng
    Cayman, Shengfeng HK, WFOE, the VIE and the VIE&#8217;s subsidiaries for the years ended December 31, 2022, 2021 and 2020.</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"></p><div>

</div><!-- Field: Page; Sequence: 23; 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 -->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"></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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.
<span style="text-decoration:underline">[Reserved]</span></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;&#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">B.
<span style="text-decoration:underline">Capitalization and Indebtedness</span></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"><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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">C.
<span style="text-decoration:underline">Reasons for the Offer and Use of Proceeds</span></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"><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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">D.
<span style="text-decoration:underline">Risk Factors</span></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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Risks
Relating to Our Corporate Structure</b></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"><i>Our
corporate structure, in particular our contractual arrangements (the &#8220;VIE Agreements&#8221;) with Shengfeng Logistics and the Shengfeng
Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, are subject to significant risks, as set forth in
the following risk factors.</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"><i>&#160;</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"><b><i>If
the PRC government deems that the contractual arrangements in relation to the VIE do not comply with applicable PRC law or PRC regulatory
restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations
change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.</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">We currently operate our business through Shengfeng Logistics, a VIE,
pursuant to the VIE Agreements, and the VIE&#8217;s subsidiaries. As a result of these contractual arrangements, under generally accepted
accounting principles in the United States, or &#8220;U.S. GAAP,&#8221; the assets and liabilities of Shengfeng Logistics are treated
as our assets and liabilities and the results of operations of Shengfeng Logistics are treated in all aspects as if they were the results
of our operations. For a description of these contractual arrangements, see &#8220;Item 3. Key Information&#8212;Our VIE Agreements.&#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: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
the opinion of AllBright, our PRC counsel, based on its understandings of the relevant PRC laws and regulations, (i) the ownership structures
of Shengfeng Logistics in China and Tianyu, our wholly owned subsidiary in China, both currently and immediately after giving effect
to this offering, are not in violation of applicable PRC laws and regulations currently in effect; and (ii) each of the contracts among
Tianyu, Shengfeng Logistics, and the Shengfeng Logistics Shareholders is legal, valid, binding, and enforceable in accordance with its
terms and applicable PRC laws. However, our PRC counsel has also advised us that there are substantial uncertainties regarding the interpretation
and application of current or future PRC laws and regulations. In addition, our VIE Agreements have not been tested in a court of law
in China as of the date of this annual report. Accordingly, the PRC regulatory authorities may ultimately take a view contrary to the
opinion of our PRC counsel in the future. It is uncertain whether any new PRC laws or regulations relating to VIE structures will be
adopted or, if adopted, what they would provide. Furthermore, it is uncertain whether any future actions by the government of China will
significantly affect the enforceability of the VIE 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"></p><div>

</div><!-- Field: Page; Sequence: 24; 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 -->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; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 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 the VIE Agreements for violation of PRC laws, rules and regulations, (ii) the VIE or its
shareholders terminate the contractual arrangements (iii) the VIE or its shareholders fail to perform their respective obligations under
such VIE Agreements, or (iv) if these regulations change or are interpreted differently in the future, our business operations in China
would be materially and adversely affected, and the value of our Class A Ordinary Shares would substantially decrease or even become
worthless. Further, if we fail to renew such VIE Agreements 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: 12pt 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 the VIE or the VIE&#8217;s subsidiaries or all or part of their respective 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 VIE or the VIE&#8217;s subsidiaries undergoes a voluntary or involuntary
liquidation proceeding, its respective 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
revenue.&#160;</span></p><div>

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

</div><p style="font: 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 the VIE Agreements 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 such VIE 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">If
our corporate structure and the VIE Agreements are determined to be illegal or invalid by a PRC court, arbitral tribunal, or regulatory
authorities, we may lose control of the VIE and have to modify such structure to comply with regulatory requirements. However, there
can be no assurance that we can achieve a structural modification without material disruption to our business. Further, if our corporate
structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, or we or Shengfeng
Logistics fails to obtain or maintain any required permits or approvals, the relevant regulatory authorities would have broad discretion
in dealing with such violations, 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: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></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">revoking the
    business or operating licenses or both of Tianyu or Shengfeng Logistics;</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>
  <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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">discontinuing or restricting
    the operations of Tianyu or Shengfeng Logistics;</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><table cellpadding="0" cellspacing="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td>
    <td style="text-align: justify; 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">imposing conditions
    or requirements with which we, Tianyu, or Shengfeng Logistics may not be able to comply;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">requiring us, Tianyu, or
    Shengfeng Logistics to change our corporate structure and contractual arrangements;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">restricting or prohibiting
    our use of the proceeds from our initial public offering to finance our business and operations in China; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><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">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">imposing fines.</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">The
imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business. In addition,
it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of Shengfeng
Logistics in our consolidated financial statements, if the PRC government authorities were to find our legal structure and VIE Agreements
to be in violation of PRC laws and regulations. If the imposition of any of these government actions causes us to lose our right to direct
the activities of Shengfeng Logistics or our right to receive substantially all the economic benefits and residual returns from Shengfeng
Logistics and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able
to consolidate the financial results of Shengfeng Logistics in our consolidated financial statements. Either of these results, or any
other significant penalties that might be imposed on us in this event, would have a material adverse effect on our financial condition
and results of operations.</span></p><div>

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

</div><p style="font: 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,
if the PRC government determines that the contractual arrangements constituting part of our VIE structure do not comply with PRC regulations,
or if these regulations change or are interpreted differently in the future, our Class A Ordinary Shares may decline in value or become
worthless if we are unable to assert our contractual control rights over the assets of the VIE and the VIE&#8217;s subsidiaries that
conduct substantially all of our operations in China.&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, 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: 25; 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 -->21<!-- 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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Our
VIE Agreements with Shengfeng Logistics and the Shengfeng Logistics Shareholders may not be effective in providing control over Shengfeng
Logistics.</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">Shengfeng Development Limited is a holding company incorporated in
the Cayman Islands and it is not a Chinese operating company. As a holding company with no material operations of its own, its operations
have been conducted in China by its subsidiaries and through contractual arrangements, or VIE Agreements, with a VIE, Shengfeng Logistics,
and the VIE&#8217;s subsidiaries. For accounting purposes, we control and receive the economic benefits of the VIE and the VIE&#8217;s
subsidiaries&#8217; business operations through the VIE Agreements, which enable us to consolidate the financial results of the VIE and
the VIE&#8217;s subsidiaries in our consolidated financial statement under U.S. GAAP. Neither we nor our subsidiaries own any equity interests
in the VIE or the VIE&#8217;s subsidiaries. As an investor in this offering, you may be subject to unique risks due to our VIE structure.
The VIE Agreements are designed to provide our wholly owned subsidiary, Tianyu, with the power, rights, and obligations to Shengfeng Logistics,
including control rights and the rights to the assets, property, and revenue of the VIE, as set forth under the VIE Agreements. Our VIE
Agreements have not been tested in a court of law in China as of the date of this annual report. We have evaluated the guidance in FASB
ASC 810 and determined that we are regarded as the primary beneficiary of the VIE, for accounting purposes, as a result of our direct
ownership in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat the VIE and the VIE&#8217;s subsidiaries as our consolidated
entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE&#8217;s subsidiaries in our consolidated financial
statements in accordance with U.S. GAAP.</p><div>

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

</div><p style="font: 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 Class A Ordinary Shares offered in this offering are shares of
our offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE&#8217;s subsidiaries in China, therefore, you
will not directly hold equity interests in the VIE or the VIE&#8217;s subsidiaries, and you may never directly hold equity interests in
the VIE or the VIE&#8217;s subsidiaries through your investment in this offering. For a description of the VIE Agreements, see &#8220;Item
3. Key Information&#8212;Our VIE Agreements.&#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">We
primarily have relied, and expect to continue to rely on the VIE Agreements to control and operate the business of Shengfeng Logistics.
However, the VIE Agreements may not be as effective in providing us with the necessary control over Shengfeng Logistics and its operations.
For example, Shengfeng Logistics and the Shengfeng Logistics 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 direct ownership of Shengfeng Logistics, we would be able to exercise our rights as a shareholder to effect changes in the
board of directors of Shengfeng Logistics, which in turn could implement changes, subject to any applicable fiduciary obligations, at
the management and operational level. However, under the current VIE Agreements, we rely on the performance by Shengfeng Logistics and
the Shengfeng Logistics Shareholders of their respective obligations under the contracts to exercise control over Shengfeng Logistics.
As of the date of this annual report, Shengfeng Logistics is owned by Fujian Yunlian Shengfeng Industry Co., Ltd. as to 54.58%, Yongxu
Liu, our chief executive officer, chairman of the board and president, as to 30.99%, and the other Shengfeng Logistics Shareholders who
collectively own 14.43% of the VIE. Fujian Yunlian Shengfeng Industry Co., Ltd. is 90% owned by Yongxu Liu. As a result, Mr. Liu directly
and indirectly owns 80.12% of Shengfeng Logistics. For more details, please see &#8220;Item 3. Key Information&#8212;Our Corporate Structure.&#8221;
The Shengfeng Logistics Shareholders may not act in the best interests of our Company or may not perform their obligations under these
contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements
with Shengfeng Logistics. Furthermore, failure of the VIE shareholders to perform certain obligations could compel the Company to rely
on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which
may not be effective. If any disputes relating to these contracts remain 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 and the Company may incur substantial costs to enforce the terms of such contracts. Therefore, our VIE Agreements
with Shengfeng Logistics and the Shengfeng Logistics Shareholders may not be as effective in ensuring our control over the relevant portion
of our business operations as direct ownership would be. Additionally, our VIE Agreements have not been tested in a court of law in China,
as of the date of this annual report, and may not be effective in providing control over the VIE. We are, therefore, subject to risks
due to the uncertainty of the interpretation and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure,
including, but not limited to, regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity
and enforcement of the contractual arrangements with the VIE. The VIE Agreements may not be enforceable in China if the PRC government
authorities or courts take a view that such VIE Agreements contravene PRC laws and regulations or are otherwise not enforceable for public
policy reasons. In the event that we are unable to enforce the VIE Agreements, we may not be able to exert effective control over Shengfeng
Logistics, and our ability to conduct our business may be materially and 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"><b><i>Our
VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual
arrangements.</i></b></span></p><div>

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</div><p style="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
our VIE Agreements are governed by PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be
interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Disputes arising from
the VIE Agreements will be resolved through arbitration in the PRC, although these disputes do not include claims arising under the United
States federal securities law and thus do not prevent you from pursuing claims under the United States federal securities law. The legal
environment in the PRC is not as developed as in the United States. As a result, uncertainties in the PRC legal system could further
limit our ability to enforce these contractual arrangements, through arbitration, litigation, and other legal proceedings remain in the
PRC, which could limit our ability to enforce these contractual arrangements and exert effective control over Shengfeng Logistics. Furthermore,
these contracts may not be enforceable in the PRC if the PRC government authorities or courts take a view that such contracts contravene
PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event we are unable to enforce these contractual
arrangements, we may not be able to exert effective control over Shengfeng Logistics, and our ability to conduct our business may be
materially and adversely affected. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would
recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities
laws of the United States or any state.&#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"><b><i>We
may not be able to consolidate the financial results of Shengfeng Logistics or such consolidation could materially and adversely affect
our operating results and financial condition.</i></b></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
business is conducted through Shengfeng Logistics, which currently is considered for accounting purposes as a VIE, and we are considered
the primary beneficiary for accounting purposes, enabling us to consolidate the financial results of Shengfeng Logistics in our consolidated
financial statements. In the event that in the future Shengfeng Logistics would no longer meet the definition of a VIE, or we are deemed
not to be the primary beneficiary for accounting purposes, we would not be able to consolidate line by line its financial results in
our consolidated financial statements for PRC purposes. Furthermore, if in the future an affiliate company becomes a VIE and we become
the primary beneficiary for accounting purposes, we would be required to consolidate that entity&#8217;s financial results in our consolidated
financial statements for PRC purposes. If such entity&#8217;s financial results were negative, this could have a corresponding negative
impact on our operating results for PRC purposes. However, any material variations in the accounting principles, practices, and methods
used in preparing financial statements for PRC purposes from the principles, practices, and methods generally accepted in the United
States and in the SEC accounting regulations must be discussed, quantified, and reconciled in financial statements for the United States
and SEC purposes.</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
VIE Agreements may result in adverse tax consequences.</i></b></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">PRC
laws and regulations emphasize the requirement of an arm&#8217;s length basis for transfer pricing arrangements between related parties.
The laws and regulations also require enterprises with related party transactions to prepare transfer pricing documentation to demonstrate
the basis for determining pricing, the computation methodology, and detailed explanations. Related party arrangements and transactions
may be subject to challenge or tax inspection by the PRC tax authorizes.</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
a tax inspection, if our transfer pricing arrangements between Tianyu and Shengfeng Logistics are judged as tax avoidance, or related
documentation does not meet the requirements, Tianyu and Shengfeng Logistics may be subject to material adverse tax consequences, such
as transfer pricing adjustment. A transfer pricing adjustment could result in a reduction, for PRC tax purpose, of adjustments recorded
by Tianyu, which could adversely affect us by (i) increasing Shengfeng Logistics&#8217; tax liabilities without reducing Tianyu&#8217;s
tax liabilities, which could further result in interest being levied to us for unpaid taxes; or (ii) imposing late payment fees and other
penalties on Shengfeng Logistics for the adjusted but unpaid taxes according to the applicable regulations. In addition, if Tianyu requests
the Shengfeng Logistics Shareholders to transfer their equity interests in Shengfeng Logistics at nominal or no value pursuant to the
VIE Agreements, such transfer may be viewed as a gift and subject Tianyu to PRC income tax. As a result, our financial position could
be materially and adversely affected if Shengfeng Logistics&#8217; tax liabilities increase or if it is required to pay late payment
fees and other penalties.</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
Shengfeng Logistics Shareholders have potential conflicts of interest with our Company which may adversely affect our business and financial
condition.</i></b></span></p><div>

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</div><p style="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Shengfeng Logistics Shareholders may have potential conflicts of interest with us. These shareholders may not act in the best interest
of our Company or may breach, or cause Shengfeng Logistics to breach the existing contractual arrangements we have with them and Shengfeng
Logistics, which would have a material and adverse effect on our ability to effectively control Shengfeng Logistics and receive economic
benefits from it. For example, the shareholders may be able to cause our agreements with Shengfeng Logistics to be performed in a manner
adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot
assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such
conflicts will be resolved in our favor.&#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">Currently,
we do not have any arrangements to address potential conflicts of interest between these shareholders and our Company, except that we
could exercise our purchase option under the exclusive call option agreements with these shareholders to request them to transfer all
of their equity interests in Shengfeng Logistics to a PRC entity or individual designated by us, to the extent permitted by PRC law.
If we cannot resolve any conflicts of interest or disputes between us and those shareholders, we would have to rely on legal proceedings,
which may materially disrupt our business. There is also substantial uncertainty as to the outcome of any such legal proceeding.</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>We
rely on the approvals, certificates, and business licenses held by Shengfeng Logistics and any deterioration of the relationship between
Tianyu and Shengfeng Logistics could materially and adversely affect our overall business operations.</i></b></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 VIE Agreements, our business in the PRC will be undertaken on the basis of the approvals, certificates, business licenses, and
other requisite licenses held by Shengfeng Logistics. There is no assurance that Shengfeng Logistics will be able to renew its licenses
or certificates when their terms expire with substantially similar terms as the ones they currently hold.</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">Further,
our relationship with Shengfeng Logistics is governed by the VIE Agreements, which are intended to provide us, through our indirect ownership
of Tianyu, with effective control over the business operations of Shengfeng Logistics. However, the VIE Agreements may not be effective
in providing control over the applications for and maintenance of the licenses required for our business operations. Shengfeng Logistics
could violate the VIE Agreements, go bankrupt, suffer from difficulties in its business, or otherwise become unable to perform its obligations
under the VIE Agreements and, as a result, our operations, reputation, business, and stock price could be severely harmed.</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
exercise of our option to purchase part or all of the shares in Shengfeng Logistics under the exclusive call option agreement might be
subject to certain limitations and substantial costs.</i></b></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
exclusive call option agreement with Shengfeng Logistics and the Shengfeng Logistics Shareholders gives Tianyu the option to purchase
up to 100% of the shares in Shengfeng Logistics. Such transfer of shares may be subject to approvals from, filings with, or reporting
to competent PRC authorities, such as the Ministry of Commerce of the PRC, or &#8220;MOFCOM,&#8221; the State Administration for Market
Regulation, and/or their local competent branches. In addition, the shares transfer price may be subject to review and tax adjustment
by the relevant tax authorities. The shares transfer price to be received by Shengfeng Logistics under the VIE Agreements may also be
subject to enterprise income tax, and these amounts could be substantial.</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"><b>Risks
Relating to Doing Business in the PRC</b></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>There
are uncertainties under the Foreign Investment Law relating to the status of businesses in China controlled by foreign invested projects
primarily through contractual arrangements, such as our business.</i></b></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">MOFCOM
and the NDRC promulgated the&#160;<i>Special Measures for Foreign Investment Access (2021 version)</i>, or the &#8220;2021 Negative List,&#8221;
on December 27, 2021, which became effective on January 1, 2022.</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 15, 2019, the National People&#8217;s Congress approved the
Foreign Investment Law of the PRC, which came into effect on January 1, 2020, repealing simultaneously the Law of the PRC on Sino-foreign
Equity Joint Ventures, the Law of the PRC on Wholly Foreign-owned Enterprises, and the Law of the PRC on Sino-foreign Cooperative Joint
Ventures, together with their implementation rules and ancillary regulations. Pursuant to the Foreign Investment Law, foreign investment
refers to any investment activity directly or indirectly carried out by foreign natural persons, enterprises, or other organizations,
including investment in new construction project, establishment of foreign funded enterprise or increase of investment, merger and acquisition,
and investment in any other way stipulated under laws, administrative regulations, or provisions of the State Council of the PRC, or the
&#8220;State Council.&#8221; The Foreign Investment Law does not explicitly stipulate the contractual arrangements as a form of foreign
investment. On December 26, 2019, the State Council promulgated the Implementation Regulations on the Foreign Investment Law, which came
into effect on January 1, 2020. However, the Implementation Regulations on the Foreign Investment Law still remain silent on whether contractual
arrangements should be deemed to be a form of foreign investment. Though these regulations do not explicitly classify contractual arrangements
as a form of foreign investment, there is still uncertainty regarding whether the VIE would be identified as a foreign-invested enterprise
in the future. As a result, there is no assurance that foreign investment via contractual arrangements would not be interpreted as a type
of indirect foreign investment activities under the definition in the future.</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
we are deemed to have a non-PRC entity as a controlling shareholder, the provisions regarding control through contractual arrangements
could apply to our VIE Agreements, and as a result Shengfeng Logistics might become subject to restrictions on foreign investment, which
may materially impact the viability of our current and future operations. Specifically, we may be required to modify our corporate structure,
change our current scope of operations, obtain approvals, or face penalties or other additional requirements, compared to entities which
do have PRC controlling shareholders. Uncertainties exist with respect to the interpretation and implementation of the Foreign Investment
Law and how it may impact the viability of our current corporate structure, corporate governance, and business operations.</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">It
is uncertain whether we would be considered as ultimately controlled by Chinese parties. Immediately prior to completion of this offering,
Mr.&#160;Yongxu Liu, our chief executive officer and Chairman and a PRC citizen beneficially and indirectly owns 41,880,000 Class B Ordinary
Shares, representing approximately 91.66% of the voting rights in our Company. It is uncertain, however, if these factors would be sufficient
to give them control over us under the Foreign Investment Law. If future revisions or implementation rules of the Foreign Investment
Law mandate further actions, such as the MOFCOM market entry clearance or certain restructuring of our corporate structure and operations,
there may be substantial uncertainties as to whether we can complete these actions in a timely manner, if at all, and our business and
financial condition may be materially and 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"><b><i>China&#8217;s
economic, political and social conditions, laws and regulations, as well as possible interventions and influences of any government policies
and actions are uncertain and their changes may be quick with little advance notice. Therefore, such uncertainties and changes could
have a material adverse effect on our business, operations and the value of our Class A Ordinary Shares.</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">Our assets and operations are currently located in China. Accordingly,
our business, financial condition, results of operations, and prospects may be influenced to a significant degree by political, economic,
and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many respects,
including the level of government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources.
Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, including the
reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial
portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant
role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over
China&#8217;s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary
policy, and providing preferential treatment to particular industries or companies. In addition, although the PRC includes also Hong Kong
Special Administrative Region and Macau Special Administrative Region, they are subject to different legal systems from mainland China.
For example, according to Basic Law of Hong Kong Special Administrative Region of the PRC (the &#8220;Basic Law&#8221;), the Hong Kong
Special Administrative Region is an inalienable part of the People&#8217;s Republic of China. The National People&#8217;s Congress (the
&#8220;NPC&#8221;) of the PRC authorizes the Hong Kong Special Administrative Region to exercise a high degree of autonomy and to enjoy
executive, legislative and independent judicial power, including that of final adjudication, in accordance with the provisions of the
Basic Law. The laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and
customary law shall be maintained, except for any that contravene the Basic Law and subject to any amendment by the legislature of the
Hong Kong Special Administrative Region. PRC national laws shall not be applied in the Hong Kong Special Administrative Region except
for those listed in the Basic Law. The Standing Committee of the National People&#8217;s Congress may add to or delete from the list of
laws in Annex III of Basic Law after consulting its Committee for the Basic Law of the Hong Kong Special Administrative Region and the
government of the Hong Kong Special Administrative Region. Laws listed in Annex III to this Law shall be confined to those relating to
national defense and foreign affairs as well as other matters outside the limits of the autonomy of the Hong Kong Special Administrative
Region as specified by the Basic Law. In the event that the Standing Committee of the National People&#8217;s Congress decides to declare
a state of war or, by reason of turmoil within the Hong Kong Special Administrative Region which endangers national unity or security
and is beyond the control of the government of the Region, decides that the Hong Kong Special Administrative Region is in a state of emergency,
the Central People&#8217;s Government may issue an order applying the relevant national laws in the Hong Kong Special Administrative Region.
As of the date of this annual report, the PRC national laws applicable to the Hong Kong Special Administrative Region include the following:
Resolution on the Capital, Calendar, National Anthem and National Flag of the People&#8217;s Republic of China, Resolution on the National
Day of the People&#8217;s Republic of China, Declaration of the Government of the People&#8217;s Republic of China on the Territorial
Sea, Nationality Law of the People&#8217;s Republic of China, Regulations of the People&#8217;s Republic of China Concerning Diplomatic
Privileges and Immunities, Law of the People&#8217;s Republic of China on the National Flag, Regulations of the People&#8217;s Republic
of China concerning Consular Privileges and Immunities, Law of the People&#8217;s Republic of China on the National Emblem, Law of the
People&#8217;s Republic of China on the Territorial Sea and the Contiguous Zone, Law of the People&#8217;s Republic of China on the Garrisoning
of the Hong Kong Special Administrative Region, Law of the People&#8217;s Republic of China on the Exclusive Economic Zone and the Continental
Shelf, Law of the People&#8217;s Republic of China on the National Anthem, and Law of the People&#8217;s Republic of China on Safeguarding
National Security in the Hong Kong Special Administrative Region. However, due to the uncertainty of the PRC legal system and changes
in laws, regulations or policies, including how those laws, regulations or policies would be interpreted or implemented, and the national
laws applicable in Hong Kong, the Basic Law might be revised in the future, and as a consequence, we may face certain legal and operational
risks associated with operating in the PRC, which may also apply to our operations in Hong Kong, including those of Shengfeng HK. However,
as of the date of this annual report, we, believe that since the list of laws in Annex III of Basic Law is currently limited to national
defense and foreign affairs, PRC national laws listed in the Basic Law does not apply to our operations in Hong Kong. Moreover, our HK
subsidiary, Shengfeng HK, does not have any business operations in Hong Kong. Nevertheless, Shengfeng HK, as an entity incorporated under
law of Hong Kong, shall be subject to Hong Kong law in 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">While
the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various
sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the Chinese government, or in the laws
and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely
affect our business and operating results, reduce demand for our products, and weaken our competitive position. The Chinese government
has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit
the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may
be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese
government has implemented certain measures, including interest rate adjustments, to control the pace of economic growth. These measures
may cause decreased economic activities in China, which may adversely affect our business and operating results.</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&#8217;s
economic, political and social conditions, laws and regulations, as well as possible interventions and influences of any government policies
and actions are uncertain and could have a material adverse effect on our business, operations and the value of our Class A Ordinary
Shares. Furthermore, the PRC government authorities may strengthen oversight and control over offerings that are conducted overseas and/or
foreign investment in China-based issuers like us. Such actions taken by the PRC government authorities may intervene or&#160;influence&#160;our
operations at any time, which are beyond our control. Any such action may adversely affect our operations and significantly limit or
completely hinder our ability to offer or continue to offer our Class A Ordinary Shares to investors and reduce the value of such securities.</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,
our Company, the VIE and the VIE&#8217;s subsidiaries, and our investors may face uncertainty about future actions by the government
of China that could significantly affect the VIE and the VIE&#8217;s subsidiaries&#8217; financial performance and operations, including
the enforceability of the contractual arrangements. As of the date of this annual report, neither our Company nor the VIE has received
or was denied permission from Chinese authorities to list on U.S. exchanges. However, there is no guarantee that our Company or VIE will
receive or not be denied permission from Chinese authorities to list on U.S. exchanges 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"><b><i>PRC
laws and regulations governing our current business operations are sometimes vague and uncertain. Uncertainties in the interpretation
and enforcement of PRC laws and regulations could limit the legal protection available to you and us. Any changes in such laws and regulations
may impair our ability to operate profitably.</i></b></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">There
are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to,
the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances.
The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement
may involve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations, including amendments
to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently
adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect
existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing
or new PRC laws or regulations may have on 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">The
PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents.
In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in
general. The legislation over the past three decades has significantly increased the protection afforded to various forms of foreign
or private-sector investment in China. Our PRC Affiliated Entities are subject to various PRC laws and regulations generally applicable
to companies in China. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, however,
the interpretations of many laws, regulations, and rules are not always uniform and enforcement of these laws, regulations, and rules
involve uncertainties.</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. Since PRC administrative and
court authorities have significant discretion in interpreting and implementing statutory and contractual terms, however, it may be more
difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy in the PRC legal
system than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules
(some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of
our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainties over the scope
and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes
in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.</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
example, 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 &#8220;Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,&#8221; 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, and cybersecurity and data privacy protection requirements and similar matters. On December 24, 2021, the CSRC promulgated
the New Overseas Listing Rules for public comments. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings
with relevant governmental authorities and report related information under certain circumstances, such as, a) an issuer making an application
for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been
listed on an overseas market; c) an issuer offering securities on an overseas market to purchase assets after having been listed overseas;
and d) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share
swap, transfer of shares or other means. On February 17, 2023, the CSRC promulgated the Trial Measures, and five supporting guidelines,
which came into effect on March 31, 2023. The Trial Measures and its supporting guidelines, reiterate the basic principles of the New
Overseas Listing Rules and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises.
Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall
complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission
of initial public offerings or listing application. If a domestic company fails to complete the required filing procedures or conceals
any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties,
such as orders to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other
directly liable persons may also be subject to administrative penalties, such as warnings and fines.</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 the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies
from the CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Overseas
Listing Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers (the &#8220;Existing Issuers&#8221;). Existing Issuers
are not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges
(for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their indirect
overseas offering and listing prior 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 to September 30, 2023. Those that complete their indirect 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 indirect overseas offerings
and listings. Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance
and listing, they shall complete the filing procedures with 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">On February 24, 2023, the CSRC, together with
Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised
the Provisions, which were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration
of China in 2009. The revised Provisions were issued under the title the &#8220;Provisions on Strengthening Confidentiality and Archives
Administration of Overseas Securities Offering and Listing by Domestic Companies&#8221;, and came into effect on March 31, 2023 together
with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas
offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including, but not limited to, (a)
a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant
individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials
that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according
to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly
or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities
companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental
to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As
of the date of this annual report, the revised Provisions came into effect and we are not aware of any PRC laws or regulations in effect
requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry,
notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities that have
jurisdiction over our operations. However, any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to comply with
the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may
result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated
for criminal liability if suspected of committing a crime. See &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulations&#8212;Regulations
on Mergers &amp; Acquisitions and Overseas Listings<i>.</i>&#8221; The Opinions, the Trial Measures, the revised Provisions and any related
implementing rules to be enacted may subject us to compliance requirement in the future. Therefore, we cannot assure you that we will
remain fully compliant with all new regulatory requirements of the Opinions, the Trial Measures or any future implementation rules on
a timely basis, or at all.</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">Uncertainties
regarding the enforcement of laws and the fact that rules and regulations in China can change quickly with little advance notice, along
with the risk that the&#160;Chinese&#160;government&#160;may&#160;intervene&#160;or&#160;influence&#160;our operations at any time, or
may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers could result in a material
change in our operations, financial performance and/or the value of our Class A Ordinary Shares or impair our ability to raise money.</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>You
may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against
us or our management named in the annual report based on foreign laws. It may also be difficult for you or overseas regulators to conduct
investigations or collect evidence within China.</i></b></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 company incorporated under the laws of the Cayman Islands, and we conduct our operations in China and our assets are located in
China. In addition, all our senior executive officers reside within China for a significant portion of the time and are PRC nationals.
As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. In addition, there
is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against
us or such persons predicated upon the civil liability provisions of the securities laws of the U.S. or any state.</span></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The recognition and enforcement of foreign judgments
are provided for under the <i>PRC Civil Procedures Law</i>. PRC courts may recognize and enforce foreign judgments in accordance with
the requirements of the <i>PRC Civil Procedures Law</i> based either on treaties between China and the country where the judgment is made
or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the
U.S. that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the <i>PRC Civil Procedures
Law</i>, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment
violates the basic principles of PRC laws or national sovereignty, security, or public interest. As a result, it is uncertain whether
and on what basis a PRC court would enforce a judgment rendered by a court in the U.S.</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">It
may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China. For example, in China,
there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside
China or otherwise with respect to foreign entities. Although the authorities in China may establish a regulatory cooperation mechanism
with its counterparts of another country or region to monitor and oversee cross-border securities activities, such regulatory cooperation
with the securities regulatory authorities in the United States may not be efficient in the absence of a practical cooperation mechanism.
Furthermore, according to Article 177 of the PRC Securities Law, or &#8220;Article 177,&#8221; which became effective in March 2020,
no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within the territory
of the PRC. Article 177 further provides that Chinese entities and individuals are not allowed to provide documents or materials related
to securities business activities to foreign agencies without prior consent from the securities regulatory authority of the State Council
and the competent departments of the State Council. While detailed interpretation of or implementing rules under Article 177 have yet
to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities
within China may further increase difficulties faced by you in protecting your interests.</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>Recent
joint statement by the SEC and the Public Company Accounting Oversight Board (United States), or the &#8220;PCAOB,&#8221; rule changes
by Nasdaq, and an act 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.</i></b></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
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.</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 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply a minimum offering size requirement for companies primarily operating
in a &#8220;Restrictive Market,&#8221; (ii) adopt a new requirement relating to the qualification of management or the board of directors
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&#8217;s auditor. On October 4, 2021, the SEC approved Nasdaq&#8217;s revised proposal for the rule changes.</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 20, 2020, the U.S. Senate passed the HFCA Act, requiring a foreign company to certify it is not owned or manipulated by a foreign
government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection.
If the PCAOB is unable to inspect the company&#8217;s auditor for three consecutive years, the issuer&#8217;s securities are prohibited
to trade on a national exchange or in the over-the-counter trading market in the United States.&#160;On December 2, 2020, the U.S. House
of Representatives approved the HFCA Act. On December 18, 2020, the HFCA Act was signed into 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">On
June 4, 2020, the U.S. President issued a memorandum ordering the President&#8217;s working group on financial markets, or the &#8220;PWG,&#8221;
to submit a report to the President within 60 days of the date of the memorandum that should include recommendations for actions that
can be taken by the executive branch and by the SEC or PCAOB to enforce U.S. regulatory requirements on Chinese companies listed on U.S.
stock exchanges and their audit firms.&#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">On
August 6, 2020, the PWG released a report recommending that the SEC take steps to implement the five recommendations outlined in the
report. In particular, to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfill its statutory
mandate, or &#8220;NCJs&#8221;, the PWG recommends enhanced listing standards on U.S. stock exchanges. This would require, as a condition
to initial and continued exchange listing, PCAOB access to work papers of the principal audit firm for the audit of the listed company.
Companies unable to satisfy this standard as a result of governmental restrictions on access to audit work papers and practices in NCJs
may satisfy this standard by providing a co-audit from an audit firm with comparable resources and experience where the PCAOB determines
it has sufficient access to audit work papers and practices to conduct an appropriate inspection of the co-audit firm. The report permits
the new listing standards to provide for a transition period until January 1, 2022 for listed companies, but would apply immediately
to new listings once the necessary rulemakings and/or standard-setting are effective.&#160;&#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">On
August 10, 2020, the SEC announced that SEC Chairman had directed the SEC staff to prepare proposals in response to the PWG Report, and
that the SEC was soliciting public comments and information with respect to these proposals. If we are listed on Nasdaq and fail to meet
the new listing standards before the deadline specified thereunder due to factors beyond our control, we could face possible de-listing
from the Nasdaq Capital Market, deregistration from the SEC, and/or other risks, which may materially and adversely affect, or effectively
terminate, the trading of our Ordinary Shares in the United States.&#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
HFCA Act 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&#8217;s public accounting
firm for three consecutive years, the issuer&#8217;s securities are banned from trade on a national exchange or in the over-the-counter
trading market in the United States 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
March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure
requirements of the HFCA Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual
report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign
jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority
in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required
to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction,
and will also require disclosure in the registrant&#8217;s annual report regarding the audit arrangements of, and governmental influence
on, such a registrant.</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 22, 2021, the U.S. Senate passed the&#160;Accelerating&#160;HFCA&#160;Act, which, if passed by the U.S. House of Representatives
and signed into law, would decrease the number of non-inspection years for foreign companies to comply with PCAOB audits from three to
two, 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
September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining,
as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms
located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.</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 5, 2021, the SEC approved the PCAOB&#8217;s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable
Act. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether it is unable to
inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by
one or more authorities in that jurisdiction.</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
December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act,
which became effective on January 10, 2022. The rules apply to registrants that 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 PCAOB is unable to inspect
or investigate completely because of a position taken by an authority in foreign jurisdictions.</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
December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered
public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by mainland China and Hong Kong authorities
in those jurisdictions. The PCAOB has made such designations as mandated under the HFCA Act. Pursuant to each annual determination by
the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such suspensions
in the future. As of the date of this annual report, our auditor is not subject to the determinations announced by the PCAOB on December
16, 2021. On August 26, 2022, the PCAOB signed the Statement of Protocol (SOP) Agreements with the China Securities Regulatory Commission
(CSRC) and China&#8217;s Ministry of Finance. The SOP, together with two protocol agreements governing inspections and investigations
(together, the &#8220;SOP Agreements&#8221;), establish a specific, accountable framework to make possible complete inspections and investigations
by the PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law. On December 15, 2022, the PCAOB Board
determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered
in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct
or otherwise fail to facilitate the PCAOB&#8217;s access in the future, the PCAOB Board will consider the need to issue a new determination.</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
December 23, 2022, the Accelerating HFCA Act was signed into law, which amended the HFCA Act by requiring the SEC to prohibit an issuer&#8217;s
securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead
of three. On December 29, 2022, the Consolidated Appropriations Act was signed into law by President Biden. The Consolidated Appropriations
Act contained, among other things, an identical provision to Accelerating HFCA Act, which reduces the number of consecutive non-inspection
years required for triggering the prohibitions under the HFCA Act from three years to two.</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
SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection 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">Our auditor prior&#160;to November 11, 2022, Friedman LLP, or Friedman,
and current auditor, Marcum Asia CPAs LLP (&#8220;Marcum Asia&#8221;), the independent registered public accounting firms that issue the
audit reports included elsewhere in this annual report, as auditors of companies that are traded publicly in the United States and firms
registered with the PCAOB, have been subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to
assess its compliance with the applicable professional standards. Both Friedman and Marcum Asia have been inspected by the PCAOB on a
regular basis, with the last inspection in 2020. Neither Friedman nor Marcum Asia is subject to the determinations announced by the PCAOB
on December 16, 2021. The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting
firms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections
in early 2023 and beyond. Each year, the PCAOB will determine whether it can inspect and investigate completely accounting firms headquartered
in mainland China and Hong Kong. Furthermore, the Accelerating HFCA Act, which requires that the PCAOB be permitted to inspect the issuer&#8217;s
public accounting firm within two years, may result in the delisting of our Company in the future if the PCAOB is unable to inspect our
accounting firm at such future time. Our securities may be prohibited from trading if our auditor cannot be fully inspected. While the
Company&#8217;s auditor is based in the U.S. and is registered with PCAOB and subject to PCAOB inspection, in the event it is later determined
that the PCAOB is unable to inspect or investigate completely the Company&#8217;s auditor because of a position taken by an authority
in a foreign jurisdiction, then such inability could cause trading in the Company&#8217;s securities to be prohibited under the Accelerating
HFCA Act, and ultimately result in a determination by a securities exchange to delist the Company&#8217;s securities. If trading in our
Class A Ordinary Shares is prohibited under the Accelerating HFCA Act in the future because the PCAOB determines that it cannot inspect
or fully investigate our auditor at such future time, Nasdaq may determine to delist our Class A Ordinary Shares. A termination in the
trading of our securities or any restriction on the trading in our securities would be expected to have a negative impact on the Company
as well as on the value of our securities.</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">It
remains unclear what the SEC&#8217;s implementation process related to the above rules will entail or what further actions the SEC, the
PCAOB or Nasdaq will take to address these issues and what impact those actions will have on the companies that have significant operations
in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market).
In addition, the above amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S.
regulatory access to audit information could create some uncertainty for investors, the market price of our Class A Ordinary Shares could
be adversely affected, and we could be delisted if we and our auditor are unable to meet the PCAOB inspection requirement or being required
to engage a new audit firm, which would require significant expense and management 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">Furthermore,
new laws and regulations or changes in laws and regulations in both the United States and China could affect our ability to list our
securities on the Nasdaq Capital Market, which could materially impair the market for and the market price of our securities.</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
custodians or authorized users of our controlling&#160;non-tangible&#160;assets, including chops and seals, may fail to fulfill their
responsibilities, or misappropriate or misuse these assets.</i></b>&#160;</span></p><div>

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

</div><p style="font: 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 usually 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.&#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">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 the application through our office
automation system and the application 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 the VIE. If any employee obtains, misuses or misappropriates
our chops and seals or other controlling&#160;non-tangible&#160;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.&#160;</span></p><div>

</div><p style="font: 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>&#160;</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><i>Increases
in labor costs in the PRC may adversely affect our business and our profitability.</i></b>&#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">China&#8217;s
economy has experienced increases in labor costs in recent years. China&#8217;s overall economy and the average wage in China are expected
to continue to grow. The average wage level for our employees has also increased in recent years. We expect that our labor costs, including
wages and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to our clients by increasing
prices for our services, our profitability and results of operations may be materially and adversely affected.&#160;</span></p><div>

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

</div><p style="font: 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 been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying
various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment
insurance, and maternity insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract
Law, or the &#8220;Labor Contract Law,&#8221; that became effective in January 2008 and its amendments that became effective in July
2013 and its implementing rules that became effective in September 2008, employers are subject to stricter requirements in terms of signing
labor contracts, minimum wages, paying remuneration, determining the term of employees&#8217; probation, and unilaterally terminating
labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices,
the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner,
which could adversely affect our business 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
are currently not in full compliance with all PRC labor-related laws and regulations in certain respects. As of the date of this annual
report, we have not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations. We
believe that the estimated unpaid contribution amounts the Company was required to reserve in respect of the social insurance and housing
fund contribution is not material. The Company has taken measures to comply with related laws and regulations. Such measures include,
but are not limited to, outsourcing our labor-related matters and making payments for unpaid social insurance and housing fund contributions,
which may increase the costs of our business and operations. We are endeavoring to have sufficient funds to address our social insurance
and housing fund contribution requirements by the end of next year. However, our estimate of unpaid contributions may not be accurate
or sufficient and may not be accumulated by such time. Additionally, as of the date of this annual report, <span style="background-color: white">our
number of dispatched workers has exceeded the 10% limitation required by the <i>Interim Provisions on Labor Dispatching</i></span>. The
Company has taken measures to comply with related laws and regulations. Such measures include, but are not limited to, decreasing the
number of dispatched workers and increasing the number of employees and outsourced workers, which is expected to increase the costs of
our business and operations. We are endeavoring to lower the rate of dispatched workers among our total employees and dispatched workers
in order to comply with related laws and regulations by the end of next year. We believe that the estimated amount of costs in respect
of taking such measures is not material. However, our estimate of costs may not be accurate or sufficient and may not be accumulated
by such time. Other than the social insurance and housing fund contributions and the estimate of costs to reduce the number of dispatched
workers, we are currently not able to quantify the contribution amounts that we will need to make for us to be in full compliance with
all PRC labor-related laws and regulations. To the best of our knowledge, as of the date of this annual report, based on all the information
available to us, we do not believe that the estimated amount of contributions that we will need to make in order to be in full compliance
with all PRC labor-related laws and regulations is material for our business operations. We will continue investigating and monitoring
our compliance status in connection with PRC labor-related laws and regulations in order to promptly address any shortfall going forward.</span></p><div>

</div><p style="font: 10pt Times New Roman, 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">The
interpretation and implementation of labor-related laws and regulations are still constantly evolving which may be further amended from
time to time. Due to the constant evolution of the labor-related laws, we cannot assure you that our current employment practices will
not violate any future labor-related laws and regulations in China, which may subject us to labor disputes or government investigations.
If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our
employees, and our business, financial condition and results of operations could 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"><b><i>Our
PRC Affiliated Entities have not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations,
which may subject us to penalties.</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">According to the <i>PRC Social Insurance Law </i>and
the <i>Administrative Regulations on the Housing Funds</i>, companies operating in China are required to participate in pension insurance,
work-related injury insurance, medical insurance, unemployment insurance, maternity insurance (collectively known as &#8220;social insurance&#8221;),
and housing funds plans, and the employers must pay all or a portion of the social insurance premiums and housing funds for their employees.
For more details, please see &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulations&#8212;Regulations
Related to Employment and Social Welfare&#8212;Social Insurance and Housing Fund.&#8221; The requirement of social insurance and housing
fund has not been implemented consistently by the local governments in China given the different levels of economic development in different
locations.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 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
PRC Affiliated Entities have not made adequate social insurance and housing fund contributions for all employees. We may be required
to make up the social insurance contributions as well as to pay late fees at the rate of 0.05% per day of the outstanding amount from
the due date. If we fail to make up for the shortfalls within the prescribed time limit, the relevant administrative authorities will
impose a fine of one (1) to three (3) times the outstanding amount upon us. With respect to housing fund plans, we may be required to
pay and deposit housing funds in full and on time within the prescribed time limit. If we fail to do so, relevant authorities could file
applications to competent courts for compulsory enforcement of payment and deposit. Accordingly, if the relevant PRC authorities determine
that we shall make supplemental social insurance and housing fund contributions or that we are subject to fines and legal sanctions in
relation to our failure to make social insurance and housing fund contributions in full for our employees, our business, financial condition,
and results of operations may be adversely affected. However, as of the date of this annual report, the relevant local authorities confirmed
in writing that no records of violation were found on our PRC Entities for social insurance and/or housing fund contribution obligations.
Further, these PRC Entities have never received any demand or order from the competent 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"><b><i>Our
number of dispatched workers has exceeded the 10% limitation required by PRC regulations, which may subject us to penalties.</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="background-color: white">The Labor
Contract Law provides that enterprises accepting labor dispatch services shall strictly control the number of dispatched workers and the
proportion of dispatched workers shall not exceed the percentage prescribed by competent labor administrative departments. The Interim
Provisions on Labor Dispatching, issued by the Ministry of Human Resources and Social Security of the People&#8217;s Republic of China
on January 24, 2014, which came into effect on March 1, 2014, require the number of dispatched workers not to exceed 10% of the total
number of 1) the employees that are employed directly by an enterprise and 2) the dispatched workers. </span>For more details, please
see &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulations&#8212;The Labor Law and the Labor Contract
Law&#8221; and <i>&#8220;</i>Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulations&#8212;The Interim Provisions
on Labor Dispatching<i>.&#8221;</i></p><div>
</div><p style="font: 10pt Times New Roman, 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; background-color: white">The
term &#8220;labor dispatch&#8221; refers to an atypical employment&#160;relationship pursuant to which the dispatch work agencies enter
into employment agreements with the workers, and then send such dispatched workers to the enterprises which have entered into labor dispatch
service agreements with the dispatch work agencies to provide services. In such circumstances, dispatched workers are under the supervision
and management of the enterprises they work in.</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; background-color: white">As
of the date of this annual report, the number of our dispatched workers has exceeded 10% of the total number of the employees directly
employed by the Company and the dispatched workers. According to the Labor Contract Law, any labor dispatching unit or employer who violates
the provisions of such law in respect of labor dispatching will be ordered by the labor administrative authorities to take corrective
action within a stipulated period. If such correction is not made within the stipulated period, a fine ranging from RMB5,000 (approximate
USD720) to RMB10,000 (approximate USD1,400) per person will be imposed to such labor dispatching unit or employer, and the labor dispatching
business permit of such labor dispatching unit will be revoked. </span><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
Company has taken measures to comply with related laws and regulations. Such measures include, but are not limited to, decreasing the
number of dispatched workers and increasing the number of employees and outsourced workers, which is expected to increase the costs of
our business and operations. We are endeavoring to lower the rate of dispatched workers among our total employees and dispatched workers
in order to comply with related laws and regulations by the end of next year. We may be required by the competent authorities to decrease
our number of dispatched workers <span style="background-color: white">within a stipulated period earlier than the end of next year.
</span>If we fail to correct such shortfall within the prescribed time limit, the relevant administrative authorities may impose a fine
<span style="background-color: white">ranging from RMB5,000 (approximate USD720) to RMB10,000 (approximate USD1,400) per person</span>
upon us. Accordingly, if the relevant PRC authorities determine that we are subject to fines in relation to our failure to decrease the
number of our dispatched workers within the prescribed time limit, our business, financial condition, and results of operations may be
adversely affected. However, as of the date of this annual report, neither the Company, nor our PRC Affiliated Entities have received
any demand or order from the competent authorities.</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>PRC
regulations relating to offshore investment activities by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary
to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary&#8217;s ability to increase
its registered capital or distribute profits to us, or may otherwise adversely affect us.</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">On
July 4, 2014, SAFE issued the <i>Circular on Issues Concerning Foreign Exchange Control over the Overseas Investment and Financing and
Round-trip Investment by Domestic Residents via Special Purpose Vehicles</i>, or &#8220;SAFE Circular 37.&#8221; According to SAFE Circular
37, prior registration with the local SAFE branch is required for PRC residents, (including PRC individuals and PRC corporate entities
as well as foreign individuals that are deemed to be PRC residents for foreign exchange administration purpose), in connection with their
direct or indirect contribution of domestic assets or interests to offshore special purpose vehicles, or &#8220;SPVs.&#8221; SAFE Circular
37 further requires amendments to the SAFE registrations in the event of any changes with respect to the basic information of the offshore
SPV, such as change of a PRC individual shareholder, name and operation term, or any significant changes with respect to the offshore
SPV, such as an increase or decrease of capital contribution, share transfer or exchange, or mergers or divisions. SAFE Circular 37 is
applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. In
February 2015, SAFE promulgated a <i>Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment</i>,
or &#8220;SAFE Notice 13,&#8221; effective in June 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound
foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with
qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision
of SAFE.</span></p><div>

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</div><p style="margin: 0"></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition to SAFE Circular 37 and SAFE Notice
13, our ability to conduct foreign exchange activities in China may be subject to the interpretation and enforcement of the <i>Implementation
Rules of the Administrative Measures for Individual Foreign Exchange </i>promulgated by SAFE in January 2007 (as amended and supplemented,
the &#8220;Individual Foreign Exchange Rules&#8221;). Under the Individual Foreign Exchange Rules, any PRC individual seeking to make
a direct investment overseas or engage in the issuance or trading of negotiable securities or derivatives overseas must make the appropriate
registrations in accordance with SAFE provisions, the failure of which may subject such PRC individual to warnings, fines, or other liabilities.</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 the date of this annual report, Mr. Yongxu
Liu has completed the initial registrations with the qualified banks, as required by the regulations. We may not be informed of the identities
of all the PRC residents holding direct or indirect interest in our Company, however, and we have no control over any of our future beneficial
owners. Thus, we cannot provide any assurance that our current or future PRC resident beneficial owners will comply with our request to
make or obtain any applicable registrations or continuously comply with all registration procedures set forth in these SAFE regulations.
Such failure or inability of our PRC residents beneficial owners to comply with these SAFE regulations may subject us or our PRC resident
beneficial owners to fines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiary&#8217;s ability
to distribute dividends to or obtain foreign-exchange-dominated loans from us, or prevent us from being able to make distributions or
pay dividends, as a result of which our business operations and our ability to distribute profits to you could be materially and adversely
affected.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>PRC regulation of parent/subsidiary loans
and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to
make loans or additional capital contributions to our PRC subsidiary and to make loans to Shengfeng Logistics, which could materially
and adversely affect our liquidity and our ability to fund and expand our business.</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 an offshore holding company conducting
our operations in China through our PRC subsidiary Tianyu, Shengfeng Logistics, and the subsidiaries of Shengfeng Logistics. We may make
loans to these entities, or we may make additional capital contributions to Tianyu, or we may establish new PRC subsidiaries and make
capital contributions to these new PRC subsidiaries.</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">Most of these ways are subject to PRC regulations
and approvals or registration. For example, any loans to Tianyu, which is treated as a foreign-invested enterprise under PRC law, are
subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to Tianyu to finance its activities cannot
exceed statutory limits and must be registered with the local counterpart of SAFE, or filed with SAFE in its information system. Pursuant
to relevant PRC regulations, we may provide loans to Tianyu up to the larger amount of (i) the balance between the registered total investment
amount and registered capital of Tianyu, or (ii) twice the amount of the net assets of Tianyu calculated in accordance with the <i>Circular
on Full-Coverage Macro-Prudent Management of Cross-Border Financing</i>, or the &#8220;PBOC Circular 9.&#8221; Moreover, any medium or
long-term loan to be provided by us to Tianyu or other domestic PRC entities must also be filed and registered with the NDRC. We may also
decide to finance Tianyu by means of capital contributions. These capital contributions are subject to registration with the State Administration
for Market Regulation or its local branch, reporting of foreign investment information with MOFCOM, or registration with other governmental
authorities in China. Due to the restrictions imposed on loans in foreign currencies extended to PRC domestic companies, we are not likely
to make such loans to Shengfeng Logistics, which is a PRC domestic company. Further, we are not likely to finance the activities of Shengfeng
Logistics and the VIE&#8217;s subsidiaries by means of capital contributions due to regulatory restrictions relating to foreign investment
in PRC domestic enterprises, which may be engaged in certain business, such as&#160;the Foreign Investment Law, which provides that foreign
investors shall not invest in any field with investment prohibited by the negative list for foreign investment access.</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 March 30, 2015, SAFE issued the <i>Circular
of the State Administration of Foreign Exchange on Reforming the Administrative Approach Regarding the Settlement of the Foreign Exchange
Capital of Foreign-invested Enterprise</i>s, or &#8220;SAFE Circular 19,&#8221; which took effect and replaced previous regulations effective
on June 1, 2015. Pursuant to SAFE Circular 19, up to 100% of foreign currency capital of a foreign-invested enterprise may be converted
into RMB capital according to the actual operation, and within the business scope, of the enterprise at its will. Although SAFE Circular
19 allows for the use of RMB converted from the foreign currency-denominated capital for equity investments in the PRC, the restrictions
continue to apply as to foreign-invested enterprises&#8217; use of the converted RMB for purposes beyond their business scope, for entrusted
loans or for inter-company RMB loans. On June 9, 2016, SAFE promulgated the <i>Notice of the State Administration of Foreign Exchange
on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account</i>, or &#8220;SAFE Circular 16,&#8221;
effective on June 9, 2016, which reiterates some rules set forth in 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-affiliated 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 this offering, to Tianyu, which may adversely affect
our liquidity and our ability to fund and expand our business in China. On October 23, 2019, the SAFE issued the <i>Notice of the State
Administration of Foreign Exchange on Further Facilitating Cross-border Trade and Investment</i>, or &#8220;SAFE Circular 28,&#8221; which,
among other things, expanded the use of foreign exchange capital to domestic equity investment area. Non-investment foreign-funded enterprises
are allowed to lawfully make domestic equity investments by using their capital on the premise without violation to prevailing special
administrative measures for access of foreign investments (negative list) and the authenticity and compliance with the regulations of
domestic investment projects. However, since SAFE Circular 28 is newly promulgated, it is unclear how SAFE and competent banks will carry
it out in practice.</p><div>

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</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, including SAFE Circular 19, SAFE Circular
16, and other relevant rules and regulations, we cannot assure you that we will be able to complete the necessary registrations or obtain
the necessary government approvals on a timely basis, if at all, with respect to future loans to Tianyu, Shengfeng Logistics, and subsidiaries
of Shengfeng Logistics, or future capital contributions by us to Tianyu. As a result, uncertainties exist as to our ability to provide
prompt financial support to Tianyu, Shengfeng Logistics, or subsidiaries of Shengfeng Logistics when needed. If we fail to complete such
registrations or obtain such approvals, our ability to use the proceeds we received or expect to receive from our offshore offerings and
to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our business,
including our liquidity and our ability to fund and expand our business.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fluctuations in exchange rates could have
a material and adverse effect on our results of operations and the value of your investment.</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">The value of RMB against the U.S. dollar and other
currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China&#8217;s
foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of RMB to the U.S.
dollar, and RMB appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this
appreciation halted and the exchange rate between RMB and the U.S. dollar remained within a narrow band. Since June 2010, RMB has fluctuated
against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government
policy may impact the exchange rate between RMB and the U.S. dollar in the future.</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 business is conducted in the PRC, and our
books and records are maintained in RMB, which is the currency of the PRC. The financial statements that we file with the SEC and provide
to our shareholders are presented in U.S. dollars. Changes in the exchange rates between RMB and U.S. dollar affect the value of our assets
and the results of our operations, when presented in U.S. dollars. The value of RMB against the U.S. dollar and other currencies may fluctuate
and is affected by, among other things, changes in the PRC&#8217;s political and economic conditions and perceived changes in the economy
of the PRC and the United States. Any significant revaluation of RMB may materially and adversely affect our cash flows, revenue, and
financial condition. Further, since our Class A Ordinary Shares are offered in U.S. dollars, we will need to convert the net proceeds
we receive into RMB in order to use the funds for our business. Changes in the conversion rate among the U.S. dollar and RMB will affect
the amount of proceeds we will have available for 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">Very limited hedging options are available in
China to reduce our exposure to exchange rate fluctuations. As of the date of this annual report, we have not entered into any hedging
transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into more hedging transactions
in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure
or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to
convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.</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>Under the PRC Enterprise Income Tax Law,
we may be classified as a PRC &#8220;resident enterprise&#8221; for PRC enterprise income tax purposes. Such classification would likely
result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations
and the value of your investment.</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">Under <i>the PRC Enterprise Income Tax Law</i>,
or the &#8220;EIT Law,&#8221; that became effective in January 2008, an enterprise established outside the PRC with &#8220;de facto 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. Under the implementation rules to the EIT Law, a &#8220;de
facto management body&#8221; is defined as a body that has material and overall management and control over the manufacturing and business
operations, personnel and human resources, finances, and properties of an enterprise. In addition, a circular, known as &#8220;SAT Circular
82,&#8221; issued in April 2009 by the State Administration of Taxation, or the &#8220;SAT,&#8221; specifies that certain offshore incorporated
enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are
located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management;
financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders&#8217;
meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin,
known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82 and clarify
the reporting and filing obligations of such &#8220;Chinese-controlled offshore incorporated resident enterprises.&#8221; SAT Bulletin
45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters.
Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups,
not those controlled by PRC individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin
45 may reflect the SAT&#8217;s general position on how the &#8220;de facto management body&#8221; test should be applied in determining
the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups,
or by PRC or foreign individuals.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If the PRC tax authorities determine that the
actual management organ of Shengfeng Cayman is within the territory of China, Shengfeng Cayman may be deemed to be a PRC resident enterprise
for PRC enterprise income tax purposes and a number of unfavorable PRC tax consequences could follow. First, we will be subject to the
uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be
subject to PRC enterprise income tax reporting obligations. Finally, dividends payable by us to our investors and gains on the sale of
our shares may become subject to PRC withholding 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. It
is unclear whether non-PRC shareholders of our Company would be able to claim the benefits of any tax treaties between their country of
tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment
in our shares. Although up to the date of this annual report, Shengfeng Cayman has not been notified or informed by the PRC tax authorities
that it has been deemed to be a resident enterprise for the purpose of the EIT Law, we cannot assure you that it will not be deemed to
be a resident enterprise in the future.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We face uncertainty with respect to indirect
transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.</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">In February 2015, SAT issued a <i>Public Notice
Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises</i>, or &#8220;SAT Circular
7.&#8221; SAT Circular 7 provides comprehensive guidelines relating to indirect transfers of PRC taxable assets (including equity interests
and real properties of a PRC resident enterprise) by a non-resident enterprise. In addition, in October 2017, SAT issued an <i>Announcement
on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises</i>, or &#8220;SAT Circular 37,&#8221; effective
in December 2017, which, among others, amended certain provisions in SAT Circular 7 and further clarify the tax payable declaration obligation
by non-resident enterprise. Indirect transfer of equity interest and/or real properties in a PRC resident enterprise by their non-PRC
holding companies are subject to SAT Circular 7 and SAT Circular 37.</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">SAT Circular 7 provides clear criteria for an
assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale
of equity through a public securities market. As stipulated in SAT Circular 7, indirect transfers of PRC taxable assets are considered
as reasonable commercial purposes if the shareholding structure of both transaction parties falls within the following situations: i)
the transferor directly or indirectly owns 80% or above equity interest of the transferee, or vice versa; ii) the transferor and the transferee
are both 80% or above directly or indirectly owned by the same party; iii) the percentages in bullet points i) and ii) shall be 100% if
over 50% the share value of a foreign enterprise is directly or indirectly derived from PRC real properties. Furthermore, SAT Circular
7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable
assets. Where a non-resident enterprise transfers PRC taxable assets indirectly by disposing of the equity interests of an overseas holding
company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly
owns the taxable assets, may report such indirect transfer to the relevant tax authority and the PRC tax authority may disregard the existence
of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding,
or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee
or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for
the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under
PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.</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">According to SAT Circular 37, where the non-resident
enterprise fails to declare the tax payable pursuant to Article 39 of the EIT Law, the tax authority may order it to pay the tax due within
required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax
authority. If the non-resident enterprise, however, voluntarily declares and pays the tax payable before the tax authority orders it to
do so within required time limits, it shall be deemed that such enterprise has paid the tax in time.</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 face uncertainties as to the reporting and
assessment of reasonable commercial purposes and future transactions where PRC taxable assets are involved, such as offshore restructuring,
sale of the shares in our offshore subsidiaries, and investments. In the event of being assessed as having no reasonable commercial purposes
in an indirect transfer transaction, we may be subject to filing obligations or taxed if we are a transferor in such transactions, and
may be subject to withholding obligations (to be specific, a 10% withholding tax for the transfer of equity interests) if we are a transferee
in such transactions, under SAT Circular 7 and SAT Circular 37. For transfer of shares by investors who are non-PRC resident enterprises,
our PRC subsidiary may be requested to assist in the filing under the SAT circulars. As a result, we may be required to expend valuable
resources to comply with the SAT circulars or to request the relevant transferors from whom we purchase taxable assets to comply with
these circulars, or to establish that we should not be taxed under these circulars, which may have a material adverse effect on our financial
condition and results of operations.</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>Our PRC subsidiary is subject to restrictions
on paying dividends or making other payments to us, which may have a material adverse effect on our ability to conduct our business. </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 a holding company incorporated in the Cayman
Islands. We may need dividends and other distributions on equity from our PRC subsidiary to satisfy our liquidity requirements, including
the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiary
incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other
distributions to us. In addition, the PRC tax authorities may require our PRC subsidiary to adjust its taxable income under the contractual
agreements Tianyu currently has in place with Shengfeng Logistics in a manner that would materially and adversely affect its ability to
pay dividends and other distribution to us. See <i>&#8220;</i>Item 3. Key Information&#8212;D. Risk Factors<i>&#8212;</i>Risks Relating
to Our Corporate Structure&#8212;The VIE Agreements may result in adverse tax consequences.&#8221;</p><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Current PRC regulations permit our PRC subsidiary
to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
In addition, our PRC subsidiary is required to set aside at least 10% of its respective accumulated profits each year, if any, to fund
certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiary may also
allocate a portion of its respective after-tax profits based on PRC accounting standards to employee welfare and bonus funds at its discretion.
These reserves are not distributable as cash dividends. These limitation on the ability of 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.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Governmental control of currency conversion
may affect the value of your investment and our payment of dividends.</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">The PRC government imposes controls on the convertibility
of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenue
in RMB. Under our current corporate structure, Shengfeng Cayman may rely on dividend payments from our PRC subsidiary, Tianyu, to fund
any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such
as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval
from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in foreign currencies
to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with
certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by our shareholders or the ultimate
shareholders of our corporate shareholders who are PRC residents. Approval from or registration with appropriate government authorities
is, however, required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the
repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign
currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies
to satisfy our foreign currency demand, we may not be able to pay dividends in foreign currencies to our shareholders.</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>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></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">Under the EIT Law and its implementation rules,
the profits of a foreign-invested enterprise generated through operations, which are distributed to its immediate holding company outside
the PRC, will be subject to a withholding tax rate of 10%. Pursuant to the <i>Arrangement between the Mainland China and the Hong Kong
Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income</i>, or the &#8220;Double Tax Avoidance Arrangement,&#8221;
a withholding tax rate of 10% may be lowered to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise for at least 12
consecutive months prior to distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other
conditions and requirements under the Double Tax Avoidance Arrangement and other applicable PRC laws.</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">However, based on the <i>Circular on Certain Issues
with Respect to the Enforcement of Dividend Provisions in Tax Treaties</i>, or the &#8220;SAT Circular 81,&#8221; which became effective
on February 20, 2009, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income
tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment.
According to <i>Circular on Several Issues regarding the &#8220;Beneficial Owner&#8221; in Tax Treaties</i>, which became effective as
of April 1, 2018, when determining an applicant&#8217;s status as the &#8220;beneficial owner&#8221; regarding tax treatments in connection
with dividends, interests, or royalties in the tax treaties, several factors will be taken into account. Such factors include whether
the business operated by the applicant constitutes actual business activities, and whether the counterparty country or region to the tax
treaties does not levy any tax, grant tax exemption on relevant incomes, or levy tax at an extremely low rate. This circular further requires
any applicant who intends to be proved of being the &#8220;beneficial owner&#8221; to file relevant documents with the relevant tax authorities.
Our PRC subsidiary is wholly owned by our Hong Kong subsidiary. However, we cannot assure you that our determination regarding our qualification
to enjoy the preferential tax treatment will not be challenged by the relevant PRC tax authority or we will be able to complete the necessary
filings with the relevant PRC tax authority and enjoy the preferential withholding tax rate of 5% under the Double Tax Avoidance Arrangement
with respect to dividends to be paid by our PRC subsidiary to our Hong Kong subsidiary, in which case, we would be subject to the higher
withdrawing tax rate of 10% on dividends received.</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>If we become directly subject to the scrutiny,
criticism, and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate
and resolve the matter which could harm our business operations, stock price, and reputation.</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">U.S. public companies that have substantially
all of their operations in China have been the subject of intense scrutiny, criticism, and negative publicity by investors, financial
commentators, and regulatory agencies, such as the SEC. Much of the scrutiny, criticism, and negative publicity has centered on financial
and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance
policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism, and negative
publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has become virtually
worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and
external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism, and negative publicity
will have on us, our business, and the price of our Class A Ordinary Shares. If we become the subject of any unfavorable allegations,
whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations
and/or defend our Company. This situation will be costly and time consuming and distract our management from developing our business.
If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a
significant decline in the value of our Class A Ordinary Shares.</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"><b><i>The disclosures in our reports and other
filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.</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 regulated by the SEC, and our reports and
other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities
Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of
any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by the CSRC,
a PRC regulator that is responsible for oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings,
and our other public pronouncements with the understanding that no local regulator has done any review of us, our SEC reports, other filings,
or any of our other public pronouncements.</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>The approval of the China Securities Regulatory
Commission, or the &#8220;CSRC,&#8221; may be required in connection with this offering under a regulation adopted in August 2006, and,
if required, we cannot assure you that we will be able to obtain such approval, in which case we may face sanctions by the CSRC or other
PRC regulatory agencies for failure to seek the CSRC approval for this offering.</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">The Regulations on Mergers and Acquisitions of
Domestic Companies by Foreign Investors, or the &#8220;M&amp;A Rules,&#8221; adopted by six PRC regulatory agencies in 2006 and amended
in 2009, requires an overseas SPV formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies
or individuals to obtain the approval of the CSRC, prior to the listing and trading of such SPV&#8217;s securities on an overseas stock
exchange. In September 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted
to it by an SPV seeking the CSRC approval of its overseas listings. The application of the M&amp;A Rules remains unclear.</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 PRC legal counsel has advised us, based on
their understanding of the current PRC law, rules, and regulations that the CSRC&#8217;s approval is not required for the listing and
trading of our shares on Nasdaq in the context of this offering, given that:</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="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr>
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="vertical-align: top; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">we established our PRC subsidiary by means of direct investment rather than by merger with or acquisition of PRC domestic companies as defined in the M&amp;A Rules;</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the CSRC already promulgated the Trial Measures and its supporting guidelines, which came into effect on March 31, 2023. The Trial Measures and its supporting guidelines shall apply to overseas securities offerings and/or listings conducted by companies incorporated overseas which normally have been treated as overseas special purpose vehicles with operations primarily in the PRC and valued on the basis of interests in PRC domestic companies; and</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">no explicit provision in the M&amp;A Rules or the Trial Measures classifies the VIE Agreements as a type of acquisition transaction subject to the M&amp;A Rules.</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">Our PRC legal counsel, however, has further advised
us that there remains some uncertainty as to how the M&amp;A Rules will be interpreted or implemented in the context of an overseas offering
and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in
any form relating to the M&amp;A Rules. We cannot assure you that relevant PRC governmental agencies, including the CSRC, would reach
the same conclusion as we do. If it is determined that the CSRC approval is required for this offering, we may face sanctions by the CSRC
or other PRC regulatory agencies for failure to seek the CSRC approval for this offering. These sanctions may include fines and penalties
on our operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the
proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiary,
or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation,
and prospects, as well as the trading price of our Class A Ordinary Shares. The CSRC or other PRC regulatory agencies may also take actions
requiring us, or making it advisable for us, to halt this offering before the settlement and delivery of the Class A Ordinary Shares that
we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and
delivery of the Class A Ordinary Shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur.</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"><b><i>We may be required to obtain permission
from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE&#8217;s
operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently
being offered may substantially decline in value and become worthless. </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">On July 6, 2021, 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 &#8220;Opinions.&#8221; 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.
Furthermore, they proposed to take measures, including promoting the construction of relevant regulatory systems to control the risks
and handle the incidents from China-based overseas-listed companies. On December 24, 2021, the CSRC promulgated the New Overseas Listing
Rules for public comments. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental
authorities and report related information under certain circumstances, such as, a) an issuer making an application for initial public
offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas
market; c) an issuer offering securities on an overseas market to purchase assets after having been listed overseas; and d) a domestic
company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of
shares or other means. On February 17, 2023, the CSRC promulgated the Trial Measures, and five supporting guidelines, which came into
effect on March 31, 2023. The Trial Measures and its supporting guidelines, reiterate the basic principles of the New Overseas Listing
Rules and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises. Pursuant
to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete
filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission
of initial public offerings or listing application. If a domestic company fails to complete the required filing procedures or conceals
any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties,
such as orders to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other
directly liable persons may also be subject to administrative penalties, such as warnings and fines.</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 24, 2023, the CSRC, together with
Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised
the Provisions, which were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration
of China in 2009. The revised Provisions were issued under the title the &#8220;Provisions on Strengthening Confidentiality and Archives
Administration of Overseas Securities Offering and Listing by Domestic Companies&#8221;, and came into effect on March 31, 2023 together
with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas
offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including, but not limited, to (a)
a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant
individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials
that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according
to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly
or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities
companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental
to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As
of the date of this annual report, the revised Provisions have come into effect and we are not aware of any PRC laws or regulations in
effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any
inquiry, notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities
that have jurisdiction over our operations. However, any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to
comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations
may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated
for criminal liability if suspected of committing a crime. See &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulations&#8212;Regulations
on Mergers &amp; Acquisitions and Overseas Listings<i>.</i>&#8221; The Opinions, the Trial Measures, the revised Provisions and any related
implementing rules to be enacted may subject us to compliance requirement in the future. We are currently not required to obtain any permission
or approval from Chinese authorities to list on U.S. exchanges nor to execute the VIE Agreements. However, if we inadvertently conclude
that such permission or approval is not required, or applicable laws, regulations, or interpretations change and the VIE or the holding
company are required to obtain such permission or approval in the future and are denied such permission or approval from the Chinese authorities
to list on U.S. exchanges, we will not be able to continue listing on U.S. exchanges or continue to offer securities to investors, which
could cause significant depreciation of the price of our Class A Ordinary Shares and materially affect the interest of the investors.</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">According to the Notice on the Administrative
Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, the
domestic companies that have already been listed overseas before the effective date of the Overseas Listing Trial Measures (i.e. March
31, 2023) shall be deemed as existing issuers (the &#8220;Existing Issuers&#8221;). Existing Issuers are not required to complete the
filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings. Further, according to the
CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness
of a registration statement for offering and listing in the U.S. has been obtained) for their indirect overseas offering and listing prior
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 to September 30, 2023. Those that complete their indirect 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 indirect overseas offerings and listings. Within such
six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance and listing, they shall
complete the filing procedures with the CSRC.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 24, 2023, the CSRC, together with
Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised
the Provisions, which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration
of China in 2009. The revised Provisions is issued under the title the &#8220;Provisions on Strengthening Confidentiality and Archives
Administration of Overseas Securities Offering and Listing by Domestic Companies&#8221;, and came into effect on March 31, 2023 together
with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas
offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including, but not limited to, (a)
a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant
individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials
that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according
to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly
or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities
companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental
to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. See
&#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulations&#8212;Regulations on Mergers &amp; Acquisitions
and Overseas Listings<i>.</i>&#8221; Any new rules or regulations promulgated in the future in that regard may impose additional requirements
or restrictions on us. If we fail to comply with these regulatory requirements, relevant regulatory authorities may impose fines and penalties
on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict
the repatriation of the proceeds from this offering into China, or even take other actions that could materially and adversely affect
our business, financial condition, results of operations, prospects and the trading price of our shares.</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 Chinese government has exercised and continued
to exercise substantial control over virtually every sector of the Chinese economy through regulations and state ownership. Our ability
to operate in the PRC may be significantly harmed by changes in its laws and regulations, including those relating to taxation, environment,
land use rights, property, cybersecurity and other matters. The central or local governments of these jurisdictions may impose new and
stricter regulations or interpretations of existing regulations with little or no advance notice that would require additional expenditures
and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future,
including regional or local variations in the implementation of economic policies, could have a significant effect on the economic conditions
in China or particular regions thereof, and could result in our divesting ourselves of any interest we then hold in our operations in
China.</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">Furthermore, it is uncertain when and whether
we will be required to obtain permission or approval from the PRC government to list on U.S. exchanges or to execute the VIE Agreements
in the future, when such permission will be obtained, if at all, or whether it will be denied or rescinded. Although we are currently
not required to obtain permission or approval from any of the PRC central or local governments for the VIE&#8217;s operations and/or the
Company&#8217;s issuance of securities to foreign investors, nor have we received any denial to list on the U.S. exchange or to execute
the VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating
to our business or industry. As indicated by the recent statements from the PRC government, the PRC government may take actions to exert
more oversight and control over the offerings that are conducted overseas and/or foreign investment in PRC-based issuers, which could
significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our
securities to significantly decline or become worthless.</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>The M&amp;A Rules and certain other PRC
regulations establish complex procedures for certain acquisitions of Chinese companies by foreign investors, which could make it more
difficult for us to pursue growth through acquisitions in China.</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">The M&amp;A Rules and recently adopted PRC 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 (i) any important industry
is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction
will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Mergers or acquisitions
that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance
to MOFCOM when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or the &#8220;Prior
Notification Rules,&#8221; issued by the State Council in August 2008 is triggered.</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, the security review rules issued
by MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise &#8220;national
defense and security&#8221; concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic
enterprises that raise &#8220;national security&#8221; concerns are subject to strict review by MOFCOM, and the rules prohibit any activities
attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. 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 MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is clear that our business
would not be deemed to be in an industry that raises &#8220;national defense and security&#8221; or &#8220;national security&#8221; concerns.
MOFCOM or other government agencies, however, may publish explanations in the future determining that our business is in an industry subject
to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual control
arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand
our market share through future acquisitions would as such be materially and adversely affected.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Chinese government exerts substantial
influence over the manner in which we must conduct our business activities.&#160;Any actions by the Chinese government, including any
decision to intervene or influence our operations or to exert control over any offering of securities conducted overseas and/or foreign
investment in China-based issuers, may cause us to make material changes to our operation, may limit or completely hinder our ability
to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.</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">The Chinese government has exercised and may continue
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability
to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations,
land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations
or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance
with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support
recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest
ourselves of any interest we then hold in Chinese properties.</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">As such, the Company&#8217;s business segments
may be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject
to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions.
The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure
to comply.</p><div>

</div><p style="font: 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">Furthermore, it is uncertain when and whether
the Company will be required to obtain permission from the PRC government to list on U.S. exchanges or enter into VIE Agreements in the
future, and even when such permission is obtained, whether it will be denied or rescinded. Although the Company is currently not required
to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list
on the U.S. exchange and or enter into VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing
or future laws and regulations relating to our business or industry.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risks Relating to Our Business and Our Industry</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"><b><i>Any service disruption experienced by our
regional sorting centers, cloud-based order fulfillment centers (&#8220;Cloud OFCs&#8221;), or service outlets may adversely affect our
business operations.</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">Our daily operations heavily rely on the orderly
performance of our regional sorting centers, Cloud OFCs, service outlets, freight sorting facilities, and storages. Any service disruption
due to: automated facilities failures, under-capacity during peak freight volume periods, force majeure events, third-party sabotage and
disputes, employee delinquencies, worker strikes, governmental inspections, orders, or mandates, or shutdowns (temporary or permanent)
will adversely impact our business operations by causing delays, suspensions, interruptions, or halts. In the event of a service disruption,
freights will be redirected to other nearby regional sorting centers, Cloud OFCs, or service outlets, but the rerouting process will likely
increase the risks in delay and delivery errors. At the same time, rerouting freights will increase pressures such as capacity and operation
in freight sorting, storage, or pickup and delivery to local sorting centers, Cloud OFCs, or service outlets and spread further across
the rest of our network. Any of the foregoing events may result in significant operational interruptions and slowdowns, client complaints,
and reputational damage.</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>We face risks associated with the freight
handled through our&#160;network.</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, through the VIE and the VIE&#8217;s subsidiaries,
handle a large volume of freights across our network daily, and we face challenges with respect to the protection and examination of freights.
Freights within our network may be stolen, damaged, or lost for various reasons, and we or third-party transportation providers or both
may be perceived or found liable for such incidents. In addition, we may fail to screen freight and detect unsafe, prohibited, or restricted
items. Unsafe items, such as flammables, explosives, toxic, radioactive, or corrosive items and materials, may damage other freights within
our network, injure recipients, and harm the personnel and assets of us and/or third-party transportation providers. Furthermore, if we
fail to prevent prohibited or restricted items from entering into our network and if we participate in the transportation and delivery
of such items, we may be subject to administrative or even criminal penalties, and if any personal injury or property damage is concurrently
caused, we may be further liable for civil compensation.&#160;</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The transportation of freight also involves inherent
risks. We constantly have a large number of vehicles and personnel in transportation, and are therefore subject to risks associated with
transportation safety, and the insurance maintained by us may not fully cover the damages caused by transportation related injuries or
loss. From time to time, our vehicles and personnel may be involved in transportation accidents, and the freight carried by them may be
lost or damaged. In addition, frictions or disputes may occasionally arise from the direct interactions between our pickup and delivery
personnel with freight senders and recipients. Personal injuries or property damages may arise if such incidents escalate.</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">Any of the foregoing could disrupt our services,
cause us to incur substantial expenses, and divert the time and attention of our management. We and third-party transportation providers
may face claims and incur significant liabilities if found liable or partially liable for any of injuries, damages, or losses. Claims
against us may exceed the amount of our insurance coverage, or may not be covered by insurance at all. Governmental authorities may also
impose significant fines on us or require us to adopt costly preventive measures. Furthermore, if our services are perceived to be insecure
or unsafe by our clients, our business volume may be significantly reduced, and our business, financial condition, and results of operations
may be materially and adversely affected.</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>Our technology systems are critical to our
business operations and growth prospects. </i></b>&#160;</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 satisfactory performance, reliability, and
availability of our technology system is critical to our ability to provide high-quality client services. We rely on our proprietary Shengfeng
Transportation Management System, or &#8220;Shengfeng TMS,&#8221; to efficiently operate our network, and our warehouse management system,
or &#8220;WMS,&#8221; to optimize our warehouse storage and management services. These integrated systems support the smooth performance
of certain key functions of our business, such as shipment transportation and tracking management, payment calculation, client services,
storage management and order management. In addition, the maintenance and processing of various operating and financial data is essential
to the daily operations of our business and formulation of our development strategies. Therefore, our business operations and growth prospects
depend, in part, on our ability to maintain and make timely and cost-effective enhancements and upgrades to our technology systems and
to introduce innovative additions which can meet changing operational needs. Failure to invest enough in information technology and equipment
could cause economic losses and put us at a disadvantage to our competitors. We can provide no assurance that we will be able to keep
up with technological improvements or that the technology developed by others will not render our services less competitive or attractive.&#160;</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">Any interruptions caused by telecommunications
failures, computer viruses, hacking, or other attempts to harm our systems that result in the unavailability or slowdown of our systems
could quickly impact the workflow in a large portion of, if not the entire, network. We can provide no assurance that our current security
mechanisms will be sufficient to protect our technology systems from any third-party intrusions, viruses or hacker attacks, information
or data theft, or other similar activities. Any such occurrences could disrupt our services, damage our reputation, and harm our results
of operations.</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>Failure to renew our current leases or locate
desirable alternatives for our facilities could materially and adversely affect our&#160;business.</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, through the VIE and the VIE&#8217;s subsidiaries,
lease properties for a majority of our offices, regional sorting centers, Cloud OFCs and service outlets. We may not be able to successfully
extend or renew such leases upon expiration of the current term on commercially reasonable terms or at all, and may therefore be forced
to relocate the affected operations. This could disrupt our operations and result in significant relocation expenses, which could adversely
affect our business, financial condition, and results of operations. In addition, we compete with other businesses for premises at certain
locations or of desirable sizes. As a result, even though we, through the VIE and the VIE&#8217;s subsidiaries, could extend or renew
our leases, rental payments may significantly increase as a result of the high demand for the leased properties. In addition, we may not
be able to locate desirable alternative sites for our facilities as our business continues to grow and failure in relocating our affected
operations could adversely affect our business and 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: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Moreover, certain lessors have not provided us
with valid ownership certificates. Under the relevant PRC laws and regulations, if the lessors are unable to obtain certificates of title
because such properties were built illegally or failed to pass the inspection or other reasons, such lease agreements may be recognized
as void and as a result, we may be required to vacate the relevant properties. In addition, if our lessors are not the owners of the properties
and they have not obtained consents from the owners or their lessors or permits from the relevant government authorities, our leases could
be invalidated. As a result, we may be subject to challenges, lawsuits or other actions taken against us with respect to the properties
leased to us that are without valid title certificates from the relevant lessors.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under PRC laws, all lease agreements are required
to be registered with the local housing authorities. Some of our lease agreements have not been registered with the relevant government
authorities. Failure to complete these required registrations may expose our landlords, lessors and the Company to potential monetary
fines.</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>Our business and results of operations may
be materially and adversely affected if we or third-party transportation providers are unable to provide high-quality services to our
clients.</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">The success of our business largely depends on
our ability to maintain and further enhance our service quality. About 30% of our freight transportation services are provided, through
the VIE and the VIE&#8217;s subsidiaries, by our self-owned fleet and the balance is provided by third-party transportation providers.
Together with third-party transportation providers, we, through the VIE and the VIE&#8217;s subsidiaries, provide B2B freight transportation
services, cloud storage, and value-added services to our clients. If we or third-party transportation providers are unable to provide
services in a timely, reliable, safe, and secure manner, our reputation and client loyalty could be negatively affected. If our client
service personnel fail to satisfy client needs and respond effectively to client complaints, we may lose potential or existing clients
and experience a decrease in client orders, which could have a material adverse effect on our business, financial condition and results
of 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: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We face intense competition which could
adversely affect our results of operations and market&#160;share.</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 operate in a highly competitive and fragmented
industry. We compete with many local, regional, and national logistics providers including Sinotrans Logistics Ltd., Beijing Changjiu
Logistics Co., Ltd., and Kerry Logistics (EAS) Limited. We compete with them based on a number of factors, including service pricing,
transportation speed, service offerings, and service quality. In particular, we may face downward pricing pressure from our competitors.
If we cannot effectively control our costs to remain competitive, our market share and revenue may decline.</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">Furthermore, as we diversify service offerings
and further expand our client base, we may face competition from existing or new players in those new sectors. In particular, we may face
competition from existing or new express delivery service providers which may expand their service offerings to freight transportation
and logistics services or adopt a business model disruptive to our business and compete with us for hiring of delivery personnel. Similarly,
existing players in an adjacent or sub-market may choose to leverage their existing infrastructure and expand their services to serve
our clients. If these players succeed in doing so, our business could be encroached by their entrance and adversely affected.</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">Certain of our current and potential competitors,
as well as international logistics operators with presence in China, may have significantly greater resources, longer operating histories,
larger client bases, and greater brand recognition than us. They may be acquired by, receive investment from, or enter into strategic
relationships with, established and well-financed companies or investors which would help enhance their competitiveness. In view of this,
some of our competitors may adopt more aggressive pricing policies or devote greater resources to marketing and promotional campaigns
than us. We may not be able to compete successfully against current or future competitors, and competitive pressures may have a material
and adverse effect on our business, financial condition, and results of&#160;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: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may be subject to catastrophic events.</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">A disruption or failure of our systems or operations
in the event of a major earthquake, weather event, cyber-attack, heightened security measures, actual or threatened terrorist attack,
strike, civil unrest, pandemic, or other catastrophic event could cause delays in providing services or performing other critical functions.
A catastrophic event that results in the destruction or disruption of any of our critical business or information systems could harm our
ability to conduct normal business operations and adversely impact our operating results.</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>Our financial condition, results of operations,
and cash flows have been adversely affected by COVID-19.</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">The COVID-19 pandemic resulted in a series of
governmental orders and mandates, including lockdowns, closures, quarantines, and travel bans in order to contain and control the spread
of the virus.</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">Consequently, the COVID-19 pandemic has materially
and adversely affected our business operations and conditions and operating results for 2020, including material negative impact on our
total revenue and net income. As a result of the government-imposed restrictions, the VIE and the VIE&#8217;s subsidiaries&#8217; facilities
and operations were mostly closed from February 2020 to late March 2020. The VIE and the VIE&#8217;s subsidiaries gradually resumed operation
during February and March 2020, but it was not until April 2020 that we resumed full operation, which has caused a decrease in our net
revenue and also adversely affected our marketing activities during the closure. We, through the VIE and the VIE&#8217;s subsidiaries,
took a series of measures in response to the pandemic, including, among others, the establishment of a special team for epidemic prevention
and control, the remote working arrangements for some of our employees, and the requirement for our employees on site to take extra measures
and procedures to lower the risks of COVID-19 exposure. We, through the VIE and the VIE&#8217;s subsidiaries, also donated some epidemic
prevention materials to areas and entities in need. These measures reduced the capacity and efficiency of our operations and&#160;increased
our expenditures.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The spread of&#160;COVID-19&#160;has caused us
to incur incremental costs. However, by leveraging our advantages in the logistics fields and our networks, we were able to resume a larger
portion of our operations in late March 2020 and have seen an increase in demand for our services since April 2020. Furthermore, to mitigate
any negative impacts that&#160;COVID-19&#160;may have on our operations, we, through the VIE and the VIE&#8217;s subsidiaries, implemented
a variety of measures, including disinfection of offices, free mask distribution, temperature monitoring to ensure the safety of our employees
returning to work, setting up quarantine rooms for employees and separate rest areas for drivers to avoid unnecessary contact, and disinfection
of all the vehicles in and out of our locations. After the initial outbreak of COVID-19, from time to time, some instances of COVID-19
infections have emerged in various regions of China, including the infections caused by the Omicron variants in early 2022. For example,
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. From April to May, 2022, our Shanghai office was shut down and all the businesses in Shanghai were
closed, which negatively affected our operational and financial results. Our shanghai office resumed full operation in June 2022. Since
December 2022, many of the restrictive measures previously adopted by the PRC governments at various levels to control the spread of the
COVID-19 virus have been revoked or replaced with more flexible measures.</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 COVID-19 pandemic has broadly affected China&#8217;s
logistic market and the macroeconomy. Our results of operations and financial performance may be adversely affected, to the extent that
COVID-19 exerts long-term negative impact on the Chinese economy. The pandemic caused temporary disruptions in the supply chains for companies
in China and elsewhere, including us and our customers and suppliers. As a result, we have experienced lower efficiency, increased aging
of our trade receivable, longer collection period and more bad debts. which could adversely affect our business operation. However, by
leveraging our advantages in the logistics fields and our networks, our results of operation for the year ended December 31, 2022 have
not been materially negatively affected by the COVID-19.</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">For more information on the impact of the COVID-19
pandemic on our operations and financial performance, see &#8220;Item 5. Operating and Financial Review and Prospects&#8212;A. Operating
Results&#8212;Impact of COVID-19 on Our Operations and Financial Performance.&#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"><b><i>Changes in industry regulations and industrial
policies may affect our future performance</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">Providing logistics services requires business
licensing and is subject to various laws, administrative rules and industry standards. In order to support the development of the logistics
industry, governments at various levels have successively introduced a number of industrial support and encouragement policies.&#160;</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 Administrative Provisions Concerning
the Running of Cargo Vehicles with Out-of-Gauge Goods promulgated by the PRC Ministry of Transport, which became effective on September
21, 2016, cargo vehicles running on public roads shall not carry cargo weighing more than, and their dimensions shall not exceed, the
limits set forth by such provisions. The operation of our vehicle fleet is subject to these provisions. If our trucks are not in compliance
with such provisions, we may be required to reduce the length of our trucks or purchase new ones to replace them. Otherwise, we may be
subject to penalties if we continue to operate those trucks that exceed the limits set forth in the provisions.&#160;</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">New laws and regulations may be promulgated from
time to time and substantial uncertainties exist regarding the interpretation and implementation of current and future PRC laws and regulations
applicable to our businesses. If the PRC government promulgates new laws and regulations that require additional approvals or licenses
or imposes additional restrictions on our daily operations, it has the authority, among other things, to levy fines, confiscate income,
revoke business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business.
Any of these actions by the PRC government may have a material and adverse effect on our results of 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: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Relevant state policies on environmental
protection may affect our future performance.</i></b>&#160;</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">Logistics service companies and provides rely
on various types and models of transportation vehicles to perform its daily operations, but due to heavy regulations in environmental
protection, energy conservation, and emission reductions, an increase in expenses is expected to incurred; which may directly or indirectly
affect our future performances.&#160;</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>If our clients are able to reduce their
logistics and supply chain costs or increase utilization of their internal solutions, our business and operating results may be materially
and adversely affected.</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">One of the main reasons that clients use contract
logistics companies is because traditional logistics is comprised of high cost, high degree of difficulties in association with developing
in-house logistics and supply chain expertise, and operational deficiencies. If, however, our clients are able to develop their own logistics
and supply chain solutions, increase utilization of their in-house supply chain, reduce their logistics spending, or otherwise choose
to terminate our services, our business and operating results may be materially and adversely affected.&#160;</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>We may not be able to maintain and enhance
our ecosystem, which could negatively affect our business and prospects.</i></b>&#160;</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 ability to maintain our ecosystem that creates
strong network effects among our participants is critical to our success. See &#8220;Item 4. Information on the Company&#8212;B. Business
Overview&#8212;Our Ecosystem.&#8221; While our ecosystem provides synergies and economies of scale across services and among our ecosystem
participants, the extent to which we are able to maintain and strengthen the attractiveness of our ecosystem depends on our ability to
offer a mutually beneficial platform for all participants, maintain the quality of our services and solutions, develop attractive services
and solutions that meet the evolving needs of our ecosystem participants, reinforce the scope and scale of our ecosystem, and retain our
participants. We must also provide sufficient geographic coverage to cement the effectiveness of our transportation network, continue
to utilize data to improve service quality and operational efficiency of all ecosystem participants, and maintain and improve our technology
infrastructure as part of our single interoperable system to ensure seamless operations.&#160;</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, our ecosystem participants may compete
with one another, which may complicate the management of our ecosystem. Further, changes made to enhance our ecosystem or balance the
interests of participants may be viewed positively by one participant but may have negative effects upon another. If we fail to balance
the interests of all participants in our ecosystem, we may fail to further attract and retain additional ecosystem participants, which
could adversely impact our business and financial condition.</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>We face risks from fuel price fluctuation.
</i></b>&#160;</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">Transportation cost is one of the major costs
of companies in the contract logistics industry, and fuel cost is a component of transportation cost. Fluctuation of fuel prices will
have a certain impact on the profitability of contract logistics service providers. Fuel costs accounted for approximately 4.13% of our
total operational expenses for the fiscal year ended December 31, 2022. Considering the number of vehicles, we own, it is estimated that
if fuel price fluctuates by +/- 5%, cost of revenue may increase or decrease by $0.68 million for the current year, which will either
increase or decrease our net profit by a maximum of $0.51 million. Fuel costs accounted for approximately 3.8% of our total operational
expenses for the year ended December 31, 2021. Considering the number of vehicles, we own, it is estimated that if fuel price fluctuates
by +/- 5%, cost of revenue may increase or decrease by $0.58 million for the current year, which will either increase or decrease our
net profit by a maximum of $0.43 million. Fuel costs accounted for approximately 3.92% of our total operational expenses for the fiscal
year ended December 31, 2020. Considering the number of vehicles, we own, it is estimated that if fuel price fluctuates by +/- 5%, cost
of revenue may increase or decrease by $0.49 million for the current year, which will either increase or decrease our net profit by a
maximum of 0.37 million. If fuel prices rise significantly in the future, we will experience pressure of increased costs.&#160;</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>Our past growth rates may not be indicative
of our future growth, and if we are not able to manage our growth effectively, our business and prospects may be materially and adversely
affected. </i></b>&#160;</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 business has grown substantially in recent years, but our past
growth rates may not be indicative of our future growth. Our expansion has placed, and will continue to place, substantial demands on
our managerial, operational, technological, and other resources. To manage and support our continued growth, we must continue to improve
our operational, administrative, financial, and technological systems, procedures, and controls, and expand, train, and manage our growing
employee and agent base. Even if we are able to expand our network as planned, we may not be able to continue to integrate and optimize
a larger network. We cannot assure you that our current and planned personnel, systems, procedures, and controls will be adequate to support
our future operations. Any failure to effectively and efficiently manage our expansion could materially and adversely affect our ability
to capitalize on new business opportunities, which in turn could have a material adverse effect on our results of 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: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Client demand is difficult to forecast accurately,
and as a result we may be unable to make planning and spending decisions to match such demand. </i></b>&#160;</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 make planning and spending decisions, including
capacity expansion, procurement commitments, personnel needs, and other resource requirements based on our estimates of client demand.
The freight volume we generate from clients can vary significantly and unexpectedly, reducing our ability to accurately estimate future
client demand. In particular, we may potentially experience capacity and resource shortages in fulfilling client orders during peak season
of e-commerce consumption or following special promotional campaigns on any e-commerce platforms. Failure to meet client demand in a timely
fashion or at all adversely affect our financial condition and results of operations.&#160;</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>Our future success depends on the continuing
efforts of our senior management team and other key personnel, and our business may be harmed if we lose their services. </i></b>&#160;</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 future success depends heavily upon the continuing
services of the members of our senior management team and other key personnel, in particular Mr. Yongxu Liu, our chairman of the board,
or &#8220;Chairman,&#8221; and chief executive officer. In addition, because of the importance of training to our business, our team of
dedicated training professionals plays a key role in our operations. If one or more of our senior executives or other key personnel, including
key training personnel, are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at
all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected.
Competition for senior management and key personnel is intense, the pool of qualified candidates is very limited, and we may not be able
to retain the services of our senior executives or key personnel, or attract and retain high-quality senior executives or key personnel
in the future. As is customary in the PRC, we do not have insurance coverage for the loss of our senior management team or other key personnel.</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, if any member of our senior management
team or any of our other key personnel joins a competitor or forms a competing company, we may lose clients, sensitive trade information,
and key professionals and staff members. Each of our executive officers and key employees has entered into an employment agreement with
us which contains confidentiality and non-competition provisions. These agreements generally have an initial term of three years, and
are automatically extended for successive one-year terms unless terminated earlier pursuant to the terms of the agreement. If any disputes
arise between any of our senior executives or key personnel and us, we cannot assure you of the extent to which any of these agreements
may be enforced.&#160;</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"></p><div>

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</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>We use third-party services in connection
with our business, and any disruption to these services could result in a disruption to our business, negative publicity, and a slowdown
in the growth of our customer base, materially and adversely affecting our business, financial condition, and results of operations.</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"><span style="font-family: Times New Roman, Times, Serif">Our
business depends on the services provided by, and relationships with, various third parties, including third-party transportation providers,
among others. For the fiscal years ended December 31, 2022, 2021 and 2020, about 71%, 70% and 70% of our freight transportation services
were provided by third-party transportation providers, respectively, which included owner-operators of a single truck, private fleets,
and large trucking companies. Several third-party transportation providers contributed a significant part of the total cost of revenue
of the Company. In particular, for the fiscal year ended December 31, 2022, Fujian Jinwang Yuntong Logistics Technology Co., Ltd. contributed
approximately 23.5% of total cost of revenue of the Company. For the year ended December 31, 2021, Anhui Luge Transportation Co., Ltd.,
or &#8220;Anhui Luge,&#8221; contributed approximately 27.8% of total cost of revenue of the Company. For the year ended December 31,
2020, Hubei Luge Logistics Co., Ltd. (&#8220;Hubei Luge&#8221;) and Anhui Luge contributed approximately 19.8% and 12.4% of total cost
of revenue of the Company, respectively. </span>&#160;&#160;<span style="font-family: Times New Roman, Times, Serif">The failure of these
and other third parties to perform in compliance with our agreements may negatively impact our 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"><b><i>Damages to brand image and corporate reputation
could materially and adversely impact our business. </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 believe our brand image and corporate reputation
play an increasingly important role in enhancing our competitiveness and maintaining our business growth. Many factors, some of which
are beyond our control, may negatively impact our brand image and corporate reputation if not properly managed. These factors include
our ability to provide superior services to our clients, successfully conduct marketing and promotional activities, manage complaints
and events of negative publicity, and maintain positive perception of our Company, our peers, and the contract logistics industry in general.
Any actual or perceived deterioration of our service quality, which is based on an array of factors including client satisfaction, rate
of complaint, and rate of accident, could subject us to damages such as loss of important clients. Any negative publicity against us or
our peers could cause damages to our corporate reputation and changes to the government policies and regulatory environment. If we are
unable to promote our brand image and protect our corporate reputation, we may not be able to maintain and grow our client base, and our
business and growth prospects may be adversely affected.&#160;</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>We may not be able to prevent others from
unauthorized use of our intellectual property, which could harm our business and competitive position.</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 regard our trademarks, domain names, trade
secrets, proprietary technologies, and other intellectual property as critical to our business. We rely on a combination of intellectual
property laws and contractual arrangements to protect our proprietary rights. It is often difficult to register, maintain, and enforce
intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not
be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality agreements and license agreements
may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not
be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Policing any unauthorized
use of our intellectual property is difficult and costly and the steps we have taken may be inadequate to prevent the misappropriation
of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could
result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail
in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by,
our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business,
financial condition, and results of operations.</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>Our business generates and processes a large
quantity of data, and improper handling of or unauthorized access to such data may adversely affect our business. In light of recent events
indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking
to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection,
and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on
Nasdaq, financial condition, results of operations, and the offering.</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 face risks related to complying with applicable
laws, rules, and regulations relating to the collection, use, disclosure, and security of personal information, as well as any requests
from regulatory and government authorities relating to such data. We could be subject to cybersecurity review in the future.</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 PRC regulatory and enforcement regime with
regard to data security and data protection has continued to evolve. There are uncertainties on how certain laws and regulations will
be implemented in practice. PRC regulators have been increasingly focused on regulating data security and data protection. We expect that
these areas will receive greater attention from regulators, as well as attract public scrutiny and attention going forward. This greater
attention, scrutiny, and enforcement, including more frequent inspections, could increase our compliance costs and subject us to heightened
risks and challenges associated with data security and protection. If we are unable to manage these risks, our reputation and results
of operations could be materially and adversely affected. See &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Regulation&#8212;Regulations
Relating to Internet Security.&#8221;</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"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Cybersecurity Law, which was adopted by the
National People&#8217;s Congress on November 7, 2016 and came into force on June 1, 2017, and the Cybersecurity Review Measures, or the
&#8220;2020 Review Measures,&#8221; which were promulgated on April 13, 2020, provide that personal information and important data collected
and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and
if a critical information infrastructure operator purchases internet products and services that affect or may affect national security,
it should be subject to cybersecurity review by the CAC (defined hereinafter). In addition, a cybersecurity review is required where critical
information infrastructure operators, or the &#8220;CIIOs,&#8221; purchase network-related products and services, which products and services
affect or may affect national security. Due to the lack of further interpretations, the exact scope of what constitute a &#8220;CIIO&#8221;
remains unclear.&#160;</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-size: 10pt">On June 10, 2021,
the Standing Committee of the National People&#8217;s Congress promulgated the Data Security Law which will take effect in September 2021.
The Data Security Law requires that data shall not be collected by theft or other illegal means, and it also provides that a data classification
and hierarchical protection system. The data classification and hierarchical protection system protects data according to its importance
in economic and social development, and the damages it may cause to national security, public interests, or the legitimate rights and
interests of individuals and organizations if the data is falsified, damaged, disclosed, illegally obtained or illegally used, which protection
system is expected to be built by the state for data security in the near future. In addition, the Office of the Central Cyberspace Affairs
Commission and the Office of Cybersecurity Review under the CAC published the Cybersecurity Review Measures (Revised Draft for Comments),
or the &#8220;Review Measures Draft,&#8221; on July 10, 2021, which provides that, aside from CIIOs that intend to purchase internet products
and services, data processing operators engaging in data processing activities that affect or may affect national security must be subject
to the cybersecurity review by the Cybersecurity Review Office. According to the Review Measures Draft, a cybersecurity review is conducted
by the CAC, to assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing.
The Review Measures Draft further requires that critical information infrastructure operators and services and data processing operators
that possess personal data of at least one (1) million users must apply for a review by the Cybersecurity Review Office of PRC, if they
plan to conduct listings in foreign countries. The deadline for public comments to the Review Measures Draft was July 25, 2021. On November
14, 2021, CAC published the Administration Measures for Cyber Data Security (Draft for Public Comments), or the &#8220;Cyber Data Security
Measure (Draft).&#8221; The Cyber Data Security Measure (Draft) provides that data processors shall apply for cybersecurity review under
certain circumstances, such as mergers, restructurings, divisions of internet platform operators that hold large amount of data relating
to national security, economic development or public interest which affects or may affect the national security, overseas listings of
data processors that process personal data for more than one million individuals, Hong Kong listings of data processors that affect or
may affect national security, and other data processing activities that affect or may affect the national security. On December 28, 2021,
the CAC, the NDRC, the Ministry of Industry and Information Technology, or &#8220;MIIT,&#8221; the Ministry of Public Security, the Ministry
of State Security, the Ministry of Finance, the Ministry of Commerce, People&#8217;s Bank of China, or &#8220;PBOC,&#8221; the State Administration
for Market Regulation, or &#8220;SAMR,&#8221; the State Administration of Radio and Television, CSRC, the State Secrecy Administration
and the State Cryptography Administration jointly promulgated the Cybersecurity Review Measures, or the &#8220;Cybersecurity Review Measures,&#8221;
which became effective on February 15, 2022, and will replace the original Cybersecurity Review Measures promulgated on April 13, 2020.
Pursuant to the Cybersecurity Review Measures, if critical information infrastructure operators purchase network products and services,
or network platform operators conduct data processing activities that affect or may affect national security, they will be subject to
cybersecurity review. A network platform operator holding more than one million users/users&#8217; individual information also shall be
subject to cybersecurity review before listing abroad. The cybersecurity review will evaluate, among others, the risk of critical information
infrastructure, core data, important data, or a large amount of personal information being influenced, controlled or maliciously used
by foreign governments and risk of network data security after going public overseas. As of the date of this annual report, we have not
received any notice from any authorities identifying us as a CIIO or requiring us to undertake a cybersecurity review by the CAC. We also
believe we are not subject to the cybersecurity review by the CAC for this offering, given that: (i) we presently possesses personal information
of less than one (1) million individual users in our business operations as of the date of this annual report; and (ii) data processed
in our business is less likely to have a bearing on national security, thus it may not be classified as core or important data by the
authorities. &#160;However, there remains uncertainty as to how the Cybersecurity Review Measures will be interpreted or implemented and
whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation
related to the Cybersecurity Review Measures. If any such new laws, regulations, rules, or implementation and interpretation come into
effect, we expect to take all reasonable measures and actions to comply. We cannot assure you that PRC regulatory agencies, including
the CAC, would take the same view as we do, and there is no assurance that we can fully or timely comply with such laws should they be
deemed applicable to our operations. We may be required to suspend new user registration in China or experience other disruptions to our
operations should we be required to have a cybersecurity review by the CAC. Any cybersecurity review could also result in negative publicity
with respect to our Company, diversion of our managerial and financial resources, and decrease in value of our Class A Ordinary Shares.
There is no certainty as to how such review or prescribed actions would impact our operations and we cannot guarantee that any clearance
can be obtained or any actions that may be required can be taken in a timely manner, or at all.</span>&#160;</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We, through the VIE and the VIE&#8217;s subsidiaries,
currently offer our mobile and desktop applications in China, and use authorization systems which granted different users with different
access authority based on their positions and roles, to protect personal information in our system for data security protection. Although
we have taken measures to protect personal information and privacy in our systems and platforms, we can provide no assurance that the
measures we have taken are effective and that our systems and platforms are not subject to data breach. The regulatory requirements with
respect to cybersecurity and data privacy are constantly evolving and can be subject to varying interpretations, and significant changes,
resulting in uncertainties about the scope of our responsibilities in that regard. Failure to comply with the cybersecurity and data privacy
requirements in a timely manner, or at all, may subject us to government enforcement actions and investigations, fines, penalties, suspension
or disruption of our operations, among other things.</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 also grant limited access to specified data
on our technology platform to certain other ecosystem participants. These third parties face the same challenges and risks inherent in
handling and protecting large volumes of data. Any system failure or security breach or lapse on our part or on the part of any of such
third parties that results in the release of user data could harm our reputation and brand and, consequently, our business, in addition
to exposing us to potential legal liability.</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">See &#8220;Item 4. Information on the Company&#8212;B.
Business Overview&#8212;Regulations&#8212;Regulations relating to Internet Information Security and Privacy Protection<i>.&#8221;</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"><b><i>We have limited insurance coverage which
could expose us to significant costs and business disruption.</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 maintain various insurance policies to safeguard
against risks and unexpected events. We, through the VIE and the VIE&#8217;s subsidiaries, have purchased compulsory motor vehicle liability
insurance and commercial insurance such as automobile third-party liability insurance, property insurance, and cargo insurance. We, through
the VIE and the VIE&#8217;s subsidiaries, have purchased employer liability insurance. We also provide work-related injury insurance to
our employees. We are not legally required to maintain insurance for freight transportation of non-hazardous items. We do not maintain
business interruption insurance, nor do we maintain key-man life insurance. We cannot assure you that our insurance coverage is sufficient
to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policies on a timely
basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less
than our actual loss, our business, financial condition, and results of operations could be materially and adversely affected.</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>If we fail to comply with regulations on
commercial franchising may result in penalties to us.</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"><span style="font-size: 10pt">Pursuant to the
Regulations on Commercial Franchising promulgated by the State Council in February 2007 and Provisions on Administration of the Record
Filing of Commercial Franchises issued by Ministry of Commerce in December 2011, collectively the Regulations and Provisions on Commercial
Franchising, commercial franchising refers to the business activities where an enterprise that possesses the registered trademarks, enterprise
logos, patents, proprietary technology, or any other business resources allows such business resources to be used by another business
operator through contract and the franchisee follows the uniform business model to conduct business operation and pay franchising fees
according to the contract. We and certain of our network partners may therefore be subject to regulations on commercial franchising. Under
the relevant regulations, we may be required to file our cooperation arrangements with the network partners with the Ministry of Commerce
or its local counterparts, but we have not made such filings. As of the date of this annual report, we have not received any order from
any governmental authorities to make such filing. If relevant authorities determine that we have failed to report franchising activities
in accordance with the regulations, we may be subject to fines ranging from RMB10,000 (approximately USD1,400) to RMB50,000 (approximately
USD7,200) and if we fail to comply within the rectification period determined by the competent governmental authority, we may be subject
to an additional fine ranging from RMB50,000 (approximately USD7,200) to RMB100,000 (approximately USD14,000) and the relevant authority
may issue a public reprimand.</span>&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We face challenges associated with diversifying
our service offerings.</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, through the VIE and the VIE&#8217;s subsidiaries,
have in the past launched new service lines such as cloud storage services and other initiatives, and intend to continue to diversify
our service offerings in the future. New services or new types of clients may involve risks and challenges we do not currently face. Such
new initiatives may require us to devote significant financial and managerial resources and may not perform as expected.</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, we may not be able to successfully
anticipate and address client demand and preferences in connection with new service offerings and our existing network and facilities
may not be adaptable to the new services or clients. For example, different service offerings may impose different requirements and service
standards. We may also be inexperienced with the operating models and cost structures associated with a new type of client or service
offerings. If we take ineffective measures and cannot promptly adopt new and more effective measures, we may suffer losses. Further, we
may not be able to ensure adequate service quality, and therefore may receive complaints or incur costly liability claims, which would
harm our overall reputation and financial performance. We may not be able to achieve profitability or recoup our investments with respect
to any new services or new types of clients in time or at all.</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"><b>Risks Relating to Our Class A Ordinary Shares
and the Trading Market</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"><b><i>If we fail to establish and maintain an
effective system of internal control over financial reporting, our ability to accurately and timely report our financial results or prevent
fraud may be adversely affected, and investor confidence and the market price of our Class A Ordinary Shares may be adversely impacted.</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 subject to reporting obligations under
U.S. securities laws. The SEC adopted rules pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 requiring every public company to
include a management report on such company&#8217;s internal control over financial reporting in its annual report, which contains management&#8217;s
assessment of the effectiveness of its internal control over financial reporting.</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 independent registered public accounting firm has not conducted
an audit of our internal control over financial reporting. However, in preparing our consolidated financial statements as of and for the
years ended December 31, 2022, we have identified material weaknesses in our internal control over financial reporting, as defined in
the standards established by the PCAOB, and other control deficiencies. The material weakness identified are a lack of accounting staff
and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements and lack of sufficient controls designed
and implemented in IT environment and IT general control activities, which mainly associated with areas of segregation of duties, program
change and cybersecurity. See &#8220;Item 15. Controls and Procedures&#8212;Disclosure Controls and Procedures&#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">Our management is currently in the process of evaluating the steps
necessary to remediate the ineffectiveness, such as (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting
experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii)
implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting
personnel; and (iii) Strengthen the supervision and controls on the IT functions, including the enhancement of logical security and job
management. Measures that we implement may not fully address the material weakness in our internal control over financial reporting and
we may not be able to conclude that the material weakness has been fully remedied.&#160;</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">Failure to correct the material weakness and other
control deficiencies or failure to discover and address any other control deficiencies could result in inaccuracies in our consolidated
financial statements and could also impair our ability to comply with applicable financial reporting requirements and make related regulatory
filings on a timely basis. As a result, our business, financial condition, results of operations, and prospects, as well as the trading
price of our Class A Ordinary Shares, may be materially and adversely affected. Due to the material weakness in our internal control over
financial reporting as described above, our management concluded that our internal control over financial reporting was not effective
as of December 31, 2022. This could adversely affect the market price of our Class A Ordinary Shares due to a loss of investor confidence
in the reliability of our reporting processes.</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"><b><i>The dual class structure of our ordinary
shares has the effect of concentrating voting control with our Chairman, and his interest may not be aligned with the interests of our
other shareholders.</i></b></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">We have a dual-class voting structure consisting
of Class A Ordinary Shares and Class B Ordinary Shares. Under this structure, holders of Class A Ordinary Shares are entitled to one vote
per one Class A Ordinary Share, and holders of Class B Ordinary Shares are entitled to 10 votes per one Class B Ordinary Share, which
may cause the holders of Class B Ordinary Shares to have an unbalanced, higher concentration of voting power. As of the date of this annual
report, Mr. Yongxu Liu, our chief executive officer and Chairman, beneficially owns 41,880,000, or 100%, of our issued Class B Ordinary
Shares, representing approximately 91.18% of the voting rights in our Company. As a result, until such time as Mr. Yongxu Liu&#8217;s
voting power is below 50%, Mr. Yongxu Liu as the controlling shareholder has substantial influence over our business, including decisions
regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant
corporate actions. He may take actions that are not in the best interests of us or our other shareholders. These corporate actions may
be taken even if they are opposed by our other shareholders. Further, such concentration of voting power may discourage, prevent, or delay
the consummation of change of control transactions that shareholders may consider favorable, including transactions in which shareholders
might otherwise receive a premium for their shares. Future issuances of Class B Ordinary Shares may also be dilutive to the holders of
Class A Ordinary Shares. As a result, the market price of our Class A Ordinary Shares could be adversely affected.</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>The dual-class structure of our ordinary
shares may adversely affect the trading market for our Class A Ordinary Shares.</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">Several shareholder advisory firms have announced
their opposition to the use of multiple class structures. As a result, the dual class structure of our ordinary shares may cause shareholder
advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital
structure. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure
could also adversely affect the value of our Class A Ordinary Shares.</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>Since we are a &#8220;controlled company&#8221;
within the meaning of the Nasdaq listing rules, we may follow certain exemptions from certain corporate governance requirements that could
adversely affect our public shareholders.</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">Our largest shareholder, Mr. Yongxu Liu, owns
more than a majority of the voting power of our outstanding ordinary shares. Under the Nasdaq listing rules, a company of which more than
50% of the voting power is held by an individual, group, or another company is a &#8220;controlled company&#8221; and is permitted to
phase in its compliance with the independent committee requirements. Although we do not intend to rely on the &#8220;controlled company&#8221;
exemptions under the Nasdaq listing rules even if we are a &#8220;controlled company,&#8221; we could elect to rely on these exemptions
in the future. If we were to elect to rely on the &#8220;controlled company&#8221; exemptions, a majority of the members of our board
of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist
entirely of independent directors. Accordingly, if we rely on the exemptions, during the period we remain a controlled company and during
any transition period following a time when we are no longer a controlled company, you would not have the same protections afforded to
shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.</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"></p><div>

</div><!-- Field: Page; Sequence: 56; 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 -->52<!-- 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"><b><i>Substantial future sales of our Class A
Ordinary Shares or the anticipation of future sales of our Class A Ordinary Shares in the public market could cause the price of our Class
A Ordinary Shares to decline.</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">Sales of substantial amounts of our Class A Ordinary
Shares in the public market, or the perception that these sales could occur, could cause the market price of our Class A Ordinary Shares
to decline. An aggregate of 40,520,000 Class A Ordinary Shares are outstanding as of the date of this annual report. Sales of these shares
into the market could cause the market price of our Class A Ordinary Shares to decline.</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"><b><i>We do not intend to pay dividends for the
foreseeable future.</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 currently intend to retain any future earnings
to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.
As a result, you may only receive a return on your investment in our Class A Ordinary Shares if the market price of our Class A Ordinary
Shares increases.</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>If securities or industry analysts do not
publish research or reports about our business, or if the publish a negative report regarding our Class A Ordinary Shares, the price of
our Class A Ordinary Shares and trading volume could decline.</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">Any trading market for our Class A Ordinary Shares
may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any
control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Class A Ordinary Shares would
likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose
visibility in the financial markets, which could cause the price of our Class A Ordinary Shares and the trading volume to decline.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The market price of our Class A Ordinary
Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above
the public offering price.</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">From the closing of our initial public offering
on April 3, 2023 to the date of this annual report, the closing price of our Class A Ordinary Shares has ranged from $4.04 per share.
The trading price of our Class A Ordinary Shares is likely to continue to be volatile and could fluctuate widely due to factors beyond
our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices
of other companies with business operations located mainly in China that have listed their securities in the United States. The securities
of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial
price declines in their trading prices. The trading performances of other Chinese companies&#8217; securities after their offerings may
affect the attitudes of investors toward Chinese companies listed in the United States in general and consequently may impact the trading
performance of our Class A Ordinary Shares, regardless of our actual operating performance.</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 market price of our Class A Ordinary Shares
may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr>
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    <td style="vertical-align: top; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">actual or anticipated fluctuations in our revenue and other operating results;</span></td></tr>
</table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

</div><p style="margin: 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr>
    <td style="text-align: justify; width: 0.25in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;</span></td></tr>
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</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr>
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="vertical-align: top; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">lawsuits threatened or filed against us; and</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.</span></td></tr>
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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">In addition, the stock markets have experienced
extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies.
In the past, shareholders have filed securities class action litigation following periods of market volatility. If we were to become involved
in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business,
and adversely affect our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></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 -->53<!-- 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; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The price of our Class A Ordinary Shares
could be subject to rapid and substantial volatility. Such volatility, including any stock run-ups, may be unrelated to our actual or
expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly
changing value of our Class A Ordinary Shares.</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">There have been instances of extreme stock price
run-ups followed by rapid price declines and strong stock price volatility with recent initial public offerings, especially among those
with relatively smaller public floats. As a relatively small-capitalization company with a relatively small public float, we may experience
greater share price volatility, extreme price run-ups, lower trading volume, and less liquidity than large-capitalization companies. In
particular, our Class A Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades, and large spreads
in bid and ask prices. Such volatility, including any stock run-ups, may be unrelated to our actual or expected operating performance
and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Class
A Ordinary Shares.</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, if the trading volumes of our Class
A Ordinary Shares are low, persons buying or selling in relatively small quantities may easily influence the price of our Class A Ordinary
Shares. This low volume of trades could also cause the price of our Class A Ordinary Shares to fluctuate greatly, with large percentage
changes in price occurring in any trading day session. Holders of our Class A Ordinary Shares may also not be able to readily liquidate
their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic
and political conditions may also adversely affect the market price of our Class A Ordinary Shares. As a result of this volatility, investors
may experience losses on their investment in our Class A Ordinary Shares. A decline in the market price of our Class A Ordinary Shares
also could adversely affect our ability to issue additional Class A Ordinary Shares or other securities and our ability to obtain additional
financing in the future. No assurance can be given that an active market in our Class A Ordinary Shares will develop or be sustained.
If an active market does not develop, holders of our Class A Ordinary Shares may be unable to readily sell the shares they hold or may
not be able to sell their shares at all.&#160;</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>If we cease to qualify as a foreign private
issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers,
and we would incur significant additional legal, accounting, and other expenses that we would not incur as a foreign private issuer.</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">As a foreign private issuer, we are exempt from
the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors, and principal
shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In
addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as
promptly as United States domestic issuers, and we are not required to disclose in our periodic reports all of the information that United
States domestic issuers are required to disclose. While we currently are deemed to be a foreign private issuer, we may cease to qualify
as a foreign private issuer in the future, in which case we would incur significant additional expenses that could have a material adverse
effect on our results of operations.</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>Because we are a foreign private issuer
and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would
have if we were a domestic issuer.</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">As a Cayman Islands company listed on the Nasdaq
Capital Market, we are subject to the Nasdaq corporate governance listing standards. Nasdaq rules, however,&#160;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.</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">Nasdaq Listing Rule 5635 generally provides that
shareholder approval is required of U.S. domestic companies listed on Nasdaq prior to issuance (or potential issuance) of securities (i)
equaling 20% or more of the company&#8217;s common stock or voting power for less than the greater of market or book value (ii) resulting
in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase plan to be established or
materially amended or other equity compensation arrangement made or materially amended. Notwithstanding this general requirement, Nasdaq
Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home country practice rather than these shareholder approval
requirements. The Cayman Islands do not require shareholder approval prior to any of the foregoing types of issuances. We, therefore,
are not required to obtain such shareholder approval prior to entering into a transaction with the potential to issue securities as described
above. We intend to comply with the requirements of Nasdaq listing rules in determining whether shareholder approval is required on such
matters. We may, however, consider following home country practice in lieu of the requirements under Nasdaq listing rules with respect
to certain corporate governance standards which may afford less protection to investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Nasdaq Listing Rule 5605(b)(1) requires listed
companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted
to, and we may follow home country practice in lieu of the above requirement. The corporate governance practice in our home country, the
Cayman Islands, does not require a majority of our board to consist of independent directors. Currently, a majority of our board members
are independent. However, if we change our board composition such that independent directors do not constitute a majority of our board
of directors, our shareholders may be afforded less protection than they would otherwise enjoy under Nasdaq&#8217;s corporate governance
requirements applicable to U.S. domestic issuers.</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>If we cannot satisfy, or continue to satisfy,
the continued listing requirements and other rules of the Nasdaq Capital Market, our securities may not be listed or may be delisted,
which could negatively impact the price of our securities and your ability to sell them.</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">Our Class A Ordinary Shares are listed on the
Nasdaq Capital Market. In order to maintain our listing on the Nasdaq Capital Market, we are required to comply with certain rules of
the Nasdaq Capital Market, including those regarding minimum stockholders&#8217; equity, minimum share price, minimum market value of
publicly held shares, and various additional requirements. Even if we currently meet the listing requirements and other applicable rules
of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy
the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.</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: 58; 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 -->54<!-- 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">If the Nasdaq Capital Market subsequently delists
our securities from trading, we could face significant consequences, including:</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr>
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="vertical-align: top; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a limited availability for market quotations for our securities;</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reduced liquidity with respect to our securities;</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a determination that our Class A Ordinary Share is a &#8220;penny stock,&#8221; which will require brokers trading in our Class A Ordinary Share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Class A Ordinary Share;</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">limited amount of news and analyst coverage; and</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a decreased ability to issue additional securities or obtain additional financing in the future.</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"><b><i>Because we are an &#8220;emerging growth
company,&#8221; we may not be subject to requirements that other public companies are subject to, which could affect investor confidence
in us and our Class A Ordinary Shares.</i></b></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">For as long as we remain an &#8220;emerging growth
company,&#8221; as defined in the Jumpstart Our Business Startups Act of 2012, we will elect to take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not &#8220;emerging growth companies,&#8221; including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory
requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. If some
investors find our Class A Ordinary Shares less attractive as a result, there may be a less active trading market for our Class A Ordinary
Shares and our share price may be more volatile.</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"><b><i>The laws of the Cayman Islands may not provide
our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States.</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 an exempted company incorporated under
the laws of the Cayman Islands with limited liability. Our corporate affairs are governed by our amended and restated memorandum and articles
of association, by the Companies Act (2021 Revision) of the Cayman Islands and by the common law of the Cayman Islands. The rights of
shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors
to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands
is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law. Decisions of the Privy
Council (which is the final Court of Appeal for British overseas territories such as the Cayman Islands) are binding on a court in the
Cayman Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal are generally of persuasive
authority but are not binding in the courts of the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly
of persuasive but not binding authority. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman
Islands law are not as clearly established as they would be under statutes or judicial precedents in the U.S. In particular, the Cayman
Islands has a less developed body of securities laws relative to the U.S. Therefore, our public shareholders may have more difficulty
protecting their interests in the face of actions by our management, directors or controlling shareholders than would shareholders of
a corporation incorporated in a jurisdiction in the U.S.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shareholders of Cayman Islands exempted companies
like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of the register of members of
these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions,
our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make
it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies
from other shareholders in connection with a proxy contest.</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 a result of all of the above, public shareholders
may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors,
or controlling shareholders than they would as public shareholders of a company incorporated in the U.S.</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>You may be unable to present proposals before
annual general meetings or extraordinary general meetings not called by shareholders.</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">Cayman Islands law provides shareholders with
only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general
meeting. These rights, however, may be provided in a company&#8217;s articles of association. Our articles of association allow our shareholders
holding shares representing in aggregate not less than 10% of our voting share capital in issue, to requisition a general meeting of our
shareholders, in which case our directors are obliged to call such meeting. Advance notice of at least 21 clear days is required for the
convening of our annual general shareholders&#8217; meeting and at least 14 clear days&#8217; notice any other general meeting of our
shareholders. A quorum required for a meeting of shareholders consists of at least one or more shareholders present or by proxy, representing
not less than one-third of the total issued shares carrying the right to vote at a general meeting of the Company. For these purposes,
&#8220;clear days&#8221; means that period excluding (a) the day when the notice is given or deemed to be given and (b) the day for which
it is given or on which it is to take effect.</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"><b><i>If we are classified as a PFIC, United States
taxpayers who own our Class A Ordinary Shares may have adverse United States federal income tax consequences.</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">A non-U.S. corporation such as ourselves will
be classified as a PFIC, for any taxable year if, for such year, either:</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr>
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">At least 75% of our gross income for the year is passive income; or</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%.</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">Passive income generally includes dividends, interest,
rents and royalties (other than rents or royalties derived from the active conduct of a trade or business), and gains from the disposition
of passive assets.</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">If we are determined to be a PFIC for any taxable
year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Class A Ordinary Shares, the U.S. taxpayer
may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.&#160;</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">Depending on the amount of cash we have and any
other assets held for the production of passive income, it is possible that, for our current taxable year or for any subsequent year,
more than 50% of our assets may be assets which produce passive income, in which case we would be deemed a PFIC, which could have adverse
U.S. federal income tax consequences for U.S. taxpayers who are shareholders. We will make this determination following the end of any
particular tax year.</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">Although the law in this regard is unclear, we
treat the PRC operating entities as being owned by us for United States federal income tax purposes, not only because we exercise effective
control over the operations of such entities but also because we are entitled to substantially all of their economic benefits, and, as
a result, we consolidate their operating results in our consolidated financial statements. For purposes of the PFIC analysis, in general,
a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own
at least 25% of the equity by value.</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">For a more detailed discussion of the application
of the PFIC rules to us and the consequences to U.S. taxpayers if we were or are determined to be a PFIC, see &#8220;Item 10. Additional
Information&#8212;E. Taxation&#8212;United States Federal Income Taxation&#8212;PFIC.&#8221;&#160;</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>Anti-takeover provisions in our amended
and restated memorandum and articles of association may discourage, delay, or prevent a change in control.</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">Some provisions of our amended and restated memorandum
and articles of association may discourage, delay, or prevent a change in control of our company or management that shareholders may consider
favorable, including, among other things, the following:</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr>
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="vertical-align: top; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">provisions that authorize our board of directors to issue shares with preferred, deferred, or other special rights or restrictions without any further vote or action by our shareholders; and</span></td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr>
    <td style="text-align: justify">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">provisions that restrict the ability of our shareholders to call meetings and to propose special matters for consideration at shareholder meetings.</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><div><a id="a_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 4. INFORMATION ON THE COMPANY</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">A. <span style="text-decoration:underline">History and Development of the Company</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the history and development of the Company,
please refer to &#8220;Item 3. Key Information&#8212;Our Corporate History.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 31, 2023, our Class A Ordinary Shares
commenced trading on the Nasdaq Capital Market under the symbol &#8220;SFWL.&#8221; On April 4, 2023, we closed our initial public offering.
We raised $9.60 million in gross proceeds from our initial public offering, before deducting underwriting discounts and other related
expenses.</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>Corporate Information</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">Our principal executive office is located at Shengfeng
Building, No. 478 Fuxin East Road, Jin&#8217;an District, Fuzhou City, Fujian Province, China, and our phone number is +86-591-83619860.
Our registered office in the Cayman Islands is located at Suite 102, Cannon Place, P.O. Box 712, North Sound Rd., George Town Grand Cayman,
KY1-9006 Cayman Islands, and the phone number of our registered office is +1-(345) 947-7275. We maintain corporate websites at sfwl.com.cn.
The information contained in, or accessible from, our websites or any other website does not constitute a part of this annual report.
Our agent for service of process in the U.S. is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.</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 SEC maintains a website at www.sec.gov that
contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC using
its EDGAR system.</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">For information regarding our principal capital
expenditures, see &#8220;Item 5. Operating and Financial Review and Prospects&#8212;B. Liquidity and Capital Resources&#8212;Capital Expenditures.&#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; text-align: justify">B. <span style="text-decoration:underline">Business Overview</span>&#160;&#160;</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"><b>Our Mission</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">The VIE is one of the leading contract logistics
service providers in China. Since the establishment of the VIE in 2001, our mission has been to provide logistics solutions to companies
in need of storage and delivery assistance in China. Through our experienced management team, we apply our well-established management
system and operation procedures to assist companies in China to increase efficiency and improve their own management systems with respect
to transportation, warehousing and time management. We aim to provide our clients with superior and customized services. Our business
slogan is &#8220;When you entrust us with your goods, we cherish them as our own.&#8221;</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"><b>Overview</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">Contract logistics is a comprehensive process
that merges traditional logistics with supply chain management. Contract logistics companies outsource resource management tasks to third-party
companies and handle activities such as planning and designing supply chains, designing facilities, processing orders, collecting payments,
managing inventories, and providing client 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"></p><div>

</div><!-- Field: Page; Sequence: 61; 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 -->57<!-- 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: 0; text-align: justify">We are a contract logistics company with consolidated
revenue of approximately $370.3 million, $346.7 million and $287.5 million for the fiscal year ended December 31, 2022, 2021 and 2020,
respectively.</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">Our
integrated logistics solutions are comprised of three segments: (1) B2B freight transportation services; (2) cloud storage services; and
(3) value-added services. Since the VIE&#8217;s inception, we, through the VIE and the VIE&#8217;s subsidiaries, have developed extensive
and reliable transportation networks in China, covering 341 cities across 31 provinces, as of December 31, 2022. Furthermore, we, through
the VIE and the VIE&#8217;s subsidiaries, serve more than 4,000 manufacturers and trading companies (medium-scale to large-scale) throughout
China, including brand names such as CATL Battery, Bright Dairy, SF Express, Schneider Electric, Tesla and Xiaomi.</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; text-align: justify">We, through the VIE and the VIE&#8217;s subsidiaries,
operate on a scalable integrated network model, which we believe is best suited to support our business and maintain the quality of our
comprehensive logistics services. As a contract logistics company, we, through the VIE and the VIE&#8217;s subsidiaries, directly operate
all of our regional sorting centers, Cloud OFCs and service outlets. We, through the VIE and the VIE&#8217;s subsidiaries, also own and
operate our fleets. In order to establish broader network and provide more efficient services, we, through the VIE and the VIE&#8217;s
subsidiaries, cooperate with third-party transportation providers in providing freight transportation services and with some network partners
to promote our business. The integrated network model aims to satisfy the need for reliability, visuality, and timeliness; while we concentrate
on the establishment of our network, continuous improvement in our comprehensive logistics services, and construction of our logistics
ecosystem. We believe this network model allows us to achieve strong operating results while maintaining and minimizing fixed costs and
capital requirements, which results in higher return on earnings and equities.</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">Operational efficiency, cost management, and competitive
pricing are critical to the success of a contract logistics company. We, through the VIE and the VIE&#8217;s subsidiaries, have achieved
strong operational efficiency through centralized control and management of 35 regional sorting centers, 22 Cloud OFCs, 42 service outlets,
approximately 600 self-owned trucks and vehicles, and over 40,000 transportation providers, route planning and optimization, and transportation
and management system.</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 goal is to provide high-quality professional
services to our clients. We, through the VIE and the VIE&#8217;s subsidiaries, have established proven systems and procedures that are
critical in achieving standardization and control over the quality of services rendered by us and third-party transportation providers.
We constantly monitor and attempt to improve on our series of key metrics in service-quality control and management such as late delivery
rate, complaint rate, and damaged or lost freight rate, as we strive to become the best in the industry by improving each of the stated
key metrics. Our superior service quality was demonstrated when the VIE was ranked 32<sup>nd</sup> among the 50 listed privately owned
logistics companies by CFLP, the first association in the logistics and procurement industry in China and an association approved by the
State Council of China, on August 24, 2022. In September 2020, the VIE was recognized by CFLP as one of the leading freight companies
for our high-quality and professional services during the COVID-19 pandemic.</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 VIE and the VIE&#8217;s subsidiaries&#8217;
total transportation volume increased from approximately 6,360,000 tons for the fiscal year ended December 31, 2021 to approximately 7,800,000
tons for the fiscal year ended December 31, 2022, representing an increase of approximately 22.64%. For the fiscal years ended December
31, 2022 and 2021, net revenue generated from providing our services provided by the VIE and the VIE&#8217;s subsidiaries were approximately
$370.3 million and $346.7 million, respectively. Our total net revenue increased by approximately 6.8% during 2022 compared to 2021. We,
through the VIE and the VIE&#8217;s subsidiaries, generated operating profit of approximately $9.8 million and $8.6 million for the fiscal
years ended December 31, 2022 and 2021, respectively. Our operating profit margin was approximately 2.7% and 2.5% for the fiscal years
ended December 31, 2022 and 2021, respectively. We recorded net profit of approximately $7.8 million and $6.6 million for the fiscal years
ended December 31, 2022 and 2021, respectively.&#160;&#160;</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">Shengfeng Development Limited is a holding company
incorporated in the Cayman Islands and it is not a Chinese operating company. As a holding company with no material operations of its
own, its operations have been conducted in China by its subsidiaries and through contractual arrangements, or the VIE Agreements, with
a VIE, Shengfeng Logistics, and the VIE&#8217;s subsidiaries. For accounting purposes, we control and receive the economic benefits of
the VIE and the VIE&#8217;s subsidiaries&#8217; business operations through the VIE Agreements, which enables us to consolidate the financial
results of the VIE and the VIE&#8217;s subsidiaries in our consolidated financial statement under U.S. GAAP. Neither we nor our subsidiaries
own any equity interests in the VIE or the VIE&#8217;s subsidiaries. As an investor in this offering, you may be subject to unique risks
due to our VIE structure. The VIE Agreements are designed to provide our wholly owned subsidiary, Tianyu, with the power, rights, and
obligations to Shengfeng Logistics, including control rights and the rights to the assets, property, and revenue of the VIE, as set forth
under the VIE Agreements. Our VIE Agreements have not been tested in a court of law in China, as of the date of this annual report, and
may not be effective in providing control over the VIE. We are, therefore, subject to risks due to the uncertainty of the interpretation
and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure, including, but not limited to, regulatory
review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangements
with the VIE. We have evaluated the guidance in FASB ASC 810 and determined that we are regarded as the primary beneficiary of the VIE,
for accounting purposes, as a result of our direct ownership in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat
the VIE and the VIE&#8217;s subsidiaries as our consolidated entities under U.S. GAAP. We have consolidated the financial results of the
VIE and the VIE&#8217;s subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Class A Ordinary Shares offered in this offering
are shares of our offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE&#8217;s subsidiaries in China,
therefore, you will not directly hold equity interests in the VIE or the VIE&#8217;s subsidiaries, and you may never directly hold equity
interests in the VIE or the VIE&#8217;s subsidiaries through your investment in this offering. For a description of the VIE Agreements,
see &#8220;Item 3. Key Information<i>&#8212;</i>Our VIE Agreements<i>.</i>&#8221;&#160;</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"><b>Our Competitive Strengths</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 believe we have the following competitive strengths:</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>Contract Logistics Service Provider with Established Operating
History in China</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">Since 2001, and as of the date of this annual
report, we, through the VIE and the VIE&#8217;s subsidiaries, have operated as a contract logistics service provider for 22 years. Our
main business operates as a less than truckload, or &#8220;LTL,&#8221; freight carriers in China, and we, through the VIE and the VIE&#8217;s
subsidiaries, also provide full truckload, &#8220;FTL,&#8221; freight transportation 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">Through years of operation, we, through the VIE
and the VIE&#8217;s subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities across 31
provinces, as of December 31, 2022. We, through the VIE and the VIE&#8217;s subsidiaries, have also established a broad clientele base
across more than 4,000 manufacturers and trading companies (medium-scale to large-scale) throughout China, including brand names such
as CATL Battery, Bright Dairy, SF Express, Schneider Electric, and Xiaomi.</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, through the VIE and the VIE&#8217;s subsidiaries,
have achieved significant growth while maintaining profitability. We had an annual net profit growth of approximately 213.4% in 2020,
approximately 10.0% in 2021, and approximately 17.8% in 2022. Our net profit amounted to approximately $7.8 million, $6.6 million and
$6.1 million for the fiscal years ended December 31, 2022, 2021 and 2020, respectively; our net profit margins for the fiscal years ended
December 31, 2022, 2021 and 2020 were approximately 2.1%, 1.9% and 2.1%, respectively.</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>Operational Efficiency Driven by Detailed
Operational Guidelines </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, through the VIE, have designed and implemented
a series of systematic guidelines as part of our daily business operations to ensure efficiency.</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>Systematic Clients Management</i> &#8211; Every
client&#8217;s order is tracked on a real-time basis. Furthermore, we generate a summary report, periodically, for each client with respect
to its orders. Our client management systematically allows us to analyze current conditions, which in turn will help us to improve our
efficiency and increase our margin. For orders with a gross margin below 5%, we will conduct cost analyzations and adjust unit prices,
frights units, frights types, and/or transportation routes accordingly in order to conserve resources and mitigate cost.</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">Through Shengfeng TMS and our Customer Relationship
Management System (the &#8220;CRM&#8221;), we maintain a profile for each client, which includes the client&#8217;s information and corresponding
contract details, in order to closely and efficiently monitor our performance for each order. We will also follow up with clients on a
regular basis to collect feedbacks in order to improve our efficiency. See &#8220;&#8212;Our Technology Infrastructure.&#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>Streamline Purchase Orders Management</i> &#8211;
Our real-time tracking is available throughout the entire process. Moreover, revenue will be recognized and costs will be incurred at
every stage of our operations, i.e. receipt, trunk, and distribution, and split between each cooperative branch. By tracking the whole
process, we are able to further meticulously analyze revenue and cost for each order.</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>Prioritize Capacity Arrangement</i> &#8211;
On a daily basis, every station and routing center will, based on our system&#8217;s support and their industry experience, adjust, arrange,
and prioritize each and every order based on clients, weights, and routes in order to fulfill every order and maximize cost efficiency.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Finance and Accounting Management</i> &#8211;
We, through the VIE, have retained Marcum Asia to perform annual auditing of our financial positions. Part of our management in finance
and accounting management process is to utilize our Shengfeng TMS, which allows us to monitor cash inflows and outflows and costs incurred
on a real time basis. This process also allows us to analyze and evaluate the profitability of our line-haul and short-haul routes and
execute decisions strategically so that we can improve efficiency.</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>Interdepartmental Management Meeting</i> &#8211;
In order to connect all departments, from headquarters to our 35 operating branches, we hold monthly business meetings during which we
summarize our monthly operations, provide feedbacks to market changes, track business progress, boost employee morals, and ensure meeting
objectives.</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>Scalable Integrated Network Model </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 believe our scalable integrated network model
is best suited to support our growth. We believe that we have the capability to utilize our integrated network model to influence, support,
and serve these ongoing, high market demands. Our model is well-suited to serve fragmented market clientele base and cope with seasonal
demand. Furthermore, our national network&#8217;s fast growth allows us to provide clients with greater geographic reach at a lower cost.</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, through the VIE and the VIE&#8217;s subsidiaries,
own and operate our own regional sorting centers, Cloud OFCs and service outlets. We, through the VIE and the VIE&#8217;s subsidiaries,
also directly own and operate our fleets. In order to establish broader network and provide more efficient services, we, through the VIE
and the VIE&#8217;s subsidiaries, cooperate with third-party transportation providers in providing freight transportation services and
with some network partners to promote our business. As of December 31, 2022, the VIE and the VIE&#8217;s subsidiaries&#8217; transportation
and sorting network is comprised of 35 regional sorting centers, 22 Cloud OFCs and 42 service outlets. Our network in China covered 341
cities in over 31 provinces as of December 31, 2022.</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>Extensive and Growing Ecosystem </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">Our ecosystem is comprised of the Company, clients,
and transportation providers. We, through the VIE and the VIE&#8217;s subsidiaries, have established business relationships with over
4,000 medium to large-scale corporate clients, and over 40,000 transportation providers, as of December 31, 2022. Moreover, our reach
extends to individual consumers, small and medium corporate clients, and large-cap companies through our network. We, through the VIE
and the VIE&#8217;s subsidiaries, serve various industries and have developed a strong presence in the manufacturing, fast moving consumer
goods and publishing industry.</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>Superior Service Quality</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 endeavor to consistently provide superior services
to our clients. We believe we have successfully designed, established and streamlined policies and processes to achieve standardization
and control over service quality delivered across our networks. We constantly monitor a variety of key service quality metrics, such as
delivery date rate, complaint rate, and damaged or lost freight rate, and we continuously strive to improve each of these rates. In addition,
we, through the VIE and the VIE&#8217;s subsidiaries, operate a call center system to provide real-time assistance to our clients 10 hours
a day, 7 days a week. We believe that our clients choose our services due to our superior service quality.</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>Experienced Management Team with a Proven
Track Record</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">Our management has extensive experience, knowledge,
and proven track records within the logistics industry, which brings us to a deeper understanding of business operations as well as deep
industry connections. The majority of our senior management team has been with the Company for many years, and some of them have been
with us since our inception in 2001. Mr. Yongxu Liu, our Chairman, chief executive officer and President, has over 20 years of experience
in the logistics industry. Mr. Yongxu Liu founded our Company with a vision to provide accessible, reliable, and high-quality logistics
solutions to Chinese businesses and to become a leading player in the industry. Under his leadership, our Company started off in 2001
from being a small-sized logistics service provider with only 60 employees, to becoming one of the largest logistics service providers
in China with total transportation volume of approximately 7,800,000 tons for the fiscal year ended December 31, 2022 and we have 1,550
employees as of December 31, 2022. For further details on our directors and senior management, see &#8220;Management.&#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>

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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"><b>Our Growth Strategies</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 aspire to be a leading company in the contract
logistics market in China, and we intend to pursue the following strategies in furtherance of our growth:</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; text-align: justify"><b><i>Expand Market Share</i></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 currently intend to build our business upon
our current position and presence with the goal to become more influential in the contract logistics market in China. We will continue
working on enhancing our brand recognition and image, improving value propositions, and achieving greater economies of scale. This will
also help us to attract new clients and increase our share of existing clients&#8217; logistics budgets through more frequent use of our
services.</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"><b><i>Broaden Our Service Offerings</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 intend to broaden our service offerings. Through
our existing transportation network, we aim to provide express delivery services and supplement our current cloud storage services with
supply chain management solutions. In addition, we plan to continue enhancing the quality of our services in order to meet the individual
needs of our clients and enhance client retention.</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>Further Strengthen Our Nationwide Transportation
Networks</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 plan to further strengthen our nationwide transportation
networks to cover more geographic areas in China and boost future growth. Specifically, we intend to enhance our network density by penetrating
into the greater Beijing area, Yangtze River Delta, western China, and northeastern China by setting up additional regional sorting centers,
Cloud OFCs, and service outlets as well as expanding our existing ones.</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>Enhance Our Technology Platform and Infrastructure</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 intend to continue investing in information
technology and equipment in order to enhance our operational efficiency, reliability, and scalability, improve client experience, and
reduce costs. Our initiatives include route planning optimization, sorting automation, and supply chain automation. To this end, we plan
to hire, train, and retain the best talents in the industry and invest in research and development, including automated, smart, and high-tech
warehouse equipment and systems. Our ultimate goal is to be able to fulfill various demands and requests from our clients by providing
them with an integrated and one-stop warehousing and distribution services and experience.</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>Pursue Strategic Alliances and Acquisition
Opportunities</i></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; text-align: justify">From time to time, we may selectively form strategic
alliances with other logistics companies or other business partners that bring synergies with our business. We may also selectively pursue
acquisitions that will complement our business and operations. As of the date of this annual report, we have not identified any specific
strategic alliances or acquisition opportunities.</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"></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 -->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: 0pt 0"><span style="font-size: 6pt"><b>&#160;</b></span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt"><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-size: 10pt">Through our integrated
network model, we, through the VIE and the VIE&#8217;s subsidiaries, provide B2B freight transportation services and cloud storage services
to our clients. As an integral part of our freight transportation services and cloud storage services, we, through the VIE and the VIE&#8217;s
subsidiaries, also provide a wide range of value-added logistics services, such as collection on delivery services, customs declaration
services, packaging services, and shipment protection services. We, through the VIE and the VIE&#8217;s subsidiaries, execute these service
commitments by investing in and retaining talented employees, developing innovative proprietary systems and processes, and utilizing a
network of transportation provided by us and third-party transportation providers. While industry definitions vary, given our extensive
contracting to create a flexible network of solutions, we are generally referred to in the industry as a contract logistics company.</span>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following chart sets out the services provided by us through the
VIE and the VIE&#8217;s subsidiaries.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;<img alt="" src="image_002.jpg"/></b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Freight Transportation Services (Transportation Services)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-size: 6pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Freight transportation service is currently the
largest segment in our business and source of income. The revenue from freight transportation service increased from approximately $327.8
million, or 94.6% of the total revenue for the fiscal year ended December 31, 2021 to approximately $346.0 million, or 93.4% of the total
revenue for the fiscal year ended December 31, 2022.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We, through the VIE and the VIE&#8217;s subsidiaries,
mainly offer FTL freight transportation and LTL freight transportation to enterprises for goods weighing over 500 kilograms as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-size: 6pt">&#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="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>FTL</i>: We provide professional transportation solutions with accurate FTL and special-truck delivery services. FTL freight transportation services are specially designed for heavy shipments which typically weigh over 3,000 kilograms. We have access to dry vans, flatbeds, hazardous parcel vans, and bulk capacity. We may connect our clients with our transportation network and third-party transportation providers that specialize in their transportation lanes and product types, and optimize the usage of our equipment.</span></td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-size: 6pt">&#160;</span></td>
    <td><span style="font-size: 6pt">&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 6pt">&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>LTL</i>: LTL freight transportation involves the shipment of single or multiple pallets of freight. LTL shipments typically weigh between 15 kilograms and 3,000 kilograms. We mainly provide transportation services for B2B LTL shipments weighing between 500 kilograms and 3,000 kilograms.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We, through the VIE and the VIE&#8217;s subsidiaries,
offer FTL freight transportation services when (i) the freight is large enough to require its own truck, (ii) the freight is fragile
and it requires special handling, or (iii) the shipment has time critical or time-definite restrictions on the transit time of the freight;
otherwise, we, through the VIE and the VIE&#8217;s subsidiaries, offer LTL freight transportation services, and our vehicles carry as
many different orders of freight as they can manage and deliver them in whichever order best suits the journey. About 30% of our freight
transportation services are provided by our self-owned fleet and the rest are provided by third-party transportation providers. For further
details on these transportation providers, see <i>&#8220;&#8212;</i>Our Transportation Providers.&#8221;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-size: 10pt">To meet our clients&#8217;
different needs, we typically provide individualized transportation services on a contractual basis. We, through the VIE and the VIE&#8217;s
subsidiaries, usually enter into freight transportation agreements directly with our clients for a series of freight transportation orders
over a year. The service pricing, freight routes, settlement terms and other terms will be set forth in the agreements. Other than the
clients who enter into service agreements with us for LTL or FTL freight transportation services, we also provide LTL freight transportation
services to some retail clients based on the shipment orders generated from time to time.</span>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the fiscal years ended December 31, 2022,
2021, and 2020, we, through the VIE and the VIE&#8217;s subsidiaries, provided freight transportation services for 2,291, 2,226 and 2,431
clients, respectively, in the industries of, among others, manufacturing, energy, telecommunications, internet, fashion, fast moving consumer
goods, publishing, agriculture and e-commerce.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-size: 6pt">&#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: 66; 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 -->62<!-- 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"></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>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Shipment Flow</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">The following diagram illustrates the process
for the completion of a typical freight transportation order.</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-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_003.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><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"></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; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;<img alt="" src="image_004.jpg"/></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="text-decoration:underline">Step 1: Freight Pickup</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; text-align: justify">Our regional sorting center arranges for vans
to collect the freight from the senders once it receives shipment orders. These vans are provided either by us or by third-party transportation
providers. Through each waybill, we assign a unique tracking number and corresponding barcode to each parcel. The waybills, coupled with
our automated systems, enable us to track the status of each individual parcel throughout the entire pickup, sorting, transportation,
and delivery process. Our service outlets also receive small shipment orders and collect and send freight to our regional sorting centers
from time to time.</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="text-decoration:underline">Step 2: Freight Sorting and Line-Haul Transportation</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon receiving freight, the regional sorting center
will sort, pack, and dispatch the freights to the destination regional sorting center (line-haul transportation services between our regional
sorting centers are provided). Barcodes attached to the freight are scanned as they pass each sorting and transportation gateway so that
we and our clients can keep track of real-time delivery progress.</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="text-decoration:underline">Step 3: Freight Delivery</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; text-align: justify">Our destination regional sorting center unloads
and sorts the freight, which is then delivered directly to the recipients&#8217; sites using vans operated by us or third-party transportation
providers. Recipients may also elect to pick up their freight at our delivery outlets. Once the recipient confirms receipt through signature,
our whole service cycle is completed and the settlement of delivery service fee promptly appears on our payment settlement system.</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"></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 -->63<!-- 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">For FTL shipments, we generally pick up the freight
directly from the clients&#8217; sites and transport them to the recipients&#8217; destination using our line-haul transportation, without
combining orders from different clients for an FTL shipment. For LTL shipments, we combine orders from different clients into an FTL shipment
at our sorting centers and transport them to the designated location. Through our line-haul and short-haul transportation lines, regional
sorting centers, and information system, we have consolidated freight and freight information to best provide valuable and concise information
to our clients.</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"><i>Freight Transportation Services Pricing</i></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our pricing, for each order of freight transportation,
depends on the weight, route, type, and value-added 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">We determine our pricing based on various factors,
including, but not limited to, operating costs, general market conditions, competitions, and service quality. Our service pricing may
also be influenced by market conditions and competitions. From time to time, we may evaluate and adjust our service pricing based on,
among other factors, market conditions and operating costs.</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>Cloud Storage Services (Warehouse Storage and Management Services)</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, through the VIE and the VIE&#8217;s subsidiaries,
offer warehouse management, order fulfillment, delivery process management, in-warehouse processing, and inventory optimization management
services to our clients to optimize their inventory and delivery process management. We, through the VIE and the VIE&#8217;s subsidiaries,
also provide and arrange transportation services and coordinate shipments from merchants to our Cloud OFCs and from there to other locations
designated by our clients as part of our order fulfillment services.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Inventory Management</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"><span style="font-size: 10pt">Cloud OFCs differ
from traditional warehouses in that they can support direct order fulfillment and dispatch operations in addition to storage functions.
They are &#8220;cloud-based&#8221; because we take full responsibility for the optimal allocation of our clients&#8217; inventory into
different Cloud OFCs and save our clients from the hassle of day-to-day operations, therefore, from our clients&#8217; point of view,
these Cloud OFCs are &#8220;in the cloud.&#8221;</span>&#160;</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 31, 2022, we, through the VIE and
the VIE&#8217;s subsidiaries, directly operated 22 Cloud OFCs across China with a total area of approximately 2,444,000 square feet, among
which 5 Cloud OFCs were multistory facilities. All the Cloud OFCs use our technology infrastructure and are connected to various information
systems across our platform. Therefore, we can allocate inventory of our clients effectively within our Cloud OFCs and coordinate our
services, including subsequent transportation and delivery, accordingly. We constantly monitor the service quality of our Cloud OFCs to
ensure we uphold the standard of our services. The following map illustrates our Cloud OFCs network as of December 31, 2022.</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"></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-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_005.jpg"/></p><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"></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 -->64<!-- 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: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;<img alt="" src="image_006.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></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">By utilizing our Cloud OFCs, we provide the following
services to our clients through the VIE and the VIE&#8217;s subsidiaries:</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="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Storage. </i>We offer reliable and convenient storage solutions for a variety of commercial needs through the warehouses owned or leased by us. Our warehouse facilities are temperature-controlled, secured, and fire-preventive to protect the integrity of our client&#8217;s products.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Pick and Pack.</i> After receiving pick tickets from our clients, our team of trained professionals retrieve clients&#8217; orders according to the instructions on the corresponding pick tickets and pack the items in preparation for shipping.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Kitting and Assembly. </i>Based on the instructions of our clients, we arrange individual items and assemble the separate pieces into a single ready-to-ship set according to specified combinations.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Fulfillment. </i>We receive orders from clients via our WMS or e-mail. We then generate pick-up tickets, and send these tickets to the warehouse for packing, before the goods are picked up by the clients&#8217; designated transportation carriers. Ownership and responsibility of the goods are then transferred to such carriers.</span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></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">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Delivery Process Management. </i>We conduct the handover of the shipments of our clients to their transportation and distribution carriers pursuant to the standard operating procedures set forth in our agreements with the clients. </span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Other Value-added Services. </i>We also offer some value-added services such as inbound qualify testing, repackaging, labeling, and inventory shelf life management.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Inventory Optimization Management.</i> We regularly provide to our clients different reports reflecting the status of their storage and inventory so that they can make business decisions accordingly to optimize their inventory structure. &#160;</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">With our WMS, we are able to effectively monitor
the capacity of our warehouses on a real-time basis and track each and every movement of a good from its entry into our warehouse to its
delivery at its destination, including receiving, storing, packing, and shipping. For details of our WMS, see &#8220;&#8212;Our technology
infrastructure.&#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">We normally enter into 1-year to 5-year service
contracts with our cloud storage service clients. Our contracts specify the details of our services based on the client&#8217;s expected
sale volumes and the floor areas to be used. Our contracts typically state the unit price of each service we provide. The amount of revenue
we generate depends on the unit price and volume.</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>Logistics</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"><span style="font-size: 10pt">We, through the
VIE and the VIE&#8217;s subsidiaries, have integrated our transportation network and Shengfeng TMS with our client&#8217;s respective
logistics network and systems. By leveraging our technologies and professional expertise, we are capable of creating and designing solutions
for optimizing, transforming, and upgrading our clients&#8217; supply chains as well as reducing their costs. Our national footprint allows
us to provide these services to our clients and their manufacturing partners across many regions of China.</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: 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 -->65<!-- 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"></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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following diagram illustrates the product
flow in a typical supply chain. Each client, based on its individual needs and recommendations from our solution design, may elect to
use any combination of the various services we provide at each step of the product flow.</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: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="image_007.jpg"/>&#160;</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; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Inbound Logistics. </i>We craft and optimize inbound logistics networks for our clients to ensure that the flow of goods and materials into their business meets their operational objectives. We use different delivery methods specific to the various goods we handle. For instance, a milk run is a delivery method used to transport mixed loads of raw materials from various suppliers to one client. Instead of having each of our client&#8217;s suppliers transport raw materials individually, we will visit the client&#8217;s suppliers on a prearranged date, pick up raw materials, and deliver them to the client.</span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></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">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Line-haul and Short-haul Distribution. </i>We assist clients in the transportation of intermediate goods and products between their factories and warehouses and between warehouses in different regions. Our line-haul and short-haul transportation network makes the process efficient and keeps the costs low for our clients.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Outbound Logistics. </i>We assist clients in the transportation of products to ender users or distribution centers through line-haul and short-haul transportation, regional distribution, or last mile delivery, depending on the destinations and the amount of freight.&#160;&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Reverse Logistics. </i>In reverse logistics, the goods move from the end user back to the seller or manufacturer, our clients. We help clients manage activities after the initial sales, including returns, refurbishing, packaging, and unsold goods. Through the process, we aim to reduce storage and distribution costs, improve clients&#8217; reputation among its end users, satisfy client&#8217;s needs, and create a more sustainable supply chain for our clients.</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"><b><i>Value-added Services</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">In addition to our B2B freight transportation
and cloud storage services, we, through the VIE and the VIE&#8217;s subsidiaries, provide a wide range of value-added services to our
clients to meet their diversified needs.</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>Collection on delivery services. </i>Under
circumstances where a seller ships goods to a buyer, we provide the seller with the option to authorize us to collect payments from the
recipient on its behalf. We charge collection fees equal to 4% of the collected payment for a transaction, and we wire the collected payment
back to the seller on the same day of collection.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-size: 10pt"><i>Customs declaration
services. </i>Some of our clients require international shipping services, in response, we provide customs declaration on an as-needed
basis to assist them in meeting the legal requirements such as import and export, and trade. We engage third-party service providers that
maintain the licenses required under applicable PRC laws and regulations for providing customs declaration services.</span>&#160;</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"><i>Delivery upstairs services. </i>We offer door-to-door
delivery services. In China, it is customary for logistics companies to charge additional fees based on the floor level. The higher the
floor, the higher the fees. Fees are calculated based on a number of factors, including, but not limited to, weight of the goods, destination
floor, and elevator availability.</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>Packaging services</i>. We provide shipment
packaging services to our clients. In addition to regular packaging materials, we provide a few other options. For instance, we have introduced
temperature control materials for packing fruits and vegetables or otherwise perishable goods, shock absorbing materials for packing fragile
goods in order to reduce damages that may occur during transportation, and wooden materials for carrying heavier goods.</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">Other than the regular and necessary packaging
protection on shipments we provide at no additional costs to the clients, we also provide additional packaging protection services in
two options: active protection and protection upon request. Active protection will be provided free of charge based on our own judgment
and experience without requests from our clients. It mostly involves shipments of special products or under certain extreme natural conditions,
such as high precision instruments which need special fixing protection, or liquids being sent to cold areas in the winter which need
cold resistant protection. Additional packaging protection upon request from our clients will incur additional fees based on the shipment
and the requests.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></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 -->66<!-- 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"></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"><i>Pay-at-arrival services</i>. We typically require
senders to pay for shipment fees as we collect freight from them. Alternatively, senders may select the pay-at-arrival option, which authorizes
us to collect shipment fees from recipients upon freight arrival. In this case, the Company will deliver the shipment upon the receipt
of shipment fees from the recipients.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Return proof of delivery</i>. For this service,
we issue receipts with either the recipients&#8217; signatures or other credible documentations back to the senders, which allows senders
to obtain proof of receipt from recipients. We also offer senders the option to receive and view such receipts electronically on their
desktop or phones.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Shipment protection</i>. We provide shipment
protection services to our clients. For the clients who enter into service agreements with us, terms and conditions of shipment insurance
are generally set forth under the service agreements, and they are usually responsible for the insurance premium in the amounts as set
forth under the agreements on a&#160;case-by-case basis. For the retail clients, they can decide on whether to purchase shipment protection
insurance policy or not at their sole discretion. If they choose to purchase such insurance policy, they will usually be charged an insurance
premium of approximately 0.3% of the declared value of the shipments. If a client has purchased shipment protection services, in case
of lost, stolen, or damaged shipment during transit, he/she should first provide us with a claim letter and proof of value. Once we verify
those materials, we will reimburse the client&#8217;s loss accordingly based on the terms and conditions set forth under the service agreements.
Afterwards, we will claim for reimbursement from the insurance company based on the insurance policies. The insurance company will then
claim for reimbursement from the parties at fault, if the Company is not at fault. If a client has not purchased shipment protection services,
then in case of lost, stolen, or damaged shipment during transit, we will reimburse for the client&#8217;s loss in the amount equal to
1 to 3 times of the shipping fees.</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; text-align: justify; margin: 0pt 0"><b>Our Network and Infrastructure</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our network consists of regional sorting centers,
Cloud OFCs, service outlets, the line-haul and short-haul transportation network operated by us, and our network partners across China.</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>Regional Sorting Centers</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our regional sorting centers are connected by a line-haul transportation
network that we operate. They collect freight directly from clients or from service outlets within their coverage area, sort it according
to destinations, and dispatch the freight to the designated regional sorting centers. As of December 31, 2022, we, through the VIE and
the VIE&#8217;s subsidiaries, operated 35 regional sorting hubs in Fujian, Guangdong, Shanghai, Beijing, Zhejiang, Hubei, and 16 other
provinces in China. Under our operational guidelines, our regional sorting centers did not experience any significant service interruption
during the COVID-19 pandemic or peak seasons.&#160;</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><!-- Field: Page; Sequence: 71; 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 -->67<!-- 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">The following map shows our nationwide sorting center network as of
December 31, 2022.</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; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="image_008.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></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; text-align: justify">Our centralized planning team coordinates the
development and expansion of new and existing regional sorting centers, including site selection, facility layout design, and equipment
purchase. As we strive to provide seamless and efficient logistic solutions to our clients, we regularly contemplate our opportunities
to improve our services. We will consider adding new regional sorting centers if they help optimize our route or increase our capacity
in the surrounding areas. We select the locations based on certain factors, including, but not limited to: (i) client density, (ii) ease
of access, (iii) rent pricing, (iv) payment method, (v) regulatory compliance, (vi) safety, and (vii) surrounding infrastructure and environment.</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 design our regional sorting centers in a uniform
manner to deliver a consistent brand image and build in extra capacity for volume growth in the foreseeable future. We hire 20 to 400
employees in each of our regional sorting center, depending on the local freight volume, and we provide each center with sorting and loading
equipment.</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">When planning routes, we prioritize the efficiency
of the entire network. We dispatch freight to the regional sorting center closest to its destination even if the regional sorting center
and the destination are located in different administrative regions. This reduces transportation time and lowers our and our clients&#8217;
transportation costs. Our route planning and management benefit from our years of experiences and information technology infrastructures,
and they enable us to track freight movement on a real-time basis.</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">Among our regional sorting centers, 2 are located
on lands that we own and the remaining 33 are located on leased lands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><b>&#160;</b></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 -->68<!-- 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; text-align: justify"><b><i>Cloud OFCs</i></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"><span style="font-size: 10pt">See &#8220;&#8212;Service Offerings by
Us&#8212;Cloud Storage Services&#8221; above.</span>&#160;</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><i>Line-haul and Short-haul Transportation Network</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, through the VIE and the VIE&#8217;s subsidiaries,
operate over 600 line-haul and short-haul routes. We utilize our self-owned fleet in addition to the vehicles owned and operated by third-party
transportation providers to form both our line-haul transportation network for long-distance, high-capacity transportation, and our short-haul
transportation network for short-distance, low-capacity pickup and delivery. Because we control route planning and vehicle dispatch of
our entire line-haul and short-haul transportation system, we plan our routes with the goal to lower transportation costs and transit
times.</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 31, 2022, our own line-haul fleet
is comprised of 294 truck headstocks and over 1,000 cabinets for ordinary shipments and 10 truck headstocks and 15 cabinets for hazardous
shipments. We, through the VIE and the VIE&#8217;s subsidiaries, invest in our fleet with our own funds so we are able to adjust the ratio
of different vehicle models swiftly to react to changes based on operational needs. We mostly use 16-meter-long trucks, which have nearly
twice the loading capacity of 9.6-meter-long trucks (commonly used in the industry), to minimize marginal costs and lower unit line-haul
transportation costs. The uniform design of our regional sorting centers with extra parking space also allows us to lower transportation
cost of freight. To increase our transportation efficiency, we utilize the drop and pull transportation method.</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 31, 2022, we, through the VIE and
the VIE&#8217;s subsidiaries, also owned 242 vehicles for our short-haul transportation.</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">For the fiscal years ended December 31, 2022 and
2021, approximately 30% and 29% of our freight transportation services were provided by our self-owned fleet and the balance was outsourced
and provided by independent third-party transportation providers. For the fiscal years ended December 31, 2022 and 2021, we had 56,370
and 49,036 outsourced vehicles for over 5.54 million and 4.84 million shipments, respectively. The price we pay to third-party transportation
providers is based on our market insights on cost factors, including (i) toll cost based on route, (ii) fuel cost based on route, type
of truck used, and fuel price, and (iii) other costs such as drivers&#8217; compensation, depreciation, and maintenance cost. For details
on third-party transportation providers, see &#8220;&#8212;Our Transportation Providers.&#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; text-align: justify; margin: 0pt 0"><b><i>Service Outlets</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, we, through the VIE and
the VIE&#8217;s subsidiaries, operated 36 service outlets across China. Our service outlets, in their assigned geographical areas, will
(1) create shipment orders and accept goods for shipment from our LTL clients; (2) deliver goods for shipment to our regional sorting
centers for freight transportation; and (3) accept shipments from regional sorting centers for the clients to pick up. Each service outlet
typically has 3 to 5 employees.</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 will consider adding new service outlets if
they help optimize our route or increase our capacity in the surrounding areas. We select the locations based on certain factors, including,
but not limited to: (i) client density, (ii) ease of access, (iii) rent pricing, (iv) internal layout, (v) regulatory compliance, and
(vi) surrounding infrastructure and environment.</p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To increase our client base and network coverage,
we, through the VIE and the VIE&#8217;s subsidiaries, have also entered into some network partner agreements. Our network partners will
create shipment orders and accept goods for shipment from their clients. Afterwards, they will deliver the goods to our regional sorting
centers for our freight transportation. The network partners are solely responsible for the rights and obligations under the service agreements
entered into by and between them and their clients. For the fiscal year ended December 31, 2022, our network partners contributed approximately
0.31% of our income from operations. For the year ended December 31, 2021, our network partners contributed approximately
0.49% of our income from operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><b>&#160;</b></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 -->69<!-- 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"><b>Our Ecosystem</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"><span style="font-size: 10pt">We have built a
growing ecosystem with various types of participants, including the Company, clients, and transportation providers. As our Company continues
to expand, we expect that more participants will join our ecosystem, which in turn, we believe, will bring us more business. The current
ecosystem has enhanced our user experience and brand value. We expect this will drive our growth.</span>&#160;</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">The following graphic illustrates the participants
and the network effect of our ecosystem.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_009.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></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; text-align: justify"><b><i>Our Clients</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, through the VIE and the VIE&#8217;s subsidiaries, mainly serve
clients in connection with the delivery of their products to consumers and other businesses. We have clients in various industries, including
manufacturing, energy, telecommunications, internet, fashion, fast moving consumer goods, publishing, agriculture and e-commerce. Our
largest clients include CATL Battery, Bright Dairy, SF Express, Schneider Electric, Tesla and Xiaomi. We served 2,634 and 2,535 clients
during the fiscal years ended December 31, 2022 and 2021, respectively, and no client accounted for more than 5% of our total revenue
during those years. The following table sets forth the top three industries our clients are in by percentage as of December 31, 2022:</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="border-bottom: Black 1.5pt solid; font-weight: bold">Industry</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">Percentage</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: 88%">Manufacturing</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">15.37</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Fast moving customer goods</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">14.30</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Publishing</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">7.00</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">36.67</td><td style="padding-bottom: 4pt; text-align: left">%</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><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"><i>Client Service</i></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 believe that our client service enhances our
client loyalty and brand image. Therefore, we provide ongoing trainings to our employees and transportation providers, and we conduct
regular performance reviews to ensure the quality of our 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"><span style="font-size: 10pt">We, through the
VIE and the VIE&#8217;s subsidiaries, operate a call center system to provide real-time assistance to our clients by our approximately
245 client service representatives 10 hours a day, 7 days a week. Our automated system continues to respond to inquiries outside of the
normal business hours and forwards complicated inquiries to our client service representatives for further handling. Our call centers
are localized with branch offices in over 20 provinces in China with mostly local hires to leverage their local knowledge. All branches
can be reached via a unified number and use the same call system and database. Our call system automatically forwards incoming calls to
the local branch near the caller&#8217;s location. Our client service representatives adhere to the same client service standards nationwide
and their local knowledge contributes to enhanced client service effectiveness. At the end of each call, we ask the caller to grade the
quality of our client service and a designated call-back team will follow up on all incidences of dissatisfaction. In addition, we hold
regular training sessions for our client service representatives and conduct regular performance reviews to ensure that they provide high
quality client service.</span>&#160;</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><i>Our Transportation Providers</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">During the fiscal years ended December 31, 2022
and 2021, we, through the VIE and the VIE&#8217;s subsidiaries, cooperated with approximately 45,558 and 36,736 transportation providers,
respectively. These transportation providers are of all sizes, including owner-operators of a single truck, private fleets, and large
trucking companies. All these transportation providers provide vehicles to carry out transportation tasks within our line-haul and short-haul
transportation network. The table below sets out the number of each category of transportation providers.</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="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="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Fiscal Years Ended<br/> 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="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><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></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; font-weight: bold; text-align: left">Owner-operators of a single truck (#)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">43,932</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">35,224</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Private fleets (#)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">25</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">54</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">Large trucking companies (#)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,601</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,458</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Total transportation providers</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">45,558</p></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">36,736</p></td><td style="text-align: left">&#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; text-align: justify">To strengthen and maintain our relationships with
transportation providers, our employees regularly communicate with them and try to assist them by increasing their equipment utilization,
reducing their empty miles, and repositioning their equipment.</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">To ensure that we only cooperate and work with
qualified transportation providers, our management formed an evaluation standard to control the quality of their services:</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="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Selection</i>. We carefully examine transportation
    providers&#8217; operating permits, vehicle condition, vehicle model, and whether the vehicles are connected with the BeiDou Navigation
    Satellite System, a Chinese satellite navigation system, and select qualified and reliable providers.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Regarding the cooperation with owner-operators
    of a single truck and private fleets, we also participate in the process to select drivers. We will verify and examine the drivers&#8217;
    licenses and take into consideration the history of cooperation between the Company and the drivers.</p></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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</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="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Inspection</i>. After a transportation provider begins cooperating with us, we regularly inspect its performance during different stages of the cooperation according to detailed specifications and timeline for services in our agreement.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Review</i>. We review the performance of each provider and rate them according to quality of services, timeliness, prices, and client services. Depending on the performance, we can increase, decrease, or terminate the cooperation with a provider.</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">We, through the VIE and the VIE&#8217;s subsidiaries,
typically enter into transportation contracts with providers (i) for a specific period of time, typically one year, or (ii) for a specific
order. Our contracts will specify the rights and obligations of the Company and the service providers, including, but not limited to,
quantities, specification, unit price, delivery timeline, payment date, liabilities and remedies. Service providers shall be responsible
for accidents, including economic loss caused to the Company, if they are at fault.</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, through Shengfeng Logistics, entered into a Road Freight Transportation
Cooperation Agreement with Hubei Luge on June 30, 2019. This agreement provided that Hubei Luge, as an Internet logistics platform, should
provide road freight transportation services in China to Shengfeng Logistics, and its designated subsidiaries, through its platform, on
the goods agreed upon and confirmed by both parties from time to time. The term of the agreement was from July 1, 2019 to December 31,
2020. Shengfeng Logistics should pay Hubei Luge a shipping fee per shipment equal to the amount of shipping fee paid by Hubei Luge to
the actual operator divided by 95.1%.</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, we, through Shengfeng Logistics, entered into a Road
Freight Transportation Platform Cooperation Agreement with Hefei Weitian Yuntong Information Technology Co., Ltd., or &#8220;Hefei Weitian,&#8221;
on September 1, 2020. This agreement provides that Hefei Weitian, including Hubei Luge and Anhui Luge as its designated subsidiaries,
as an Internet logistics platform, shall provide road freight transportation services in China to Shengfeng Logistics, and its designated
subsidiaries, through its platform, on the goods agreed upon and confirmed by both parties from time to time. The term of agreement was
from September 1, 2020 to August 31, 2021. We, through Shengfeng Logistics, have renewed the agreement in which the new term is from September
1, 2021 to December 31, 2023. Shengfeng Logistics shall pay Hefei Weitian a shipping fee per shipment equal to the amount of shipping
fee paid by Hefei Weitian to the actual operator divided by 95.1%. Anhui Luge and Hubei Luge are affiliates under the control of Hefei
Weitian.&#160;</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>Security and Safety</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; text-align: justify">We have designed and integrated safety policies
and procedures across the full scope of our business. Our key safety measures include:</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>Operational Security and Safety</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, through the VIE and the VIE&#8217;s subsidiaries,
have established security screening protocols to inspect freights before acceptance. We have listed prohibited items for ground transportation
such as flammables, explosives, gunpowder, and gasoline. We also implement X-ray screenings to find hazardous or prohibited items. Our
safety screening system will continue to evolve in order to meet ever changing technologies.</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">Workplace safety and transportation safety are
important to our business. We have implemented protocols for safety of ground transportation for the operations of our regional sorting
centers, Cloud OFCs, and service outlets to minimize risks of accidents. We provide periodic trainings to our employees and transportation
providers to recognize hazards, mitigate risks and avoid injuries of themselves and others at work.</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>

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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"><b><i>Data Privacy and Safety</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, through the VIE and the VIE&#8217;s subsidiaries,
have designed and implemented comprehensive procedures and guidelines to regulate our employees and transportation providers&#8217; actions
in relation to confidential data and information to ensure data security. We employ a variety of technical solutions to prevent and detect
risks and vulnerabilities in our data privacy and safety, such as encryption and a firewall. We store and transmit all confidential data
and information in encrypted format on separate servers and back up our data and information on a regular basis. We do not share our data
or allow third parties to access our data stored on our servers without prior authorization, and we periodically test our systems and
procedures to detect and eliminate information security risks and privacy risks.</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>Our Technology Infrastructure</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">In order to build our core technology systems
and software to meet our needs, we, through the VIE and the VIE&#8217;s subsidiaries, maintain an in-house team for our technology research
and development. For details of our research and development, see &#8220;&#8212;Research and Development.&#8221; We, through the VIE
and the VIE&#8217;s subsidiaries, have also contracted with some third-party software design companies for licenses to use some of the
systems they designed and developed, such as some financial reporting and accounting systems. Our goal is to utilize these technologies
to increase efficiency in operations, enhance client experience, and contribute to our success.</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">Shengfeng TMS is the main system for our transportation
services, which is a comprehensive management system that allows us to effectively monitor and manage the various stages of transportation,
payment, and client service. Shengfeng TMS has the following key functions:</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-size: 10pt"><i>Shipment transportation
and tracking management. </i>Our shipments are sorted and dispatched based on the automatic routing calculation function provided by Shengfeng
TMS. Our GPS trackers, attached to every vehicle, is synchronized with Shengfeng TMS, which will allow us to track the status and location
of each shipment on a real time basis. We also integrate our GPS tracking with BeiDou Navigation Satellite System, WeChat mini programs,
and manual recording, also available on our website and official WeChat account. This integration will allow our clients to track shipments
and search our service outlet locations and sorting center locations.</span>&#160;</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>Payment calculation</i>. Shengfeng TMS tracks
each client&#8217;s order and allows us to view and issue bills to our clients and track client payments.</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>Client portal and service support. </i>We maintain
an online client portal, where our clients may register their own accounts. Through our online client portal, our clients may view all
of their order histories, track shipment status in real time, and make direct service requests. Our client service representatives have
access to Shengfeng TMS&#8217;s database through which they can provide a better and more effective service to our clients on a real time
basis. In particular, our employees will load and unload the shipments according to the preferences of the clients, stored in the TMS
system and sent through the portal, and our drivers will provide delivery services based on the instructions and requirements sent from
the portal to cater for the needs of the clients.</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>Portals for third-party transportation providers.
</i>Our management relies on Shengfeng TMS to effectively manage transport providers. We create an individual profile for each of our
service providers and store all corporate records or other material information into the system. Service providers are required to register
for accounts on the system prior to their cooperation with us, which allows them to monitor the real-time status and location of each
shipment they have been assigned. This also allows us to keep track of those shipments in the hands of third-party transportation providers,
as service providers are required to report location and shipments status of transport to Shengfeng TMS on a regular basis. In addition,
Shengfeng TMS is also capable of handling payment settlements.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We, through the VIE and the VIE&#8217;s subsidiaries,
own and operate a data center to support our core operational systems such as Shengfeng TMS and WMS. Our data center provides the network
infrastructure for our managerial, network safety, authority authentication, data backup, and other non-core functions.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In order to optimize our warehouse storage and
management services, we utilize our WMS. It has six core functions: a) storage location management; b) order management; c) &#8220;First-In,
First-Out&#8221; management; d) order and operation review; e) bar code management and tracking; and f) storage management. With WMS,
we are able to increase the accuracy of goods dispatching, to enhance the efficiency of the operation, to improve the quality management
and to control and realize the warehouse management process visualization.</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 WMS operates according to certain rules of
warehouse management including rules of pick-up, quality inspection, warehouse and storage separation and arrangement. Rules of the WMS
can be set based on the characteristics of different projects on site. Depending on the features of the goods, we perform certain procedures
accordingly after their receipt, such as counting, quality inspection, box combination, storage location designation, and storage on the
shelves. After the goods are stored in our warehouse, we keep track of their storage locations and we may move them from time to time
in preparation of upcoming shipments or for better utilization of storage space. Once we receive any order for shipment, we make plans,
create good pick-up orders, pick up the goods and verify the process again to control our accuracy and our service quality. Goods will
also be tracked until delivery and such result will be reflected in our system. With our WMS, we are able to effectively monitor the capacity
of our warehouses on a real-time basis and track each and every movement of a good from its entry into our warehouse to its delivery at
its destination, including receiving, storing, packing, and shipping.</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>Intellectual Property</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We rely on a combination of trademark, patents,
copyrights, trade secret, and contractual agreements to protect our proprietary rights.</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>Trademark</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"><span style="font-size: 10pt">As of the date of
this annual report, we had registered, through the VIE and the VIE&#8217;s subsidiaries, 36 trademarks, including 33 trademarks with the
Trademark Office of the State Administration for Industry and Commerce in China, such as our Company&#8217;s Chinese name, &#8220;Shengfeng
(<span style="font-family: Times New Roman, Times, Serif">&#30427;&#20016;</span>),&#8221; 1 trademark with the Economic Affairs Bureau
of Macao Special Administrative Region, 1 trademark with Trade Marks Registry Intellectual Property Department of the Government of the
Hong Kong Special Administrative Region and 1 trademark with the Intellectual Property Office of Taiwan.</span>&#160;</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>Copyright</i></b></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">As of the date of this annual report, we had registered,
through the VIE and the VIE&#8217;s subsidiaries, 79 computer software copyrights, including those that relate to Shengfeng TMS, with
the PRC National Copyright Administration.</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>Patent</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">As of the date of this annual report, we had registered,
through Guangdong Shengfeng Logistics Co., Ltd., one of the VIE&#8217;s subsidiaries, 2 invention patents and 12 utility model patents
with the National Intellectual Property Administration.</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 -->74<!-- 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"><b><i>Domain Name</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">As of the date of this annual report, we had registered,
through the VIE, 8 domain names, including our main website. The following table summarizes our domain name registration:</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="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">Domain Name</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: center">Territory</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">sfwl.com.cn</td><td>&#160;</td>
    <td style="text-align: center">China</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">sfwl.ink</td><td>&#160;</td>
    <td style="text-align: center">International</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">sfwl.net</td><td>&#160;</td>
    <td style="text-align: center">International</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">sfwl.online</td><td>&#160;</td>
    <td style="text-align: center">International</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">sfwl.vip</td><td>&#160;</td>
    <td style="text-align: center">International</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="width: 60%; text-align: left">4008556688.cn</td><td style="width: 1%">&#160;</td>
    <td style="width: 39%; text-align: center">China</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">4008556688.com.cn</td><td>&#160;</td>
    <td style="text-align: center">China</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">4008556688.net</td><td>&#160;</td>
    <td style="text-align: center">International</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">Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to infringe upon our intellectual property rights. In addition, third parties may initiate litigation
against us alleging infringement of their proprietary rights. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related
to Our Business and Industry&#8212;We may not be able to prevent others from unauthorized use of our intellectual property, which could
harm our business and competitive position<i>.</i>&#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 the date of this annual report, we have
not been subject to any material dispute or claims for infringement upon third-party trademarks, licenses, and other intellectual property
rights in China.</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>Competition</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The contract logistics industry in China is highly
fragmented, and we compete with many local, regional, and national logistics companies with more resources including Sinotrans Logistics
Ltd., Beijing Changjiu Logistics Co., Ltd., and Kerry Logistics (EAS) Limited. The competitions among contract logistics companies are
primarily based off of service pricing, transportation speeds, service offerings, and other factors. We believe our relatively long operating
history, superior operational capabilities, well-established national transportation networks, and high-quality services give us the competitive
advantages over others.</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">Entry into the contract logistics industry requires
significant initial investment in network construction, equipment and vehicle purchases, and formulation and attraction of new business
partners. However, other express delivery service providers or e-commerce companies which may be more established, may utilize or further
improve their existing proprietary delivery and transportation infrastructure to compete with us. Furthermore, as we look to expand our
service offerings and client base, we may face competition from players in those new sectors.</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>Branding and Marketing</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We strive to enhance our brand awareness through high service quality
and various marketing initiatives. Shengfeng Logistics was recognized as one of China&#8217;s outstanding logistics companies by the China
Communications and Transportation Association (the &#8220;CCTA&#8221;). Furthermore, Shengfeng Logistics was classified as an AAAAA class
logistics company and among the top 10 companies with logistics informatization capacity by the China Federation of Logistics and Purchasing
in 2018. Shengfeng Logistics was also recognized as a top 100 logistics companies in China by the CCTA in 2016 and 2018, respectively.
Shengfeng Logistics was also ranked 32<sup>nd</sup> out of the top 50 privately-owned logistics companies in China by CFLP as of December
31, 2022.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We, through the VIE and the VIE&#8217;s subsidiaries,
launched various programs and marketing activities to promote our brand and services. We rely on various social network mobile applications
such as WeChat to distribute business updates and corporate news. Additionally, we offer convenient features such as shipment tracking,
service outlet locator, shipment booking through our WeChat official account.</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 participate in conferences and exhibitions
in different industries to expand our pool of potential clients. We also design and develop different service packages to cater for the
demands of clients in different industries so that we could extend our reach of potential clients in similar industries and upstream and
downstream suppliers. We pay close attention to the development of innovative industries such as new energy vehicles, shared bikes and
Internet TV, and have formed cooperation relationships with companies in such industries.</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 bring in new clients through promotion activities
by our sales employees, market bidding activities, research on upstream and downstream entities of our current clients, participation
in conferences and exhibitions, meetings, calls, referrals, and other activities. In addition, we require our own fleet to apply our logos
onto transportation vehicles and personnel uniforms in a consistent and unified manner in order to further enhance our brand recognition
during interactions with the clients.</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 plan to develop and improve our marketing strategies
by focusing on the following: a) maintaining existing client relationships; b) establishing new client relationships; c) enhancing our
service quality and efficiency; and d) managing our marketing system and expertise. We will make specific marketing plans and take different
approaches based on the various industries, sizes, contract amounts and needs of our clients.</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>Employees</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">As of December 31, 2022, 2021, and 2020, we, through the VIE and the
VIE&#8217;s subsidiaries, had a total of 1,550, 1,543 and 1,583 full-time employees located in China, respectively. The following table
sets forth the breakdown of our employees by function as of December 31, 2022:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#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="border-bottom: Black 1.5pt solid; font-weight: bold">Function</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">% of 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: 76%">Stevedore</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">46</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">2.97</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Transportation</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">263</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">16.97</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Management Administration</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">350</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">22.58</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Client Service</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">217</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">14.00</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Operation Support</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">569</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">36.71</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Sales and Marketing</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">83</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">5.35</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">Technology and Engineering</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</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">1.42</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <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">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">1,550</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">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">100</td><td style="padding-bottom: 4pt; text-align: left">%</td></tr>
  </table><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition to our own full-time employees, our
workforce also includes 666 dispatched workers and 576 contractors, as of December 31, 2022. In addition, third-party transportation providers
retain their own employees according to their individual operational needs.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe our employees&#8217; compensation packages
are competitive and we have created a merit-based work environment that encourages initiative. As a result, we have generally been able
to attract and retain qualified personnel and maintain a stable core management team.</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 required by applicable PRC laws and regulations to participate
in various statutory employee benefit plans, including social insurance, medical insurance, maternity insurance, workplace injury insurance,
unemployment insurance, and pension benefits through a PRC government-mandated multi-employer defined contribution plan. Pursuant to PRC
regulations, we are required to contribute specific percentage of salaries, bonuses, and allowances (up to a maximum amount, specified
by local governmental regulations) to the employee benefit plan. As of the date of this annual report, we have not made adequate social
insurance and housing fund contributions for all employees as required by PRC regulations, but we have taken measures to comply with related
laws and regulations. Such measures include, but are not limited to, outsourcing our labor-related matters and making payments for unpaid
social insurance and housing fund contributions, which may increase the costs of our business and operation.&#160;<span style="font-size: 10pt">&#160;&#160;</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">We enter into standard labor agreements with our
full-time employees with standard confidentiality and non-compete provisions.</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 believe that we maintain a good working relationship
with our employees, and we have not experienced any major labor disputes.</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; text-align: justify; margin: 0pt 0"><b>Research and Development&#160;</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As information technology plays an essential role
in our business and services, we endeavor to develop and adopt advanced information technology to increase efficiency and accuracy in
operations, enhance client experience and satisfaction, and ultimately contribute to our growth and success.</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, through the VIE and the VIE&#8217;s subsidiaries,
maintain an in-house R&amp;D team which consists of four departments in Shengfeng Logistics: Product Department (8 employees and 1 manager),
Operation and Maintenance Department (3 employees and 1 manager), TMS Research and Development Department (10 employees and 1 manager)
and WMS Research and Development Department (3 employees and 1 manager). All of the said departments are under the supervision of the
Director of the Information Section of Shengfeng Logistics. Product Department is mainly responsible for the gathering of product development
requests and opinions, coordinating the communication among different parties on product development and providing necessary trainings
to support new products. Operation and Maintenance Department is mainly responsible for maintaining the computer network, operating systems,
software and hardware, and other equipment to ensure they function properly and are secured. TMS Research and Development Department and
WMS Research and Development Department are mainly responsible for the research and development of TMS and WMS. At least once or twice
per year, the Director of the Information Section will call for a meeting with certain managers and qualified employees from the R&amp;D
departments to discuss the necessity and possibility of new information technology developments and technology upgrades. Any proposal
discussed and approved during the meeting will be presented to the management for further discussion and decision.</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">From time to time, we contract with some third-party
software design companies for licenses to use some of the systems they designed and developed, such as some financial reporting and accounting
systems. They will also maintain the systems and provide necessary supports 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 passion and dedication for improvement and innovation have been
translated into our ability to develop and introduce new and diversified services with a fast pace, converting our advantage in research
and development into our commercial competitive advantage in the logistic industry. Through years of effort, as of December 31, 2022,
we have registered 43 computer software copyrights with the PRC National Copyright Administration and 1 invention patent with the National
Intellectual Property Administration. Since 2012, Shengfeng TMS has been our main system, which is a comprehensive management system that
allows us to effectively monitor and manage the various stages of transportation, payment, and client service. It is the Company&#8217;s
plan to continue its dedication to the research and development on information technology to enhance efficiency and client experience.</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">For more details on our technology infrastructure
and intellectual property, please refer to &#8220;&#8212;Our Technology Infrastructure&#8221; and &#8220;&#8212;Intellectual Property.&#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>

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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"></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: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif"><b>Properties
and Facilities</b></span>&#160;</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">Our principal executive office is located at Shengfeng
Building, No. 478 Fuxin East Road, Jin&#8217;an District, Fuzhou City, Fujian Province, People&#8217;s Republic of China, 350001, where
we, through Shengfeng Logistics, lease such property from a related party, Fuzhou Tianyu Shengfeng Industrial Co., Ltd., a company controlled
by Yongteng Liu, who is the brother of Yongxu Liu, our CEO and Chairman, with an area of approximately 24,886.16 square feet, with a lease
term from November 1, 2020 to October 31, 2022 and was renewed to October 31, 2024 with a monthly rent of RMB115,648 (approximately US$17,194).
We also need to pay a monthly property management fee of RMB15,564 (approximately US$2,314). We have priority to renew the lease as long
as we use the property for the same purpose, but we are required to notify the landlord at least two months in advance if we would like
to renew the lease.</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">As of December 31, 2022, we, through two of the VIE&#8217;s
subsidiaries, owned 2 office buildings in China with aggregate gross floor areas of approximately 58,348.58 square feet are on the land
we own, and we, through the VIE and the VIE&#8217;s subsidiaries, leased 34 office buildings in China with aggregate gross floor areas
of approximately 255,868.48 square feet. The terms of such leases range from 1 to 5 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">As of December 31,2022, we, through one of the VIE&#8217;s
subsidiaries, owned 4 land use rights with aggregate gross areas of approximately 340,388.43 square feet in Tong Zhou District, Beijing,
China. The use terms of the lands are 50 years. We have not commenced construction on the lands as of the date of this annual report.</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, as of December 31, 2022, 2 of the
regional sorting centers operated by the VIE and the VIE&#8217;s subsidiaries with an aggregate gross floor area of approximate 64,838.16
square feet are on the land we own, and 33 of the regional sorting centers operated by the VIE and the VIE&#8217;s subsidiaries with an
aggregate gross floor area of approximately 1,626,419.11 square feet are on leased land. The terms of such leases range from 1 to 5 years.</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 the date of this annual report, we, through
the VIE and the VIE&#8217;s subsidiaries, directly operate 22 Cloud OFCs across China to provide warehouse storage and management services.
As of December 31, 2022, 2 of the Cloud OFCs operated by the VIE and the VIE&#8217;s subsidiaries with an aggregate gross floor area of
approximate 819,989.20 square feet are on the land we own, and 20 of the Cloud OFCs operated by the VIE and the VIE&#8217;s subsidiaries
with an aggregate gross floor area of approximately 1,623,861.95 square feet are on the land we leased. The terms of such leases range
from 1 to 3 years.</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 the date of this annual report, we, through the VIE and the VIE&#8217;s
subsidiaries, directly operate 36 service outlets across China. As of December 31, 2022, all of the service outlets operated by us with
an aggregate gross floor area of approximately 134,476.76 square feet are on the land we leased. The terms of such leases range from 1
to 5 years.&#160;</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 areas of self-owned properties and leased
premises are based on the figures specified in the certificates of land use or the corresponding lease agreements.</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: 82; 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 -->78<!-- 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: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">The
following table shows the information of the </span>&#160;<span style="font-family: Times New Roman, Times, Serif">properties we, through
three of the VIE&#8217;s subsidiaries, own as of December 31, 2022:&#160;</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="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; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Location</b></span></td>
    <td>&#160;</td>
    <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Area (Square Feet)</b></span></td>
    <td>&#160;</td>
    <td>&#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>Term of Use</b></span></td>
    <td>&#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>Current Use</b></span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: bottom; width: 17%; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tong Zhou District, Beijing, China</span></td>
    <td style="vertical-align: bottom; width: 1%">&#160;</td>
    <td style="vertical-align: top; width: 1%; text-align: center">&#160;</td>
    <td style="vertical-align: top; width: 16%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">159,901.66</span></td>
    <td style="vertical-align: bottom; width: 1%">&#160;</td>
    <td style="vertical-align: bottom; width: 1%">&#160;</td>
    <td style="vertical-align: top; width: 17%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">October 31, 1994 to October 30, 2044</span></td>
    <td style="vertical-align: bottom; width: 1%">&#160;</td>
    <td style="vertical-align: top; width: 45%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Construction
    has not been commenced as of the date of this annual report.</span></td></tr>
  <tr style="background-color: white">
    <td style="vertical-align: bottom; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tong Zhou District, Beijing, China</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">155,027.65</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">October 31, 1994 to October 30, 2044</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Construction
    has not been commenced as of the date of this annual report.</span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: bottom; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tong Zhou District, Beijing, China</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12,531.02</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">January 23, 1995 to January 22, 2045</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Construction
    has not been commenced as of the date of this annual report.</span></td></tr>
  <tr style="background-color: white">
    <td style="vertical-align: bottom; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Tong Zhou District, Beijing, China</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12,928.10</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">January 23, 1995 to January 22, 2045</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Construction
    has not been commenced as of the date of this annual report.</span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: bottom; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Fuqing City, Fuzhou Province, China</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">349,132.7</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Until April 10, 2063</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">318,390.98 for Warehouse Storage and Management Services, 28,588.95 for Regional Sorting Center and 2,152.78 for offices</span></td></tr>
  <tr style="background-color: white">
    <td style="vertical-align: bottom; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Suzhou City, Jiangsu Province, China</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">187,515.50</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Until December 30, 2056</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">131,319.7 for Warehouse Storage and Management Services and 56,195.8 for offices</span></td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: bottom; padding-left: 9pt; text-indent: -9pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Suzhou City, Jiangsu Province, China</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">406,527.71</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Until January 29, 2058</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">370,278.5 for Warehouse Storage and Management Services and 36,249.21 for Regional Sorting Center</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">We believe that the facilities that we currently
own and lease are generally adequate to meet our current needs, but we expect to seek additional space as needed to accommodate our future&#160;growth.</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">As of December 31, 2022, we, through the VIE and
the VIE&#8217;s subsidiaries, operated 35 regional sorting hubs in Fujian, Guangdong, Shanghai, Beijing, Zhejiang, Hubei, and 16 other
provinces in China. Among our regional sorting centers, two are located on lands that we own and the remaining 33 are located on leased
lands. We provide each center with sorting and loading equipment.</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 31, 2022, our, through the VIE
and the VIE&#8217;s subsidiaries, own line-haul fleet is comprised of 262 truck headstocks and over 1,000 cabinets for ordinary shipments
and 10 truck headstocks and 15 cabinets for hazardous shipments. We also owned 262 vehicles for our short-haul transportation as of the
same date.</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">Tangible properties of our regional sorting centers,
Cloud OFCs, service outlets, and line-haul and short-haul transportation network operated by the VIE and the VIE&#8217;s subsidiaries
across China include transportation and electronic equipment.</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; text-align: justify; margin: 0pt 0"><b>Seasonality</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our operating results have been subject to seasonal
trends as a result of, or influenced by, numerous factors, including national holidays, weather patterns, consumer demands, economic conditions,
and others. Although seasonal changes have not significantly impacted on our cash flow or affected our operations, we cannot guarantee
that it will not adversely impact us in the future.</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"><b>Insurance</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, through the VIE and the VIE&#8217;s subsidiaries,
maintain various insurance policies to safeguard against risks and unexpected events. We have purchased compulsory motor vehicle liability
insurance and commercial insurance such as automobile third-party liability insurance, property insurance, and cargo insurance. We have
purchased employer liability insurance. We also provide work-related injury insurance to our employees.</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"></p><div>

</div><!-- Field: Page; Sequence: 83; 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 -->79<!-- 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">We do not purchase insurance for items delivered by us. Instead, our
clients may purchase shipment protection services for valuable items, and we will compensate those clients based on the declared value
in the event of loss or damage that was caused by us. For more details, please see &#8220;&#8212;Value-added Services&#8212;Shipment Protection.&#8221;
Our clients are responsible for purchasing insurance for hazardous items delivered in the shipments, subject to the provisions set forth
under the respective shipping agreements. We do not maintain business interruption insurance nor key-man insurance. Our management will
evaluate the adequacy of our insurance coverages from time to time and purchase additional insurance policies as needed.</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">Unless otherwise set forth in their respective
agreements, third-party transportation providers will be responsible solely for the shipment insurance. When an accident occurs, a transportation
provider will reimburse and compensate our loss pursuant to our agreements and any third parties&#8217; loss. If the transportation provider
is not able to compensate the full amount of the loss to us or any other third parties, our insurance company will pay for the compensation
under our insurance policies. Afterwards, the transportation provider shall reimburse our insurance company.</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"><b>Legal Proceedings</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">From time to time, we are subject to legal proceedings,
investigations, and claims incidental to the conduct of our business. We are not a party to, nor are we aware of, any legal proceeding,
investigation, or claim which, in the opinion of our management, is likely to have an adverse material effect on our business, financial
condition, or operation result. We may periodically be subject to legal proceedings, investigations, and claims relating to our business.
We may also initiate legal proceedings to protect our rights and interests.</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; text-align: justify; margin: 0pt 0"><b>Regulations</b>&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This section sets forth a summary of the principal
laws and regulations relevant to our business and operations in the PRC and the U.S.</p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This section sets forth a summary of the most
significant rules and regulations that affect our business activities in China.</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>Regulations Relating to Foreign Investment</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">The Foreign Investment Law, promulgated by the
National People&#8217;s Congress on March 15, 2019, has come into effect on January 1, 2020 and has replaced the major existing laws and
regulations governing foreign investment in the PRC, including the Sino-foreign Equity Joint Ventures Enterprises Law, the Sino-foreign
Co-operative Enterprises Law, the Wholly Foreign-invested Enterprise Law, and their implementation rules and ancillary regulations. Pursuant
to Foreign Investment Law, the existing foreign invested enterprises established prior to the effective date of the Foreign Investment
Law may keep their corporate organization forms within five years after the effective date of the Foreign Investment Law before such existing
foreign invested enterprise change their organization forms, organization structures, and their activities of foreign-invested enterprises
in accordance with the Company Law, the Partnership Enterprise Law and other laws. According to the Foreign Investment Law, &#8220;foreign-invested
enterprises&#8221; thereof refers to enterprises that are wholly or partly invested by foreign investors and registered within China under
the PRC laws, &#8220;foreign investment&#8221; thereof refers to any foreign investor&#8217;s direct or indirect investment in China,
including: (1) establishing foreign-invested enterprises in China either individually or jointly with other investors; (2) obtaining stock
shares, stock equity, property shares, other similar interests in Chinese domestic enterprises; (3) investing in new projects in China
either individually or jointly with other investors; and (4) making investment through other means provided by laws, administrative regulations,
or State Council provisions.</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: 84; 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 -->80<!-- 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">Investments conducted by foreign investors in
the PRC are subject to the Catalogue of Industries for Encouraging Foreign Investment, or the Catalogue, and the Negative List, which
were jointly issued by the NDRC and the MOFCOM. The version of the Catalogue currently in force was amended in 2020 and became effective
on January 27, 2021, and the version of the Negative List currently in force was amended in 2021 and became effective on January 1, 2022,
both of which further reduce restrictions on foreign 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">On December 26, 2019 the State Council issued
the Implementation Regulations for the Foreign Investment Law, or the Implementation Regulations which came into effect on January 1,
2020. According to the Implementation Regulations, in the event of any discrepancies between the Foreign Investment Law, the Implementation
Regulations and relevant provisions on foreign investment promulgated prior to January 1, 2020, the Foreign Investment Law and the Implementation
Regulations shall prevail. The Implementation Regulations also indicated that foreign investors that invest in sectors on the Negative
List in which foreign investment is restricted shall comply with special management measures with respect to shareholding, senior management
personnel and other matters in the Negative List.</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"><b>Regulations Relating to Road Transportation</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 PRC Regulations on Road Transportation
promulgated by the State Council in April 2004 and most recently amended in March 2019, and the Provisions on Administration of Road Freight
Transportation and Stations (Sites) issued by the Ministry of Transportation in June 2005 and most recently amended in June 2019, or the
Road Freight Provisions, the business operations of road freight transportation refer to commercial road freight transportation activities
that provide public services. The road freight transportation includes general road freight transportation, special road freight transportation,
road transportation of large articles, and road transportation of dangerous cargos. Special road freight transportation refers to freight
transportation using special vehicles such as vehicles with containers, refrigeration equipment, or tank containers. The Road Freight
Provisions set forth detailed requirements with respect to vehicles and drivers.</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 Road Freight Provisions, anyone engaging
in the business of operating road freight transportation or stations (sites) must obtain a road transportation operation permit from the
local county-level road transportation administrative bureau, and each vehicle used for road freight transportation must have a road transportation
certificate from the same authority. The incorporation of a subsidiary of a road freight transportation operator that intends to engage
in road transportation business is subject to the same approval procedure. If a road freight transportation operator intends to establish
a branch, it should file with the local road transportation administrative bureau where the branch is to be established.&#160;</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">Although the road transportation operation permits
have no limitation with respect to geographical scope, several provincial governments in China, including Shanghai and Beijing, promulgated
local rules on administration of road transportation, stipulating that permitted operators of road freight transportation registered in
other provinces should also make filings with the local road transportation administrative bureau where it carries out its 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">The VIE and the VIE&#8217;s subsidiaries have
obtained road transportation operation permits to operate general road freight transportation or station (sites).</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Measures for the Administration
of Road Transportation Safety of Hazardous Goods, or the &#8220;Measures,&#8221; jointly promulgated by the Ministry of Transport, the
Ministry of Industry &amp; Information Technology, the Ministry of Public Security, the Ministry of Ecology and Environment, the Ministry
of Emergency Management and the State Administration for Market Regulation in China, which took effect on January 1, 2020, the transportation
of hazardous goods with road transportation vehicles and relevant activities shall be governed by the Measures. Under the Measures, carriers
of hazardous goods shall carry hazardous goods within the business scope permitted by the competent transport departments. Carriers of
hazardous goods shall maintain carrier&#8217;s liability insurance for the hazardous goods they carry. The Measures set forth detailed
requirements with respect to consignors, carriers, loaders and drivers.</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>Regulations Relating to Cargo Vehicles</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 Administrative Provisions concerning
the Running of Cargo Vehicles with Out-of-Gauge Goods promulgated by the Ministry of Transportation, or the &#8220;Cargo Provisions,&#8221;
took effect in August 2016 and most recently amended in August 2021, cargo vehicles running on public roads shall not carry cargo weighing
more than the limits prescribed by this regulation and their dimensions shall not exceed those as set forth in the same regulation. Vehicle
operators who violate this regulation may be subject to a fine of up to RMB30,000 (approximately USD4,300) for each violation. In the
event of repeated violations, the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business
operation registration of the relevant vehicle. Under the Cargo Provisions and the Regulations on Protecting Highway Safety promulgated
by the State Council in China, or the &#8220;Highway Regulations,&#8221; which took effect on July 1, 2011, in the event of repeated violations,
the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business operation registration of
the relevant vehicle. In the event that more than 10% of the total vehicles of any road transportation enterprise are not in compliance
with the Highway Regulations in any year, such road transportation enterprise&#8217;s business shall be suspended for rectification and
its road transportation license may be revoked.</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 trucks and other vehicles owned and
operated by third-party trucking companies, and the operation of our fleet is subject to this new regulation. We have an obligation to
educate and manage vehicle operators as well as to urge them to comply with this regulation. We weigh and measure each cargo truck as
they enter and leave our hubs and sortation centers to ensure their compliance with this regulation in terms of cargo weight. If any truck
is not in compliance with this regulation, we will replace it with another vehicle that complies with this regulation. Otherwise, we may
be subject to penalties under this regulation if we operate those trucks that exceed the limits set forth in the regulation.</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"><b>Regulations Relating to Product Quality </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 Product Quality Law of the PRC,
or the Product Quality Law, which was promulgated by the Standing Committee of the National People&#8217;s Congress on February 22, 1993,
became effective on September 1, 1993, and was recently amended on December 29, 2018, business operators, including manufacturers and
sellers, are required to assume certain obligations in respect of product quality. Violations of the Product Quality Law may result in
the imposition of fines. In addition, a company in violation of the Product Quality Law may be ordered to suspend its operations and its
business license may be revoked. Criminal liability may be incurred under severe circumstances. A consumer or other victim who suffers
injury or property losses due to product defects may demand compensation from the manufacturer as well as from the seller. Where the responsibility
lies with the manufacturer, the seller shall, after settling compensation with the consumer, have the right to recover such compensation
from the manufacturer, and vice versa.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></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"><b>Regulations Relating to Pricing</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">In China, the prices of a small number of products
and services are guided or fixed by the government. According to the Pricing Law of the PRC, or the Pricing Law promulgated by the SCNPC
on December 29, 1997 and became effective on May 1, 1998, business operators must, as required by the government departments in charge
of pricing, mark the prices explicitly and indicate the name, origin of production, specifications and other related particulars clearly.
Business operators may not sell products at a premium or charge any fees that are not explicitly indicated. Business operators must not
commit the specified unlawful pricing activities, such as colluding with others to manipulate the market price, using false or misleading
prices to deceive consumers to transact, or conducting price discrimination against other business operators. Any business operator who
fails to comply with the Pricing Law may be subject to administrative sanctions such as warning, ceasing unlawful activities, compensation,
confiscating illegal gains and fines. The business operators may be ordered to suspend business for rectification or have their business
licenses revoked under severe 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">We are subject to the Pricing Law as a service
provider and believe that our pricing activities are currently in compliance with the law in all material aspects.</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>Regulations Relating to Leasing</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 Law on Administration of Urban
Real Estate of the PRC promulgated by the SCNPC on July 5, 1994, amended on August 30, 2007, August 27, 2009, August 26, 2019 and took
effect on January 1, 2020, when leasing premises, the lessor and lessee are required to enter into a written lease contract, containing
provisions such as the leasing term, use of the premises, rental and repair liabilities, and other rights and obligations of both parties.
Pursuant to the Administrative Measures for Commodity House Leasing promulgated by the Ministry of Housing &amp; Urban-Rural Development
in China promulgated on December 2010 and took effect in February 1, 2011, both lessor and lessee are also required to register the lease
with the real estate administration department. If the lessor and lessee fail to complete the registration procedures, both lessor and
lessee may be subject to fines ranging from RMB1,000 (approximately USD$140) to RMB10,000 (approximately USD$1,400). In addition, although
the unregistered lease agreements are considered binding agreements, in practice, some of the remedies generally available to the registered
lease agreements may not be fully applicable to the unregistered lease agreements, such as specific performance of lease agreement against
new purchasers of the property. Some of our leases have not completed 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">According to the Civil Code of the PRC, the lessee
may sublease the leased and occupies premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises,
the lease contract between the lessee and the lessor remains valid. The lessor is entitled to terminate the lease contract if the lessee
subleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises, the lease contract between
the lessee and the lessor will still remain valid.</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 Civil Code of the PRC, if a mortgagor
leases the mortgaged property before the mortgage contract is executed, the previously established leasehold interest will not be affected
by the subsequent mortgage. <span style="background-color: white">The Supreme People&#8217;s Court has revised a judicial interpretation
regarding disputes over lease contracts on urban buildings, which took effect in January 2021, providing that if the ownership of the
leased premises changes during the term of lessee&#8217;s occupation in accordance with the lease contract, and the lessee requests the
assignee of such premises to continue to perform the original lease contract, the PRC court shall support such request unless the mortgage
right has been established before the leasing and the ownership changes due to the mortgagee&#8217;s realization of the mortgage right.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Regulations relating to Internet Information Security and Privacy
Protection</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">On December 28, 2000, the SCNPC enacted the Decision
on the Protection of Internet Security, as amended on August 27, 2009, which provides that the following activities conducted through
the internet are subject to criminal liabilities: (1) gaining improper entry into any of the computer information networks relating to
state affairs, national defensive affairs, or cutting-edge science and technology; (2) violation of relevant provisions of the State in
the form of unauthorized interruption of any computer network or communication service resulting in the computer network or communication
system&#8217;s malfunction ; (3) spreading rumors, slanders or other harmful information via the internet for the purpose of inciting
subversion of the state political power; (4) stealing or divulging state secrets, intelligence or military secrets via internet; (5) spreading
false or inappropriate commercial information; or (6) infringing on the intellectual property.</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 December 13, 2005, the Ministry of Public Security
issued the Provisions on the Technical Measures for Internet Security Protection, which took effect on March 1, 2006. These regulations
require internet service providers to take proper measures including anti-virus, data back-up, keeping records of certain information
such as the login-in and exit time of users, and other related measures, and to keep records of certain information about their users
for at least 60 days. On June 22, 2007, the Ministry of Public Security, State Secrecy Bureau, State Cryptography Administration and the
Information Office of the State Council jointly promulgated the Administrative Measures for the Multi-level Protection of Information
Security, under which the security protection grade of an information system may be classified into five grades which are (a) Level I,
the destruction of such information system will cause damage to the legitimate rights and interests of citizens, legal persons and other
organizations, but will cause no damage to national security, social order or public interest; (b) Level II, the destruction of such information
system will cause material damage to the legitimate rights and interests of citizens, legal persons and other organizations or cause damage
to social order and public interests, but will not damage national security; (c) Level III, the destruction of such information system
will cause material damage to social order and public interests or will cause damage to national security; (d) Level IV, the destruction
of such information system will cause particularly material damage to social order and public interests or will cause material damage
to national security; (e) Level V, the destruction of such information system will cause particularly material damage to national security.
Companies operating and using information systems shall protect the information systems and any system equal to or above level II as determined
in accordance with these measures, and a record-filing with the competent authority is required.</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 Cybersecurity Law of the PRC, as adopted by
the National People&#8217;s Congress on November 7, 2016, has come into force on June 1, 2017. Considered as the fundamental law in the
area of cybersecurity in China, the Cybersecurity Law regulates network operators and others from the following perspectives: the principle
of Cyberspace sovereignty, security obligations of network operators and providers of network products and services, protection of personal
information, protection of critical information infrastructure, data use and cross-border transfer, network interoperability and standardization.
Network operators shall, according to the requirements of the rules for graded protection of cybersecurity, fulfill security protection
obligations to ensure that the network is free from interference, damage or unauthorized access, and prevent network data from being divulged,
stolen or falsified. In addition, any network operators collecting personal information shall follow the principles of legitimacy, rationality
and necessity and shall not collect or use any personal information without due authorization of the person whose personal information
is collected. Each individual is entitled to request a network operator to delete his or her personal information if he or she finds that
the collection and use of such information by such operator violate the laws, administrative regulations or the agreement by and between
such network operator and such individual; and is entitled to request any network operator to make corrections if he or she finds errors
in such information collected and stored by such network operator. Such network operator shall take measures to delete the information
or correct the errors.&#160;</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 13, 2020, NDRC, the MIIT, the Ministry
of Public Security, the MOF, MOFCOM, PBOC, the SAMR, the State Administration of Radio and Television, the State Secrecy Administration
and the State Cryptography Administration promulgated the Cybersecurity Review Measures, or the &#8220;2020 Review Measures,&#8221; which
provides that a cybersecurity review is required where critical information infrastructure operators, or the &#8220;CIIOs,&#8221; purchase
network-related products or services, which affects or may affect national security. Critical information infrastructure in important
industries and sectors such as public communications, information service, energy, transport, water conservancy, finance, public service
and e-government, and other critical information infrastructure that, once damaged, disabled or have data disclosed, may severely threaten
the national security, national economy, people&#8217;s livelihood and public interests, will be given extra protection on the basis of
the graded system for cybersecurity protection. Prior to the purchase of a network product or service, CIIOs shall assess the possible
risks to national security resulting from the use of such product or service. Where national security is or may be affected, an application
for cybersecurity review shall be filed by such CIIOs with the cybersecurity review authority. There, however, has not been a clear scope
of critical information infrastructure or parameters for determining what constitutes a CIIO.</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">According to the Regulations for Security Protection
of Critical Information Infrastructure published by CAC in July 2017 (currently in draft version soliciting public opinion), entities
providing cloud computing, big data and other large-scale public information network services fall within the scope of what constitutes
a CIIO, as damage, dysfunction or data leakage of the network facilities and information systems operated and administered by them may
severely jeopardize national security, people&#8217;s livelihood and public interest. We have purchased certain server or network facilities
for our mobile and desktop application which we believe are less likely to severely jeopardize national security, people&#8217;s livelihood
and public interests. As of the date of this annual report, we have not received any notice from any authorities identifying us as a CIIO.
Due to the unclear scope of what may constitute a CIIO, we cannot assure you that the PRC regulatory agencies would agree with our conclusion.
If we are identified as a CIIO, we may be required to, among others: (i) ensure that our data centers to be constructed have the function
of supporting the stable and continuous operation of business; (ii) perform security protection obligations to protect critical information
infrastructure from being disturbed, damaged or unauthorized accessed, and to prevent network data from leakage, theft or tampering; (iii)
have a dedicated cybersecurity management body and person in charge of cybersecurity, conduct background reviews on the person-in-charge
and other persons holding key positions, conduct cybersecurity education, technology trainings and skill assessments for relevant staff
on a regular basis, implement disaster recovery backup for important systems and databases, adopt remedial measures to promptly address
security risks such as system vulnerabilities, and make emergency plans for cybersecurity incidents and conduct regular rehearsals of
these plans; and (iv) establish and improve a security inspection and evaluation system. In addition, if our purchase of a network product
or service may affect national security, we have to pass a cybersecurity review conducted by the cybersecurity review authority in advance,
and enter into a security and confidentiality agreement with the provider.</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 July 10, 2021, the Office of the Central Cyberspace
Affairs Commission and the Office of Cybersecurity Review under the CAC promulgated the Review Measures Draft to solicit public opinion
and comments. The Review Measures Draft provides that data processors who engage in data processing activities that affect or may affect
national security, are included in the scope of cybersecurity review. The deadline for public comments to the Review Measures Draft was
July 25, 2021. The Review Measures Draft further requires that critical information infrastructure operators and services and data processing
operators that possess personal data of at least one (1) million users must apply for a review by the Cybersecurity Review Office of PRC,
if they plan to conduct listings in foreign countries.</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 November 14, 2021, CAC published the Administration
Measures for Cyber Data Security (Draft for Public Comments), or the &#8220;Cyber Data Security Measure (Draft).&#8221; The Cyber Data
Security Measure (Draft) provides that data processors shall apply for cybersecurity review under certain circumstances, such as mergers,
restructurings, divisions of internet platform operators that hold large amount of data relating to national security, economic development
or public interest which affects or may affect the national security, overseas listings of data processors that process personal data
for more than one million individuals, Hong Kong listings of data processors that affect or may affect national security, and other data
processing activities that affect or may affect the national security.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 28, 2021, the CAC, NDRC, MIIT, the
Ministry of Public Security, the Ministry of State Security, the Ministry of Finance, the Ministry of Commerce, PBOC, SAMR, the State
Administration of Radio and Television, CSRC, the State Secrecy Administration and the State Cryptography Administration jointly promulgated
the Cybersecurity Review Measures, or the &#8220;Cybersecurity Review Measures,&#8221; which became effective on February 15, 2022, and
will replace the original Cybersecurity Review Measures promulgated on April 13, 2020. Pursuant to the Cybersecurity Review Measures,
if critical information infrastructure operators purchase network products and services, or network platform operators conduct data processing
activities that affect or may affect national security, they will be subject to cybersecurity review. A network platform operator holding
more than one million users/users&#8217; individual information also shall be subject to cybersecurity review before listing abroad. The
cybersecurity review will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large
amount of personal information being influenced, controlled or maliciously used by foreign governments and risk of network data security
after going public overseas.</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 the date of this annual report, we have not received any notice
from any authorities requiring us to undertake a cybersecurity review by the CAC. Pursuant to the Cybersecurity Review Measures, we believe
we are not subject to the cybersecurity review by the CAC for this offering, given that: (i) we presently possesses personal information
of less than one (1) million individual users in our business operations, as of the date of this annual report; and (ii) data processed
in our business is less likely to have a bearing on national security, thus it may not be classified as core or important data by the
authorities. However, there remains uncertainty as to how the Cybersecurity Review Measures will be interpreted or implemented and whether
the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation
related to the Cybersecurity Review Measures. If any such new laws, regulations, rules, or implementation and interpretation come into
effect, we will take all reasonable measures and actions to comply. We cannot assure you that PRC regulatory agencies, including the CAC,
would take the same view as we do, and there is no assurance that we can fully or timely comply with such laws should they be deemed applicable
to our operations. There is no certainty as to how such review or prescribed actions would impact our operations and we cannot guarantee
that any clearance can be obtained or any actions that may be required can be taken in a timely manner, or at all. As the Cybersecurity
Review Measures have not taken effect as of the date of this annual report and there are no detailed rules or official interpretation
being introduced yet, the definition of &#8220;online platform operators listing in a foreign country with more than one (1) million users&#8217;
personal information data&#8221; remains unclear as of the date of this annual report. It is possible that CAC may require us to file
the cybersecurity review. The cybersecurity review procedure usually takes 45-70 business days, and sometimes even longer in special situations,
to complete. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Our Business and Our Industry&#8212;Our business
generates and processes a large quantity of data, and improper handling of or unauthorized access to such data may adversely affect our
business<i>.</i>&#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">On December 29, 2011, the MIIT promulgated the
Several Provisions on Regulating the Market Order of Internet Information Services, which became effective on March 15, 2012. On December
28, 2012, the SCNPC promulgated the Decision on Strengthening Network Information Protection to enhance the legal protection of information
security and privacy on the internet. The Provisions on Protection of Personal Information of Telecommunications and Internet Users promulgated
by the MIIT on July 16, 2013 contain detailed requirements on the use and collection of personal information as well as the security measures
to be taken by internet service providers. Specifically, (1) the users&#8217; personal information shall not be collected without prior
consent; (2) the personal information shall not be collected or used other than those necessary for internet service providers to provide
services; (3) the personal information shall be kept strictly confidential; and (4) a series of detailed measures shall be taken to prevent
any divulge, damage, tamper or loss of personal information of users.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Notice of the Supreme People&#8217;s
Court, the Supreme People&#8217;s Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing
upon the Personal Information of Citizens, issued in April 2013, and the Interpretation of the Supreme People&#8217;s Court and the Supreme
People&#8217;s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information
of Citizens, which was issued on May 8, 2017 and took effect on June 1, 2017, the following activities may constitute the crime of infringing
upon a citizen&#8217;s personal information: (1) providing a citizen&#8217;s personal information to specified persons or releasing a
citizen&#8217;s personal information online or through other methods in violation of relevant national provisions; (2) providing legitimately
collected information relating to a citizen to others without such citizen&#8217;s consent (unless the information is processed, not traceable
to a specific person and not recoverable); (3) collecting a citizen&#8217;s personal information in violation of applicable rules and
regulations when performing a duty or providing services; or (4) collecting a citizen&#8217;s personal information by purchasing, accepting
or exchanging such information in violation of applicable rules and regulations. In addition, on May 28, 2020, the National People&#8217;s
Congress of the PRC approved the PRC Civil Code, which took effect on January 1, 2021. Pursuant to the PRC Civil Code, the collection,
storage, use, process, transmission, provision and disclosure of personal information shall follow the principles of legitimacy, properness
and necessity.&#160;</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 March 12, 2021, the CAC, MIIT, the Ministry
of Public Security and the SAMR, announced the Provisions on the Scope of Necessary Personal Information for Common Types of Mobile Internet
Applications, which provide that the operators of mobile internet applications shall not deny the users who do not consent to the collection
of unnecessary information from using basic functional services of such applications. Specifically, such provisions further provide that
the basic functional service of mail and express delivery refers to &#8220;delivery service of items such as mails, packages and printed
matters&#8221; and the necessary personal information for that category shall include identity information (i.e. name, type and number
of ID cards) of the sender, the address and contact phone of the sender, the name and address and contact phone of the recipient as well
as the name and nature and amount of the items for delivery. Violations could be reported to the proper authority and will be dealt with
in accordance with PRC laws.</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, through the VIE and the VIE&#8217;s subsidiaries,
adopted certain policies to protect the privacy of our clients, such as the policies in our software for our client. Our current software
and systems are in compliance with PRC laws and regulations in material respects. Any failure, or perceived failure, by us to comply with
any regulatory requirements or privacy protection related laws, rules&#160;and regulations could result in proceedings or actions against
us by governmental entities or other proper authorities. These proceedings or actions could subject us to significant penalties and negative
publicity, require us to change our business practices, increase our costs and severely disrupt 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"><b>Regulations relating to Intellectual Property
Rights</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"><span style="background-color: white"><b><i>Patent</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="background-color: white">Patents
in the PRC are principally protected under the Patent Law of the PRC promulgated by the SCNPC in 1984 and then respectively amended in
1992, 2000, 2008, 2020, of which the amendment in 2020 will be effective on June 1, 2021, and its implementation rules. Novelty, inventiveness
and practicality are three essential ingredients of patens in the PRC. The latest amendment provides that, in general, the protection
period is 20 years for an invention patent, 10 years for a utility model patent and 15 years for a design patent, commencing from their
respective application dates.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="background-color: white"><b><i>Copyright</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="background-color: white">The PRC
Copyright Law, promulgated in 1990 and amended in 2001, 2010 and 2020, of which the amendment in 2020 will be effective on June 1, 2021,
or the Copyright Law, and its related implementing regulations, promulgated in 2002 and amended in 2013, are the principal laws and regulations
governing copyright related matters. The Copyright Law provides that Chinese citizens, legal persons, or other organizations shall, whether
published or not, enjoy copyright of their works, which includes, among others, works of literature, art, natural science, social science,
engineering technology and computer software. Under the Copyright Law, the term of protection for copyrighted software is 50 years. The
Regulation on the Protection of the Right to Communicate Works to the Public over Information Networks, which was most recently amended
on January 30, 2013, provides specific rules on fair use, statutory license, and a safe harbor for the use of copyrights and copyright
management technology, and specifies the liabilities of various entities for violations, including copyright holders, libraries and internet
service providers.</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="background-color: white"><b><i>Trademark</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="background-color: white">The PRC
Trademark Law was adopted in 1982 and then amended in 1993, 2001, 2013 and 2019 respectively. The implementation rules of the PRC Trademark
Law were adopted in 2002 and amended in 2014. Registered trademarks are protected under the Trademark Law of the PRC and related rules
and regulations. The Trademark Office of National Intellectual Property Administration handles trademark registrations and grants a protection
term of ten years to registered trademarks. Where registration is sought for a trademark that is identical or similar to another trademark
which has already been registered or given preliminary examination and approval for use in the same or similar category of commodities
or services, such application for registration of this trademark may be rejected. Trademark registrations are effective for a renewable
ten-year period, unless otherwise revoked.</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"><span style="background-color: white"><b><i>Domain name</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="background-color: white">The MIIT,
promulgated the Administrative Measures on Internet Domain Name, or the Domain Name Measure on August 24, 2017 to protect domain names.
According to the Domain Name Measures, domain name applicants are required to duly register their domain names with domain name registration
service institutions. The applicants will become the holder of such domain names upon the completion of the registration procedures. The
permits for registered domain names are effective for five years, which are subject to renewals, cancellations or revocations.</span></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"><span style="background-color: white"><b><i>Trade secrets</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="background-color: white">According
to the PRC Anti-Unfair Competition Law, promulgated by the SCNPC in September 1993, as amended in November 4, 2017 and April 23, 2019
respectively, the term &#8220;trade secrets&#8221; refers to technical, operational or other commercial information that is unknown to
the public, has utility, may create business interests or profits for its legal owners or holders, and is maintained as a secret by its
legal owners or holders through corresponding confidentiality measures. Under the PRC Anti-Unfair Competition Law, business persons are
prohibited from infringing others&#8217; trade secrets by: (1) obtaining the trade secrets from the legal owners or holders by any unfair
methods such as theft, bribery, fraud, coercion, electronic intrusion, or any other illicit means; (2) disclosing, using or permitting
others to use the trade secrets obtained illegally under item (1) above; or (3) disclosing, using or permitting others to use the trade
secrets, in violation of any contractual agreements or any requirements of the legal owners or holders to keep such trade secrets in confidence.
Pursuant to the PRC Civil Code, if one intentionally infringes upon the intellectual property rights of others and the circumstance is
severe, the infringed party is entitled to the corresponding punitive compensation; or (4) abetting a person, or tempting, or aiding a
person into or in acquiring, disclosing, using, or allowing another person to use the trade secret of the rightful holder in violation
of his or her non-disclosure obligations or the requirements of the rightful holder for keeping the trade secret confidential.</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"></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"><b>Regulations relating to Employment</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"><b><i>The Labor Law and the Labor Contract Law</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"><span style="background-color: white">According
to the Labor Law of the PRC, or the Labor Law, which was promulgated on July 5, 1994 and last amended and came into effect on December
29, 2018, enterprises and institutions shall establish, provide and improve their system of workplace safety and sanitation, strictly
follow state rules and standards on workplace safety and the relevant articles of occupational protection, and educate employees in occupational
safety and sanitation in the PRC. Occupational safety and sanitation facilities shall comply with state-fixed standards. </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="background-color: white">The Labor
Contract Law of the PRC, or the Labor Contract Law, which was issued on June 29, 2007, amended on December 28, 2012 and became effective
on July 1, 2013, and its implementation rules provide requirements concerning employment contracts between an employer and its employees.
If an employer fails to enter into a written employment contract with an employee after the lapse of more than one month, but less than
one year from the date on which the employment relationship is established, the employer must rectify the situation by entering into a
written employment contract with the employee and pay the employee twice the employee&#8217;s salary for the period from the date following
the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written
employment contract. The Labor Contract Law and its implementation rules also require compensation to be paid upon certain terminations.
In addition, if an employer intends to enforce a&#160;</span>non-compete<span style="background-color: white">&#160;provision in an employment
contract or&#160;</span>non-competition<span style="background-color: white">&#160;agreement with an employee, it has to compensate the
employee on a monthly basis during the term of the restriction period after the termination or expiration of the labor contract. Employers
in most cases are also required to provide severance payments to their employees after their employment relationships are terminated.
The Labor Contract Law also provides that enterprises accepting labor dispatch services shall strictly control the number of dispatched
workers and the proportion of dispatched workers shall not exceed the percentage prescribed by competent labor administrative departments.
As of the date of this annual report, other than that we have not made adequate social insurance and housing fund contributions for all
employees as required by PRC regulations, and that our number of dispatched workers has exceeded the limitation required by PRC regulations,
we believe that we are currently compliant with the foregoing laws and regulation in all material respects.</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"><b><i>The Interim Provisions on Labor Dispatching</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">The Interim Provisions on Labor
Dispatching, issued by the Ministry of Human Resources and Social Security of the People&#8217;s Republic of China on January 24, 2014,
which came into effect on March 1, 2014, require the number of dispatched workers not to exceed 10% of the total number of 1) the employees
that are employed directly by an enterprise and 2) the dispatched workers. As of the date of this annual report, the number of dispatched
workers has exceeded 10% of the total number of the employees and the dispatched workers of the Company. Therefore, Company is currently
not in compliance with the Interim Provisions on Labor Dispatching. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Relating to Doing Business in the PRC&#8212;Increases in labor costs in the PRC may adversely affect our business and our profitability&#8221;
and &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;Our number of dispatched
workers has exceeded the 10% limitation required by PRC regulations, which may subject us to penalties.&#8221;

</p><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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Social Insurance and Housing Funds</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">Pursuant to the Interim Regulations on Levying
Social Insurance Premiums, promulgated on January 22, 1999 and revised on March 24, 2019, Decisions of the State Council on Modifying
the Basic Endowment Insurance System for Enterprise Employees, promulgated on December 3, 2005, Decision on Establishment of Basic Medical
System for Urban Employee, issued by State Council and became effective on December 14, 1998, the Regulations on Unemployment Insurance,
became effective on January 22, 1999, Regulations on Work-Related Injury Insurance, promulgated on April 27, 2003, amended on December
20, 2010 and became effective on January 1, 2011, and the Interim Measures concerning the Maternity Insurance for Enterprise Employees,
promulgated on December 14, 1994 and became effective on January 1, 1995, employers are required to register with the competent social
insurance authorities and provide their employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance,
work-related injury insurance and medical insurance.&#160;</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 Opinions of the General Office of
the State Council on Comprehensively Advancing Combined Implementation of Maternity Insurance and Basic Medical Insurance for Employees,
promulgated by the General Office of State Council on March 6, 2019, maternity insurance funds shall merge into the basic medical care
insurance funds for employees so as to unify payment and harmonize consolidation level. The new ratio of employers&#8217; contribution
to basic medical care insurance for employees is determined based on the aggregate of the ratios of employers&#8217; contribution to maternity
insurance and basic medical care insurance for employees, and an individual is not required to pay for maternity insurance. Therefore,
after March 6, 2019, our Company has no record of maternity insurance funds in the payment details of social security, since it has been
merged into the basic medical care insurance funds.</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 Social Insurance Law of the PRC,
or the Social Insurance Law, which became effective on July 1, 2011 with last amendment on December 29, 2018, all employees are required
to participate in basic pension insurance, basic medical insurance schemes and unemployment insurance, which must be contributed by both
the employers and the employees. All employees are required to participate in work-related injury insurance and maternity insurance schemes,
which must be contributed by the employers. Employers are required to complete registrations with local social insurance authorities.
Moreover, the employers must timely make all social insurance contributions. Except for mandatory exceptions such as force majeure, social
insurance premiums shall not be paid late, reduced or be exempted. Where an employer fails to make social insurance contributions in full
and on time, the social insurance contribution collection agencies shall order it to make all or outstanding contributions within a specified
period and impose a late payment fee at the rate of 0.05% per day from the date on which the contribution becomes due. If such employer
fails to make the overdue contributions within such time limit, the relevant administrative department may impose a fine equivalent to
1&#8212;3 times the overdue amount. We are in compliance with laws and regulations related to social insurance and housing funds in China
in material aspects.&#160;</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 Emergency Notice on Practicing
Principles of the State Council Executive Meeting and Stabilizing Work on Collecting Social Insurance Premiums, promulgated by the Ministry
of Human Resources and Social Security on September 21, 2018, local authorities are prohibited from recovering the unpaid social insurance
premiums from enterprises.&#160;</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 Administrative Regulations on
the Housing Provident Fund, which became effective on April 3, 1999 and was amended on March 24, 2002 and March 24, 2019, enterprises
are required to register with the competent administrative centers of housing provident fund and open bank accounts for housing provident
funds for their employees. Employers are also required to timely pay all housing fund contributions for their employees. Where an employer
fails to submit and deposit registration of housing provident funds or fails to complete the formalities of opening housing provident
fund accounts for its employees, the housing provident fund management center shall order it to complete the formalities within a prescribed
time limit. Failing to comply by the expiration of the time limit will subject the employer to a fine ranging from RMB10,000 (approximately
USD1,400) to RMB50,000 (approximately USD7,200). When an employer fails to pay housing provident funds due in full and on time, housing
provident fund center is entitled to order it to rectify, and failing to comply could result in enforcement exerted by the court.&#160;</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"></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"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Regulations Relating to Tax</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"><b><i>Enterprise income tax</i></b>&#160;</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">According to the Enterprise Income Tax Law of
the PRC, or the EIT Law, which was promulgated on March 16, 2007, became effective from January 1, 2008 and was amended on February 24,
2017 and December 29, 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. The Implementing Rules of the Enterprise Income Law of the PRC, or the Implementing Rules of the EIT Law defines a &#8220;de facto
management body&#8221; as a managing body that in practice exercises &#8220;substantial and overall management and control over the production
and operations, personnel, accounting, and properties&#8221; of the enterprise. Non-PRC resident enterprises without any branches in the
PRC pay an enterprise income tax in connection with their income originating from the PRC at the tax rate of 10%.&#160;</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">Enterprises that are recognized as high and new
technology enterprises in accordance with the Administrative Measures for the Determination of High and New Tech Enterprises issued by
the Ministry of&#160;Science, the MOF, and the State Administration of Taxation, or the SAT, are entitled to enjoy a preferential enterprise
income tax rate of 15%. The validity period of the high and new technology enterprise qualification shall be three years from the date
of issuance of the certificate. An enterprise can re-apply for such recognition before or after the previous certificate expires.</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 3, 2015, the SAT issued the Announcement
on Several Issues Concerning the Enterprise Income Tax on Indirect Transfer of Assets by Non-Resident Enterprises, or the SAT Circular
7. The SAT Circular 7 repeals certain provisions in the Notice of the State Administration of Taxation on Strengthening the Administration
of Enterprise Income Tax on Income from Equity Transfer by Non-Resident Enterprises, or the SAT Circular 698, issued by SAT on December
10, 2009, and the Announcement on Several Issues Relating to the Administration of Income Tax on Non-resident Enterprises, issued by SAT
on March 28, 2011, and clarifies certain provisions in the SAT Circular 698. The SAT Circular 7 provides comprehensive guidelines relating
to, and heightens the Chinese tax authorities&#8217; scrutiny on, indirect transfers of assets by a non-resident enterprise (including
assets of organizations and premises in PRC, immovable property in the PRC, equity investments in PRC resident enterprises), or the PRC
Taxable Assets. For instance, when a non-resident enterprise transfers equity interests in an overseas holding company that directly or
indirectly holds certain PRC Taxable Assets and if the transfer is believed by the PRC tax authorities to have no reasonable commercial
purpose other than to evade enterprise income tax, the SAT Circular 7 allows the PRC tax authorities to reclassify the indirect transfer
of PRC Taxable Assets into a direct transfer and therefore impose a 10% rate of PRC enterprise income tax on the non-resident enterprise.
The SAT Circular 7 lists several factors to be taken into consideration by tax authorities in determining if an indirect transfer has
a reasonable commercial purpose. However, regardless of these factors, the overall arrangements in relation to an indirect transfer satisfying
all the following criteria will be deemed lack of a reasonable commercial purpose: (i) 75% or more of the equity value of the intermediary
enterprise being transferred is derived directly or indirectly from PRC Taxable Assets; (ii) at any time during the one-year period before
the indirect transfer, 90% or more of the asset value of the intermediary enterprise (excluding cash) is comprised directly or indirectly
of investments in the PRC, or during the one-year period before the indirect transfer, 90% or more of its income is derived directly or
indirectly from the PRC; (iii) the functions performed and risks assumed by the intermediary enterprise and any of its subsidiaries and
branches that directly or indirectly hold the PRC Taxable Assets are limited and are insufficient to prove their economic substance; and
(iv) the foreign tax payable on the gain derived from the indirect transfer of the PRC Taxable Assets is lower than the potential PRC
tax on the direct transfer of those assets. However, indirect transfers falling into the scope of the safe harbors under the SAT Circular
7 may not be subject to PRC tax under the SAT Circular 7. The safe harbors include qualified group restructurings, public market trades
and exemptions under tax treaties or arrangements.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 17, 2017, SAT issued the Announcement
on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or the SAT Circular 37, which took effect on December
1, 2017. Certain provisions of the SAT Circular 37 were repealed by the Announcement of the State Administration of Taxation on Revising
Certain Taxation Normative Documents. According to the SAT Circular 37, the balance after deducting the equity net value from the equity
transfer income shall be the taxable income amount for equity transfer income. Equity transfer income shall mean the consideration collected
by the equity transferor from the equity transfer, including various income in monetary form and non-monetary form. Equity net value shall
mean the tax computation basis for obtaining the said equity. The tax computation basis for equity shall be: (i) the capital contribution
costs actually paid by the equity transferor to a Chinese resident enterprise at the time of investment and equity participation, or (ii)
the equity transfer costs actually paid at the time of acquisition of such equity to the original transferor of the said equity. Where
there is reduction or appreciation of value during the equity holding period, and the gains or losses may be confirmed pursuant to the
rules of the finance and tax authorities of the State Council, the equity net value shall be adjusted accordingly. When an enterprise
computes equity transfer income, it shall not deduct the amount in the shareholders&#8217; retained earnings, such as undistributed profits,
from the investee enterprise, which may be distributed in accordance with the said equity. In the event of partial transfer of equity
under multiple investments or acquisitions, the enterprise shall determine the costs corresponding to the transferred equity in accordance
with the transfer ratio, out of all costs of the equity.&#160;</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 SAT Circular 7 and the Law of the PRC
on the Administration of Tax Collection promulgated by the SCNPC on September 4, 1992 and newly amended on April 24, 2015, in the case
of an indirect transfer, entities or individuals obligated to pay the transfer price to the transferor shall act as withholding agents.
If they fail to make withholding or withhold the full amount of tax payable, the transferor of equity shall declare and pay taxes to the
relevant tax authorities within seven days from the occurrence of the tax payment obligation. Where the withholding agent does not make
the withholding, and the transferor of the equity does not pay the tax payable amount, the tax authority may impose late payment interest
on the transferor. In addition, the tax authority may also hold the withholding agents liable and impose a penalty ranging from 50% to
300% of the unpaid tax on them.</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>Value-added Tax</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">Pursuant to the Interim Regulations on Value-Added
Tax of the PRC, which was promulgated by the State Council on December 13, 1993 and amended on November 5, 2008, February 6, 2016 and
November 19, 2017, and the Implementation Rules for the Interim Regulations on Value-Added Tax of the PRC, which was promulgated by the
MOF and SAT on December 15, 2008, became effective on January 1, 2009 and amended on October 28, 2011, entities or individuals engaging
in sale of goods, provision of processing services, repairs and replacement services or importation of goods within the territory of the
PRC shall pay value-added tax, or the VAT. Unless otherwise provided, the rate of VAT is 17% on sales and 6% on the services. On April
4, 2018, MOF and SAT jointly promulgated the Circular of the MOF and the SAT on Adjustment of Value-Added Tax Rates, or the Circular 32,
according to which (i) for VAT taxable sales acts or import of goods originally subject to VAT rates of 17% and 11% respectively, such
tax rates shall be adjusted to 16% and 10%, respectively; (ii) for purchase of agricultural products originally subject to tax rate of
11%, such tax rate shall be adjusted to 10%; (iii) for purchase of agricultural products for the purposes of production and sales or consigned
processing of goods subject to tax rate of 16%, such tax shall be calculated at the tax rate of 12%; (iv) for exported goods originally
subject to tax rate of 17% and export tax refund rate of 17%, the export tax refund rate shall be adjusted to 16%; and (v) for exported
goods and cross-border taxable acts originally subject to tax rate of 11% and export tax refund rate of 11%, the export tax refund rate
shall be adjusted to 10%. Circular 32 became effective on May 1, 2018 and shall supersede existing provisions which are inconsistent with
Circular 32.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Since November 16, 2011, the MOF and the SAT have
implemented the Pilot Plan for Imposition of Value- Added Tax to Replace Business Tax, or the VAT Pilot Plan, which imposes VAT in lieu
of business tax for certain &#8220;modern service industries&#8221; in certain regions and eventually expanded to nation-wide application
in 2013. According to the Implementation Rules for the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax released by
the MOF and the SAT on the VAT Pilot Program, the &#8220;modern service industries&#8221; include research, development and technology
services, information technology services, cultural innovation services, logistics support, lease of corporeal properties, attestation
and consulting services. The Notice on Comprehensively promoting the Pilot Plan of the Conversion of Business Tax to Value-Added Tax,
which was promulgated on March 23, 2016, became effective on May 1, 2016 and was amended on July 11, 2017, sets out that VAT in lieu of
business tax be collected in all regions and industries.</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 March 20, 2019, MOF, SAT and the General Administration
of Customs jointly promulgated the Announcement on Relevant Policies for Deepening Value-Added Tax Reform, which became effective on April
1, 2019, and provides that (i) with respect to VAT taxable sales acts or import of goods originally subject to VAT rates of 16% and 10%
respectively, such tax rates shall be adjusted to 13% and 9%, respectively; (ii) with respect to purchase of agricultural products originally
subject to tax rate of 10%, such tax rate shall be adjusted to 9%; (iii) with respect to purchase of agricultural products for the purposes
of production or consigned processing of goods subject to tax rate of 13%, such tax shall be calculated at the tax rate of 10%; (iv) with
respect to export of goods and services originally subject to tax rate of 16% and export tax refund rate of 16%, the export tax refund
rate shall be adjusted to 13%; and (v) with respect to export of goods and cross-border taxable acts originally subject to tax rate of
10% and export tax refund rate of 10%, the export tax refund rate shall be adjusted to 9%.&#160;</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>Dividend withholding tax</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">Under the Law of the PRC on Wholly Foreign-Owned
Enterprises, which was promulgated by the National People&#8217;s Congress of the PRC in 1986, revised by the SCNPC on October 31, 2000
and September 3, 2016 and repealed on January 1, 2020, foreign-invested enterprises in the PRC may pay dividends only out of their accumulated
profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises
in the PRC are also required to allocate at least 10% of their respective accumulated profits after tax each year, if any, to certain
reserve funds unless these accumulated reserves have reached 50% of the registered capital of such enterprises. These reserves are not
distributable as cash dividends.</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">According to the EIT Law and its implementing
rules, dividends paid to investors of an eligible PRC resident enterprise can be exempted from EIT and dividends paid to foreign investors
are subject to a withholding tax rate of 10%, unless relevant tax agreements entered into by the PRC government provide otherwise.</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 PRC State Administration of Taxation, or the
SAT, and the government of Hong Kong entered into the Arrangement between the Mainland of the PRC and the Hong Kong Special Administrative
Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Incomes, or the Arrangement,
on August 21, 2006. According to the Arrangement, 5% withholding tax rate shall apply to the dividends paid by a mainland China company
to a Hong Kong resident, provided that such Hong Kong resident directly holds at least 25% of the equity interests in the mainland China
company, and 10% of withholding tax rate shall apply if the Hong Kong resident holds less than 25% of the equity interests in the mainland
China company.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Circular on Relevant Issues Relating
to the Implementation of Dividend Clauses in Tax Treaties, which was promulgated by the SAT and became effective on February 20, 2009,
all of the following requirements shall be satisfied when a fiscal resident as the other party of a tax agreement needs to be entitled
to be taxed at a tax rate specified in the tax agreement for the dividends paid to it by a PRC resident company: (i) such a fiscal resident
who obtains dividends shall be a company as provided in the tax agreement; (ii) owner&#8217;s equity interests and voting shares of the
PRC resident company directly owned by such a fiscal resident reaches a specified percentage; and (iii) the equity interests of the PRC
resident company directly owned by such a fiscal resident, at any time during the 12 months prior to obtaining the dividends, reach a
percentage specified in the tax agreement.</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">According to the Tentative Administrative Measures
on Tax Convention Treatment for Non-Residents which was promulgated by the SAT on August 24, 2009 and became effective on October 1, 2009,
if a non-resident enterprise that receives dividends from a PRC resident enterprise wishes to enjoy the favorable tax benefits under the
tax arrangements, it shall submit an application for approval to the competent tax authority. Without being approved, the non-resident
enterprise may not enjoy the favorable tax treatment provided in the tax agreements.</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 Tentative Administrative Measures on Tax Convention
Treatment for Non-Residents was repealed by the Administrative Measures on Tax Convention Treatment for Non-Resident Taxpayers, which
was promulgated by the SAT on August 27, 2015 and became effective on November 1, 2015 with last amendment on June 15, 2018, if a non-resident
enterprise receives dividends from a PRC resident enterprise, it could directly enjoy the favorable tax benefits under the tax arrangements
at tax returns, and be subject to the subsequent regulation of the competent tax authority. The Administrative Measures on Tax Convention
Treatment for Non-Resident Taxpayers has subsequently been repealed by the Administrative Measures on Treaty Benefits Treatment for Non-Resident
Taxpayers, promulgated by the SAT on October 14, 2019 and became effective on January 1, 2020, which still adopts the same provisions
as the Tentative Administrative Measures on Tax Convention Treatment for Non-Residents.</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>Regulations relating to Foreign Exchange</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"><span style="font-size: 10pt">Pursuant to the
Foreign Exchange Administration Regulations of the PRC, or the Foreign Exchange Administrative Regulation, as amended in August 2008,
Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related
foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments
in securities outside of China, unless the SAFE&#8217;s prior approval is obtained and prior registration with the SAFE is made. On May
10, 2013, the SAFE promulgated the Circular of the SAFE on Printing and Distributing the Administrative Provisions on Foreign Exchange
in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents, or the SAFE Circular No. 21, which was last amended
and became effective on December 31, 2019. It provided for and simplified the operational steps and regulations on foreign exchange matters
related to direct investment by foreign investors, including foreign exchange registration, account opening and use, receipt and payment
of funds, and settlement and sales of foreign exchange.</span>&#160;</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">Pursuant to the Notice of the SAFE on Further
Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, or the SAFE Circular No. 59, promulgated by the
SAFE on November 19, 2012, became effective on December 17, 2012 and was further amended on May 4, 2015, approval is not required for
opening a foreign exchange account and depositing foreign exchange into the account relating to the direct investments. The SAFE Circular
No. 59 also simplified the capital verification and confirmation formalities for foreign invested entities, the foreign capital and foreign
exchange registration formalities required for the foreign investors to acquire equities from Chinese parties, and further improved the
administration on exchange settlement of foreign exchange capital of foreign invested 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"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>SAFE Circular 37</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">In July 2014, SAFE promulgated
SAFE Circular 37, which replaces the previous SAFE Circular 75. SAFE Circular 37 requires PRC residents, including PRC individuals and
PRC corporate entities, to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities.
SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we may
make in the future.&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Under SAFE Circular 37,
PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special
purpose vehicles, or SPVs, are required to register such investments with SAFE or its local branches. In addition, any PRC resident who
is a direct or indirect shareholder of an SPV, is required to update its registration with the local branch of SAFE with respect to that
SPV, to reflect any change of basic information or material events. If any PRC resident shareholder of such SPV fails to make the required
registration or to update the registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the
proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional
capital contributions into its subsidiaries in China. In February 2015, SAFE promulgated SAFE Notice 13. Under SAFE Notice 13, applications
for foreign exchange registration of inbound foreign direct investments and outbound direct investments, including those required under
SAFE Circular 37, must be filed with qualified banks instead of SAFE. Qualified banks should examine the applications and process registrations
under the supervision of SAFE. As of the date of this annual report, Mr. Yongxu Liu has completed the initial registrations with the qualified
banks as required by the regulations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Regulations Relating to Employee Stock Incentive
Plan</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On February&#160;15,
2012, the SAFE promulgated the Notice of the State Administration of Foreign Exchange on Issues concerning the Foreign Exchange Administration
of Domestic Individuals&#8217; Participation in Equity Incentive Plans of Overseas Listed Companies, or the &#8220;Notice&#8221;. In accordance
with the Notice and relevant rules and regulations, PRC citizens or&#160;non-PRC&#160;citizens residing in China for a continuous period
of not less than one year, who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions,
are required to register with the SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company,
and complete certain procedures. We and our employees who are PRC citizens or who reside in China for a continuous period of not less
than one year and who participate in our stock incentive plan will be subject to such regulation. In addition, the SAT has issued circulars
concerning employee share options or restricted shares. Under these circulars, employees working in the PRC who exercise share options,
or whose restricted shares vest, will be subject to PRC individual income tax, or the IIT. The PRC subsidiaries of an overseas listed
company have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to
withhold IIT of those employees related to their share options or restricted shares. If the employees fail to pay, or the PRC subsidiaries
fail to withhold, their IIT according to relevant laws, rules and regulations, the PRC subsidiaries may face sanctions imposed by the
tax authorities or other PRC government authorities.</p><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"><b>Regulations relating to Dividend Distributions</b>&#160;</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 principal regulations governing distribution
of dividends of wholly foreign-owned enterprise, or the WFOE, include the PRC Company Law. Under these regulations, WFOEs in China may
pay dividends only out of their accumulated profits, if any, determined in accordance with the PRC accounting standards and regulations.
In addition, FIEs in the PRC are required to allocate at least 10% of their accumulated profits each year, if any, to fund certain reserve
funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash
dividends.</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"><b>Regulations on Mergers &amp; Acquisitions and
Overseas Listings</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">On August 8, 2006, six PRC regulatory agencies, including the CSRC,
promulgated the Rules on the Merger and Acquisition of Domestic Enterprises by Foreign Investors, or the M&amp;A Rules, which became effective
on September 8, 2006 and were amended on June 22, 2009. The M&amp;A Rules, among other things, require offshore special purpose vehicles
formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC domestic enterprises or individuals
to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle&#8217;s securities on an overseas
stock exchange. In September 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by
special purpose vehicles. The CSRC approval procedures require the filing of a number of documents with the CSRC. Although (i) The CSRC
currently has not issued any definitive rule or interpretation concerning whether offerings like ours are subject to the M&amp;A Rules;
and (ii) no provision in the M&amp;A Rules clearly classifies contractual arrangements as a type of transaction subject to the M&amp;A
Rules, the interpretation and application of the regulations remain unclear, this offering may ultimately require approval from the CSRC.
If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval and any failure to obtain or
delay in obtaining CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.</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 M&amp;A Rules, and other 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 (i) any important industry is
concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will
lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand.</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, according to the Notice on Establishing
the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by the General Office of the
State Council on February 3, 2011 and became effective on March 4, 2011, the Rules on Implementation of Security Review System for the
Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by MOFCOM on August 25, 2011 and became effective on September
1, 2011, mergers and acquisitions by foreign investors that raise &#8220;national defense and security&#8221; concerns and mergers and
acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise &#8220;national security&#8221;
concerns are subject to strict review by MOFCOM, and the regulations prohibit any activities attempting to bypass such security review,
including by structuring the transaction through a proxy or contractual control arrangement.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 6, 2021, 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 &#8220;Opinions.&#8221; 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. Measures,
including promoting the construction of relevant regulatory systems, will be taken to control the risks and handle the incidents from
China-concept overseas listed companies. On December 24, 2021, the CSRC promulgated the draft of State Council Administration Rules in
respect of Overseas Securities Offering and Listing of Domestic Enterprise and the draft Recording Administrative Rules of Overseas Securities
Offering and Listing of Domestic Enterprise, or the &#8220;New Overseas Listing Rules,&#8221; for public comments. The New Overseas Listing
Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under
certain circumstances, such as, a) an issuer making an application for initial public offering and listing in an overseas market; b) an
issuer making an overseas securities offering after having been listed on an overseas market; c) an issuer offering securities on an overseas
market to purchase assets after having been listed overseas; and d) a domestic company seeking an overseas direct or indirect listing
of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means. On February 17, 2023, the CSRC
promulgated the Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. The Trial Measures and its supporting
guidelines, reiterate the basic principles of the New Overseas Listing Rules and impose substantially the same requirements for the overseas
securities offering and listing by domestic enterprises. Pursuant to the Trial Measures, domestic companies that seek to offer or list
securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the
Trial Measures within three working days following its submission of initial public offerings or listing application. According to the
Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the
CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas before the effective date of the Overseas Listing
Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers (the &#8220;Existing Issuers&#8221;). Existing Issuers are not
required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges
(for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their overseas
offering and listing prior March 31, 2023 but have not yet completed their overseas issuance and listing, are granted a six-month transition
period from March 31, 2023 to September 30, 2023. Those that 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 offerings and listings. Within such six-month
transition period, however, if such domestic companies fail to complete their overseas issuance and listing, they shall complete the filing
procedures with the CSRC. If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies
any major content in its filing documents, such domestic company may be subject to administrative penalties, such as orders to rectify,
warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons
may also be subject to administrative penalties, such as warnings and fines.</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 24, 2023, the CSRC, together with Ministry of Finance of
the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions, which
were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009. The
revised Provisions were issued under the title &#8220;Provisions on Strengthening Confidentiality and Archives Administration of Overseas
Securities Offering and Listing by Domestic Companies&#8221;, and came into effect on March 31, 2023 together with the Trial Measures.
One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as
is consistent with the Trial Measures. The revised Provisions require that, including, but not limited to, (a) a domestic company that
plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities
including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets
or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the
secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its
overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service
providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public
interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As of the date of this annual report,
the revised Provisions have come into effect and we are not aware of any PRC laws or regulations in effect requiring that we obtain permission
from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry, notice, warning, sanction or any
regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
However, any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to comply with the above confidentiality and archives
administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being
held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected
of committing a crime. The Opinions, the Trial Measures and any related implementing rules to be enacted may subject us to additional
compliance requirements in this offering and future financial activities. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks
Relating to Doing Business in the PRC&#8212;The M&amp;A Rules and certain other PRC regulations establish complex procedures for certain
acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions
in China<i>.</i>&#8221;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">C. <span style="text-decoration:underline">Organizational Structure</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; text-align: justify">See &#8220;&#8212;A. History and Development of
the Company.&#8221;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">D. <span style="text-decoration:underline">Property, Plants and Equipment</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; text-align: justify">See &#8220;&#8212;B. Business Overview&#8212;Properties.&#8221;</p><div>

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

</div><div><a id="a_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 4A. UNRESOLVED STAFF COMMENTS</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">Not applicable.</p><div>

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

</div><div><a id="a_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS</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"><i>You should read the following discussion and
analysis of our financial condition and results of operations in conjunction with our combined financial statements and consolidated financial
statements and the related notes included in this annual report. This discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under &#8220;Risk Factors&#8221; and elsewhere in this annual report.</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; text-align: justify; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>A.
Operating Results</b></span></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"><span style="background-color: white"><b>Overview</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">We are a holding company incorporated in the Cayman
Islands and are not a Chinese operating company. As a holding company with no material operations of our own, our operations have been
conducted in China by our subsidiaries and through the VIE Agreements, with the VIE and the VIE&#8217;s subsidiaries. For accounting purposes,
we control and receive the economic benefits of the VIE and the VIE&#8217;s subsidiaries&#8217; business operations through such VIE Agreements,
which enables us to consolidate the financial results of the VIE and the VIE&#8217;s subsidiaries in our consolidated financial statement
under U.S. GAAP. Neither we nor our subsidiaries own any equity interests in the VIE or the VIE&#8217;s subsidiaries. We have evaluated
the guidance in FASB ASC 810 and determined that we are regarded as the primary beneficiary of the VIE, for accounting purposes, as a
result of our direct ownership in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat the VIE and the VIE&#8217;s subsidiaries
as our consolidated entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE&#8217;s subsidiaries in
our consolidated financial statements in accordance with U.S. GAAP.&#160;</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Class A Ordinary Shares are shares of our
offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE&#8217;s subsidiaries in China, therefore, as an
investor, you will not directly hold equity interests in the VIE or the VIE&#8217;s subsidiaries, and you may never directly hold equity
interests in the VIE or the VIE&#8217;s subsidiaries through your investment in our Class A Ordinary Shares. For a description of the
VIE Agreements, see &#8220;<i>Corporate History and Structure&#8212;Our VIE Agreements</i>.&#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">The VIE is a contract logistics service provider
in China. Contract logistics is a comprehensive process that merges traditional logistics with supply chain management. Contract logistics
companies outsource resource management tasks to third-party companies and handle activities such as planning and designing supply chains,
designing facilities, processing orders, collecting payments, managing inventories, and providing client 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">Our integrated logistics solution services are
comprised of three segments: (1) B2B freight transportation; (2) cloud storage; and (3) value-added services. Since 2001, we, through
the VIE and the VIE&#8217;s subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities
in over 31 provinces as of December 31, 2022.</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, through the VIE and the VIE&#8217;s subsidiaries,
operate on a scalable integrated network model, which we believe is best suited to support our business and maintain the quality of our
comprehensive logistics services. As a contract logistics company, we, through the VIE and the VIE&#8217;s subsidiaries, directly own
and operate all of our regional sorting centers, Cloud OFCs, and service outlets. We, through the VIE and the VIE&#8217;s subsidiaries,
also directly own and operate our fleets. In order to establish a broader network and provide more efficient services, we, through the
VIE and the VIE&#8217;s subsidiaries, cooperate with third-party transportation providers in providing freight transportation services.
We believe this network model allows us to achieve strong operating results while maintaining and minimizing fixed costs and capital requirements,
which results in higher return on earnings and equities.</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">Operational efficiency, cost management, and competitive
pricing are critical to the success of a contract logistics company. We, through the VIE and the VIE&#8217;s subsidiaries, have achieved
strong operational efficiency through centralized control and management of 35 regional sorting centers, 22 Cloud OFCs, 42 service outlets,
approximately 600 self-owned trucks and vehicles, and over 40,000 transportation providers, route planning and optimization, and transportation
and management system.&#160;</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">For the fiscal years ended December 31, 2022 and
2021, our net revenue, mainly generated from providing transportation and warehouse storage services, was approximately $370.3 million
and $346.7 million, respectively. Our total net revenue increased by approximately 6.8% during 2022 compared to 2021, primarily driven
by the higher net revenue from transportation services and warehouse storage and storage management services. We recorded net income of
approximately $7.8 million and $6.6 million for the years ended December 31, 2022 and 2021, respectively.</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">For the fiscal years ended December 31, 2021 and
2020, our net revenue, mainly generated from providing transportation and warehouse storage services, was approximately $346.7 million
and $287.5 million, respectively. Our total net revenue increased by approximately 20.6% during 2021 compared to 2020, primarily driven
by the higher net revenue from both transportation services, warehouse storage and storage management services. We recorded net income
of approximately $6.6 million and $6.0 million for the years ended December 31, 2021 and 2020, respectively.</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="background-color: white"><b>General
Factors Affecting Our Results of Operations</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="background-color: white">Our business
and operating results are affected by a number of general factors in China&#8217;s transportation industry, including, but not limited
to:</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="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">China&#8217;s overall economic growth, level of urbanization and level of consumption;</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><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; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the development of the manufacturing industry, fast moving consumer goods industry, telecommunication industry, and publishing industry; and</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><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; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">market competition.</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">Unfavorable changes in any of these general factors
could materially and adversely affect our business and our results of operations.&#160;</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"></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"><span style="background-color: white"><b>Key Factors
Affecting Our Results of Operations</b></span>&#160;</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>Our ability to expand our customer base</i></b>&#160;</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 will continue to seek to expand our customer
base to achieve sustainable growth. We aim to attract new customers and maintain our existing customers. We acquire customers for our
transportation services through the referral of our existing customers and our own efforts including online and off-line advertising.
We plan to strengthen our partnerships by improving the quality and variety of our services. Additionally, we plan to put on more efforts
to acquire more warehouse storage management service customers through our existing transportation service customers.&#160;</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>Strategic Acquisitions and Investments</i></b>&#160;</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 may selectively pursue acquisitions, investments,
joint ventures and partnerships that we believe are strategic and complementary to our operations and technology. The business or financial
performance of the companies we have invested in as well as our ability to successfully integrate these investments with our existing
business would impact our results of operations and financial conditions.&#160;</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>Impact of COVID-19 on Our Operations and Financial
Performance</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">The COVID-19 pandemic has spread in China and throughout the world.
As the majority of our net revenue is derived from transportation and warehouse storage management services in China, our results of operations
and financial condition have been, and could continue to be affected by the spread of&#160;COVID-19.</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 connection with the intensifying efforts to
contain the spread of&#160;COVID-19,&#160;the Chinese government has taken a number of actions, which included extending the Chinese Spring
Festival in 2020, quarantining individuals infected with or suspected of having&#160;COVID-19,&#160;prohibiting residents from free travel,
encouraging employees of enterprises to work remotely from home and cancelling public activities, among others. The&#160;COVID-19&#160;has
also resulted in temporary closure of many corporate offices, retail stores, manufacturing facilities and factories across China.</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 response to the evolving dynamics related to
the COVID-19 pandemic, we have followed guidelines issued by local authorities to prioritize the health and safety of our employees and
suppliers including third-party transportation providers. As a result of the government-imposed restrictions, the VIE and the VIE&#8217;s
subsidiaries&#8217; facilities and operations were mostly closed from February 2020 to late March 2020. The VIE and the VIE&#8217;s subsidiaries
gradually resumed operation during February and March 2020, but it was not until April 2020 that we resumed full operation, which has
caused a decrease in our net revenue and also adversely affected our marketing activities during the closure. We, through the VIE and
the VIE&#8217;s subsidiaries, took a series of measures in response to the pandemic, including, among others, the establishment of a special
team for epidemic prevention and control, the remote working arrangements for some of our employees, and the requirement for our employees
on site to take extra measures and procedures to lower the risks of COVID-19 exposure. We, through the VIE and the VIE&#8217;s subsidiaries,
also donated some epidemic prevention materials to areas and entities in need. These measures reduced the capacity and efficiency of our
operations and&#160;increased our expenditures.</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 spread of&#160;COVID-19&#160;has caused us
to incur incremental costs. However, by leveraging our advantages in the logistics fields and our networks, we, through the VIE and the
VIE&#8217;s subsidiaries, were able to resume a larger portion of our operations in late March 2020 and have seen an increase in demand
for our services since April 2020 as the COVID-19 pandemic became gradually under control starting from the 2<sup>nd</sup> quarter of
2020 in China. Furthermore, to mitigate any negative impacts that&#160;COVID-19&#160;may have on our operations, we, through the VIE and
the VIE&#8217;s subsidiaries, implemented a variety of measures, including disinfection of offices, free mask distribution, temperature
monitoring to ensure the safety of our employees returning to work, setting up quarantine rooms for employees and separate rest areas
for drivers to avoid unnecessary contact, and disinfection of all the vehicles in and out of our locations.&#160;</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">From April to May, 2022, Shanghai was shut down and all of the businesses
in Shanghai were closed, due to the COVID-19 Omicron variant. Our business in Shanghai dropped significantly and revenue decreased by
approximately $2 million, compared with revenue in March 2022. The shutdown was over in June 2022, and business in Shanghai has since
resumed. Many of the restrictive measures previously adopted by the PRC governments at various levels to control the spread of the COVID-19
virus have been revoked or replaced with more flexible measures since December 2022. While the revocation or replacement of the restrictive
measures to contain the COVID-19 pandemic could have a positive impact on our normal operations, the extent of the impact on the Company&#8217;s
future financial results will be dependent on future developments such as the length and severity of the crisis, the potential resurgence
of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy
and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. Given this uncertainty, the Company
is currently unable to quantify the expected impact of the COVID-19 pandemic on its future operations, financial condition, liquidity
and results of operations if the current situation continues.&#160;</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 -->100<!-- 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: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Results of Operations</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">The following consolidated results of operations
include the results of operations of the Company, its wholly owned subsidiaries and consolidated VIE and the VIE&#8217;s subsidiaries.</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 following table summarizes our consolidated
results of operations, both in absolute amounts and as percentages of our total net revenue for the periods presented. The operating results
in any historical period are not necessarily indicative of the results that may be expected for any future period.</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>For the years ended December 31, 2022 and
2021</i></b></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="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; text-align: justify">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="14" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Years Ended December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: justify">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: justify">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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 in&#160;thousand</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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 in&#160;thousand</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">%</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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 in&#160;thousand)</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="text-align: justify">&#160;</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="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">346,039</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">
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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: White">
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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"><b><i>Net revenues</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"><i>Transportation services</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">We, through the VIE and the VIE&#8217;s subsidiaries,
provide transportation services to companies in mainland China. Our major customers are in the manufacturing industry, the fast-moving
consumer goods industry, the telecommunication industry, and the publishing industry. Revenue from transportation services is recognized
upon customers&#8217; receipt of the transported goods.</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>Warehouse storage management services</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">We, through the VIE and the VIE&#8217;s subsidiaries,
generate revenue of warehouse storage management services through the provision of warehouse storage management services to various customers.
We help companies place the goods and maintain the daily input and output of the goods. We primarily charge our customers service fees
for our storage services and the daily management services. Revenue from the warehouse storage management services is recognized over
the service period.</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 net revenues were approximately $370.3 million
for the year ended December 31, 2022, increasing by approximately 6.8% from approximately $346.7 million for the year ended December 31,
2021. The increase of our net revenues was primarily driven by fast growth of e-Commerce business in China since the pandemic. Approximately
5.5% increase in the net revenues generated from our transportation services from approximately $327.8 million (which accounted for approximately
94.6% of our total net revenue) for the year ended December 31, 2021 to approximately $346.0 million (which accounted for approximately
93.4% of our total net revenue) for the year ended December 31, 2022, as result of the transportation services orders from Tesla increased
significantly for the year ended December 31, 2022 since it became our client in fiscal year 2021. In addition, we obtained a new customer
Meihua Holding Group Co., Ltd. in fiscal year 2022 with significant revenue.</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">Net revenue generated from our warehouse storage
management services increased by approximately 20.4% from approximately $16.9 million (which accounted for approximately 4.9% of our total
net revenue) for the year ended December 31, 2021 to approximately $20.3 million (which accounted for approximately 5.5% of our total
net revenue) for the year ended December 31, 2022, primarily due to the growth of our existing clients&#8217; business.&#160;</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"></p><div>

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</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>Cost of revenues</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">Our cost of revenue consists of cost of transportation
services and cost of warehouse storage management services. The cost of transportation services comprises cooperation cost (the payments
made to third-party transportation providers), depreciation and amortization expenses, toll fees, employee wages and benefits and fuel
cost. Cooperation cost is the direct cost of transportation paid by the Company to third-party transportation providers, who are independent
contractors and third-party carriers. The cost of warehouse storage management services consists of rental fees, handling fees, employee
wages and benefits in connection with our services to our clients.</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 cost of revenues was approximately $328.8
million for the year ended December 31, 2022, compared to approximately $305.4 million for the year ended December 31, 2021, which was
in line with the increase of revenue, and continuing increase of worldwide inflation has led to a sharp rise in fuel prices in 2022, which
might significantly increase the Company&#8217;s operating costs in the future. The gross margin of the transportation service has decreased
as result of the increased costs. The Company will be considering changing the service prices if the price of fuel continues to rise.
The recent inflationary pressures have not materially impacted our operations. The management estimates that for every 1% change in fuel
prices, the Company&#8217;s operating costs will increase by approximately 0.04% accordingly. As of the date of this annual report, we
believe that the impact of the increased price of fuel on Company&#8217;s operating costs is not significant, and we have not identified any
actions to mitigate inflationary pressures.&#160;</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>Gross profit</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">Our overall gross profit increased by approximately
0.5% from approximately $41.3 million for the year ended December 31, 2021 to approximately $41.5&#160;million for the year ended December
31, 2022. The gross profit increased by approximately $0.2 million, mainly due to stable orders offset by the increase of fuel prices,
as mentioned previously for the fiscal year 2022. For the years ended December 31, 2022 and 2021, our overall gross margin was approximately
11.2% and 11.9%, respectively. The gross margin slightly decreased due to the same reason.</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="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#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"><b><i>Operating expenses</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">Our operating expenses decreased by approximately
3.3% from approximately $32.8 million for the year ended December 31, 2021 to approximately $31.7 million for the year ended December
31, 2022 for the following reasons:</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>Selling and marketing expenses</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">Our sales and marketing expenses consist primarily
of employee wages, rental expenses and benefits for sales and marketing staff, rental expense, depreciation expenses and other daily expenses
which are related to the sales and marketing functions. Selling and marketing expenses decrease by approximately $0.3 million from approximately
$7.7 million for the year ended December 31, 2021 to approximately $7.4 million for the year ended December 31, 2022, which was attributable
to decreased employee wages and benefits.</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>General and administrative expenses</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">Our general and administrative expenses consist
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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">Our general and administrative expenses decreased
by approximately 3.1% from approximately $25.0 million for the year ended December 31, 2021 to approximately $24.3 million for year ended
December 31, 2022, which was attributable to the decrease in employee wages and benefits as some employees worked from home or worked
in alternating turns in the first half of fiscal year 2022, due to the COVID-19 Omicron variant.&#160;</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Income from operations</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">As a result of the foregoing, our profit from
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million for the year ended December 31, 2022</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">&#160;</p><div>

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    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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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">Our total net other expense amounted to approximately
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</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Income before income taxes</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">As a result of the foregoing, our income before
income taxes increased by approximately $1.3 million or approximately 15.5% to approximately $9.4 million for the year ended December
31, 2022 from approximately $8.2 million for the year ended December 31, 2021.</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">Provision for income taxes</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 effective income tax rate decreased from approximately
18.6% for the year ended December 31, 2021 to approximately 17.0% for the year ended December 31, 2022, which is mainly due to the different
profit made in different VIE&#8217;s subsidiaries. As more profit made in those entities&#8217; which has a preferential tax rate for
the year ended December 31, 2022, the provision for income tax decreased slightly.</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>Net income</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">As a result of the foregoing, our net income increased
by approximately $1.2 million or 17.8% to approximately $7.8 million for the year ended December 31, 2022 from approximately $6.6 million
for the year ended December 31, 2021.</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"><b><i>For the years ended December 31, 2021 and
2020</i></b></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="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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</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"></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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Net revenues</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"><i>Transportation services</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">We, through the VIE and the VIE&#8217;s subsidiaries,
provide transportation services to companies in mainland China. Our major customers are in the manufacturing industry, the fast moving
consumer goods industry, the telecommunications industry, and the publishing industry. Revenue from transportation services is recognized
upon customers&#8217; receipt of the transported goods.</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>Warehouse storage management services</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">We, through the VIE and the VIE&#8217;s subsidiaries,
generate revenue of warehouse storage management services through the provision of warehouse storage management services to various customers.
We help companies place the goods and maintain the daily input and output of the goods. We primarily charge our customers service fees
for our storage services and the daily management services. Revenue from the warehouse storage management services is recognized over
the service period.</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 net revenues were approximately $346.7 million
for the year ended December 31, 2021, increasing by approximately 20.6% from approximately $287.5 million for the year ended December
31, 2020. The increase of our net revenues was primarily driven by fast growth of e-Commerce business in China since the COVID-19 pandemic.
Approximately 19.8% increase in the net revenues generated from our transportation services from approximately $273.7 million (which accounted
for approximately 95.2% of our total net revenue) for the year ended December 31, 2020 to approximately $327.8 million (which accounted
for approximately 94.6% of our total net revenue) for the year ended December 31, 2021, as a result of increased transportation service
orders processed during the year compared with prior year, which was mostly contributed by the existing clients, and was attributable
to the Company&#8217;s strengthened sales efforts and the continuous increase in the market demand during the fiscal year 2021 as a result
of the development of e-commerce businesses in China. In addition, transportation services revenue from the auto parts industry grew rapidly
during the year ended December 31, 2021, as the Company obtained a new major client, Tesla Shanghai Co., Ltd.</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">Net revenue generated from our warehouse storage
management services also increased by approximately 36.6% from approximately $12.4 million (which accounted for approximately 4.3% of
our total net revenue) for the year ended December 31, 2020 to approximately $16.9 million (which accounted for approximately 4.9% of
our total net revenue) for the year ended December 31, 2021, primarily due to approximately 15.1% increase in client number and the growth
of our existing clients&#8217; 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"><b><i>Cost of revenues</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">Our cost of revenue consists of cost of transportation
services and cost of warehouse storage management services. The cost of transportation services comprises cooperation cost (the payments
made to third-party transportation providers), depreciation and amortization expenses, toll fees, employee wages and benefits and fuel
cost. Cooperation cost is the direct cost of transportation paid by the Company to third-party transportation providers, who are independent
contractors and third-party carriers. The cost of warehouse storage management services consists of rental fees, handling fees, employee
wages and benefits in connection with our services to our clients.</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 cost of revenues was approximately $305.4
million for the year ended December 31, 2021, compared to approximately $251.5 million for the year ended December 31, 2020, which was
in line with the increase of revenue, and was mainly attributable to the increase in the cooperation cost, due to the sharp increase of
transportation revenue for the year ended December 31, 2021. Furthermore, because of significant increase in transportation revenue, the
Company&#8217;s self-owned fleet was fully utilized. The Company had to engage third party subcontracting logistic companies to perform
some of the transportation services for its clients. In addition, the toll fees increased as a result of the expiration of a deduction
policy on toll fees from February to May 2020, due to the impact of the COVID-19 pandemic for such period as there was no deduction for
the year ended December 31, 2021. The worldwide inflation has led to a sharp rise in fuel prices, which might significantly increase the
Company&#8217;s operating costs in the future. The gross margin of the transportation service has decreased as result of the increased
costs. The Company will be considering changing the service prices if the price of fuel continues to rise. The recent inflationary pressures
have not materially impacted our operations. The management estimates that for every 1% change in fuel prices, the Company&#8217;s operating
costs will increase by approximately 0.04% accordingly.</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>Gross profit</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">Our overall gross profit increased by approximately
14.9% from approximately $36.0 million for the year ended December 31, 2020 to approximately $41.3&#160;million for the year ended December
31, 2021. The gross profit increased by approximately $5.4 million mainly due to the increase of revenue without too much changes in gross
profit margin from fiscal year 2020 to fiscal year 2021. For the years ended December 31, 2021 and 2020, our overall gross margin was
approximately 11.9% and 12.5%, respectively. The gross margin slightly decreased mainly due to the increase in the cooperation cost for
the transportation service. As a result of the increased orders received during the year ended December 31, 2021, we were unable to fulfill
the orders by our self-owned fleet, and more orders were subcontracted to the third-party carriers compared with the year ended December
31, 2020. As the cooperation costs with the third-party carriers were relatively higher than the costs of using our self-owned fleet,
a proportional increase in cost of revenue related to transportation services was higher than the increase in revenue. In addition, the
toll fees increased as a result of the expiration of a deduction policy on toll fees, as previous mentioned.</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">&#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: justify">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="6">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
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  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: justify">Operating expenses</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 52%; font-weight: bold; text-align: justify">Selling and marketing</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(7,720</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(6,139</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(1,581</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(25,038</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(23,632</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,406</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">5.9</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: justify; padding-bottom: 4pt">Total operating expenses</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(32,758</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">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(29,771</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(2,987</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; 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"><b><i>Operating expenses</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">Our operating expenses increased by approximately
10.0% from approximately $29.8 million for the year ended December 31, 2020 to approximately $32.8 million for the year ended December
31, 2021 for the following reasons:</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>Selling and marketing expenses</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">Our sales and marketing expenses consist primarily
of employee wages, rental expenses and benefits for sales and marketing staff, rental expense, depreciation expenses and other daily expenses
which are related to the sales and marketing functions.</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 sales and marketing expenses increased by
approximately 25.8% from approximately $6.1 million for the year ended December 31, 2020 to approximately $7.7 million for the year ended
December 31, 2021. Due to investing more resources in sales and marketing channels and the economic recovery after Covid-19 pandemic in
China, the Company&#8217;s travel and promotion expenses increased in the year ended December 31, 2021 compared to the year ended December
31, 2020.</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>General and administrative expenses</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">Our general and administrative expenses consist
primarily of employee wages and benefits for corporate employees, rental expenses, depreciation and amortization expense and other expenses
which are related to the general corporate functions.</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 general and administrative expenses increased
by approximately 5.9% from approximately $23.6 million for the year ended December 31, 2020 to approximately $25.0 million for year ended
December 31, 2021, which was mainly attributable to the increase in employee wages and benefits from approximately $15.4 million for the
year ended December 31, 2020 to approximately $16.0 million for the year ended December 31, 2021. In early 2020, some employees worked
from home or worked in alternating turns, due to the COVID-19 pandemic, but the situation did not last long and it soon recovered.</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>Income from operations</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">As a result of the foregoing, our profit from
operations increased by approximately 38.4% from approximately $6.2 million for the year ended December 31, 2020 to approximately $8.6
million for the year ended December 31, 2021.</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="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#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">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#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="text-align: justify">&#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: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</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="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,330</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,329</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">1</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: White">
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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><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 total net other income was approximately $1.4
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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"><i>Interest expense</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">Our interest expense increased by approximately
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</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">&#160;</p><div>

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subsidies. The decrease was approximately $1.5 million or 73.0% from approximately $2.1 million for the year ended December 31, 2020 to
approximately $0.6 million for the year ended December 31, 2021, which was primarily due to the decrease of government subsidies received
in the fiscal year 2021 compared with previous year.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Income before income taxes</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">As a result of the foregoing, our income before
income taxes increased by approximately $0.5 million or approximately 7.2% to approximately $8.2 million for the year ended December 31,
2021 from approximately $7.6 million for the year ended December 31, 2020.</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>Net income</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">As a result of the foregoing, our net income increased
by approximately $0.6 million or 9.9% to approximately $6.6 million for the year ended December 31, 2021 from approximately $6.0 million
for the year ended December 31, 2020.</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>Impact of Foreign Currency Fluctuations</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">The reporting currency of the Company is USD.
The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities
are translated at the unified exchange rate as quoted by the People&#8217;s Bank of China at the end of the period. The statement of income
accounts is translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments
resulting from this process are included in accumulated other comprehensive income (loss). Transaction gains and losses that arise from
exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of
operations as incurred. The foreign currency translation from RMB to USD could materially affect our financial condition and results of
operations due to the fluctuation of exchange rate. The exchange rates in effect are shown below:</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="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: White">
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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">We did not have any foreign currency investments
hedged by currency borrowings or other hedging instruments in years ended December 31, 2022, 2021 and 2020.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>B. Liquidity and Capital Resources</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">The PRC government imposes controls on the convertibility
of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations,
our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE. Approval from or registration
with appropriate government authorities is, however, required where RMB is to be converted into foreign currency and remitted out of China
to pay capital expenses such as the repayment of loans denominated in foreign currencies. See &#8220;Risk Factors&#8212;Governmental control
of currency conversion may affect the value of your investment and our payment of dividends.&#8221;&#160;</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">Current PRC regulations permit our PRC subsidiary
to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
In addition, our PRC subsidiary is required to set aside at least 10% of its respective accumulated profits each year, if any, to fund
certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. We had various outstanding
bank loans of approximately $47.7 million as of December 31, 2022. We have also entered into non-cancellable operating lease agreements
for several offices, operating facilities and warehouses. The following table sets forth our contractual obligations as of December 31,
2022:</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="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: White">
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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; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cash flows and working capital</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">The following table sets forth a summary of our
cash flows for the periods indicated:</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="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td style="font-weight: bold">&#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: White">
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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">(2,127</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,814</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">538</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; background-color: White">
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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: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a holding company with no material operations
of our own, we conduct a substantial majority of our operations through our PRC subsidiary and the VIE in China. We are permitted under
PRC laws and regulations to provide funding to our PRC subsidiary in China through capital contributions or loans, subject to the approval
of government authorities and limits on the amount of capital contributions and loans. In addition, our subsidiaries in China may provide
Renminbi funding to the VIE only through loans. All of the net proceeds from this offering would be immediately available to be loaned
to the VIE and the VIE&#8217;s subsidiaries, subject to the respective loan agreements to be entered into between the Company and the
VIE and the VIE&#8217;s subsidiaries. Foreign currency capital of a foreign-invested enterprise may be converted into Renminbi capital
at its will according to the actual operation of the enterprise, as long as it is within such enterprise&#8217;s business scope.</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>Cash flows in Operating Activities</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">For the year ended December 31, 2022, net cash
generated from operating activities was approximately $6.9 million, primarily comprised of net income of approximately $7.8 million and
adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $7.0 million, approximately
$10.8 million for amortization of right-of-use assets and interest of lease liabilities, deferred income taxes expenses of approximately
$1.2 million, increased of notes payable approximately $2.1 million in operating activities, increased of accounts payable of approximately
$7.9 million. Net cash generated from operating activities was partially offset by approximately $11.3 million decrease in operating lease
liabilities, approximately $1.0 million decreased in salary and welfare payables, approximately $2.0 million increased in prepayments
and other current assets, approximately $17.0 million increased in account receivable and approximately $1.0 million increase in notes
receivable. The cash generated from operating activities was mainly resulted from the increased revenue for the year ended December 31,
2022 of approximately $23.6 million compared with prior year. Our net income increased by approximately $1.2 million to approximately
$7.8 million for the year ended December 31, 2022 from approximately $6.6 million for the year ended December 31, 2021.</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: 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 -->107<!-- 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: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2021, net cash
generated from operating activities was approximately $16.6 million, primarily comprised of net income of approximately $6.6 million and
adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $5.9 million, approximately
$9.5 million for amortization of right-of-use assets and interest of lease liabilities, deferred income taxes expenses of approximately
$1.5 million, the decrease of notes receivable of approximately $9.4 million in operating activities, decreased of inventories of approximately
$0.8 million and increase of accounts payable of approximately $2.5 million. Net cash generated from operating activities was partially
offset by approximately $9.4 million decrease in operating lease liabilities, approximately $3.2 million increase in accounts receivables,
approximately $2.3 million increased in prepayments and other current assets, approximately $3.8 million increase in other non-current
assets and approximately $2.4 million decrease in note payable. The cash generated from operating activities was mainly resulted from
the increased revenue in transportation services and warehouse storage and storage management services for the year ended December 31,
2021 of approximately $58.7 million. Our net income increased by approximately $0.6 million to approximately $6.6 million for the year
ended December 31, 2021 from approximately $6.0 million for the year ended December 31, 2020.</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">For the year ended December 31, 2020, net cash
provided by operating activities was approximately $2.3 million, primarily comprised of net income of approximately $6.0 million and adjusted
for non-cash items such as depreciation and amortization expense for property and equipment of approximately $4.7 million, approximately
$8.6 million for amortization of right-of-use assets and interest of lease liabilities, approximately $1.3 million deferred income taxes,
the increase in notes payable related to normal operating activities of approximately $1.5 million, the increase of accounts payable of
approximately $14.0 million, the increase in salary and welfare payable of approximately $1.3 million, the increase in accrued expenses
and other current liabilities of approximately $1.8 million and the increase in tax payable of approximately $2.3 million. Net cash provided
by operating activities was partially offset by approximately $18.7 million increase in accounts receivable, the increase in note receivable
of approximately $1.6 million, the increase in prepayments and other current assets of approximately $5.0 million, the increase in other
non-current assets of approximately $6.0 million and approximately $8.5 million decrease in operating lease liabilities. The cash provided
by operating activities was mainly resulted from the increased revenue in transportation services and warehouse storage and storage management
services for the year of approximately $54.8 million. Our net income increased by approximately $4.1 million to approximately $6.0 million
in the fiscal year ended December 31, 2020 from approximately $1.9 million for the fiscal year ended December 31, 2019.</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>Cash flows in Investing Activities</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">For the year ended December 31, 2022, net cash
used in investing activities was approximately $6.7 million, consisted primarily of cash used to acquire property and equipment of approximately
$6.9 million and approximately $0.3 million cash used for purchasing intangible assets, mainly offset by cash proceeds received from disposal
of property and equipment of approximately $0.5 million.</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">For the year ended December 31, 2021, net cash
used in investing activities was approximately $23.9 million, consisted primarily of cash used to acquire property and equipment of approximately
$25.4 million and approximately $0.3 million cash used for purchasing intangible assets, mainly offset by cash proceeds received from
disposal of property and equipment of approximately $1.3 million and disposal of subsidiaries of approximately $0.5 million.</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">For the year ended December 31, 2020, net cash
used in investing activities approximately of $7.8 million, consisted primarily of cash used to acquire property and equipment of approximately
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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"><b><i>Cash flows in Financing Activities</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">For the year ended December 31, 2022, net cash
generated from financing activities was approximately $6.0 million, consisted primarily of cash proceeds from bank loans of approximately
$61.3 million, partially offset by cash repaid for bank loans of approximately $55.5 million.&#160;</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">For the year ended December 31, 2021, net cash
used in financing activities was approximately $2.1 million, consisted primarily of cash repaid for bank loans of approximately $67.6
million, partially offset by capital contribution from non-controlling shareholders of approximately $3.4 million and cash proceeds from
bank loans of approximately $62.6 million.</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>

</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 -->108<!-- 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: justify">For the year ended December 31, 2020, net cash
provided by financing activities of approximately $13.1 million, consisted primarily of cash proceeds from bank loans of approximately
$62.3 million and cash injection from the non-controlling shareholders of approximately $0.3 million, partially offset by cash repaid
for bank loans of approximately $50 million.</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>Capital Expenditures</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">Our capital expenditures are incurred primarily
in connection with purchase of fixed assets, including electronic equipment, office equipment and vehicles, and intangible assets. Our
capital expenditures were approximately $7.2 million, $25.7 million and $7.9 million for the fiscal years ended December 31, 2022, 2021
and 2020, respectively. Subsequent to December 31, 2022 and as of the date of this annual report, there have been no material commitments
for capital expenditures. We intend to fund our future capital expenditures with our existing cash balance, proceeds of bank loans and
proceeds from the initial public offering.</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>Off-Balance&#160;Sheet Commitments and Arrangements</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 have no off-balance sheet arrangements including
arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.</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"><span style="font-size: 10pt"><b>C. Research and Development, Patents and Licenses, etc.</b></span></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">See &#8220;Item 4. Information on the Company&#8212;B.
Business Overview&#8212;Our Technology&#8221; and &#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Intellectual
Property.&#8221;</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"><span style="font-size: 10pt"><b>D. Trend Information</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">Other than as described elsewhere in this annual
report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse
effect on our revenue, income from continuing operations, profitability, liquidity or capital resources, or that would cause our reported
financial information not necessarily to be indicative of future operating results or financial condition.</p><div>

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

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>E.
Critical Accounting Estimates</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">We prepare our consolidated financial statements
in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions. 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
and assumptions on our own historical data 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 and assumptions on an ongoing basis.</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 expectations regarding the future are based
on available information and assumptions that we believe to be reasonable and accurate, 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.</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 critical accounting policies, judgments and
estimates that we believe to have the most significant impact on our consolidated financial statements are described below, which should
be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual
report. When reviewing our financial statements, you should consider.</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify">&#9679;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">our selection of critical accounting policies;</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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify">&#9679;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">the judgments and other uncertainties affecting the application of such policies;</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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify">&#9679;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">the sensitivity of reported results to changes in conditions and assumptions;</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">Our critical accounting policies and practices
include the following: (i) revenue recognition; (ii) accounts receivable, net; and (iii) income taxes. See Note 2&#8212;Summary of Significant
Accounting Policies to our consolidated financial statements for the disclosure of these accounting policies. We believe the following
accounting estimates involve the most significant judgments used in the preparation of our financial statements.</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 -->109<!-- 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: 0; text-align: justify">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. We consider our critical accounting estimates include (i)&#160;allowance for doubtful accounts for accounts receivable,
(ii) provision for prepayments and other assets, (iii) discount rate used in operating lease right-of-use assets, and (iv)&#160;valuation
allowance of deferred tax assets.</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>Allowance for doubtful accounts for accounts
receivable</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 review on a periodic basis for doubtful accounts
for the outstanding trade receivable balances based on historical collection trends, aging of receivables and other information available.
Additionally, we evaluate individual client&#8217;s financial condition, credit history, and the current economic condition to make specific
bad debt provisions when we deem necessary.</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 allowance is based on our management&#8217;s
best estimates of specific losses on individual exposures and a provision on historical trends of collections. The allowance rate will
fluctuate based upon the changes of the historical allowance rate and our management&#8217;s estimate. If actual conditions are less favorable
than those projected by the management, additional doubtful accounts may be required, which could negatively impact our operating results.
If actual conditions are more favorable than those projected by the management, we may have a higher profit margin when account receivable
balances that have been previously reserved are eventually collected. A 1% increase or decrease of allowance rate for each aged account
receivable balances would result in a decrease or increase of approximately $0.14 million and $0.10 million in profit before tax for the
years ended December 31, 2022 and 2021, respectively.</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>Provision for prepayments and other assets</i></b></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">Prepayment and other assets primarily consist
of VAT recoverable, advances to vendors for purchasing goods, long-lived assets or services that have not been received or provided, advances
to employees, security deposits made to customers and advances to employees. Prepayment and other assets are classified as either current
or non-current based on the terms of the respective agreements. These advances are unsecured and are reviewed periodically to determine
whether their carrying value has become impaired. The Company considers the assets to be impaired if the collectability of the advance
becomes doubtful. The Company uses the aging method to estimate the allowance for uncollectible balances. The allowance is also based
on management&#8217;s best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections
and utilizations. Actual amounts received or utilized may differ from management&#8217;s estimate of credit worthiness and the economic
environment. The provisions for prepayments and other assets were approximately $0.5 million and $0.4 million as of December 31, 2022
and 2021, respectively.</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>Discount rate used in operating lease right-of-use
asset</i></b></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">Right-of-use asset (&#8220;ROU&#8221;) assets
represent the Company&#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.</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 most of our leases do not provide an implicit
rate, we use the incremental borrowing rate based on the information available at lease commencement date to determine the present value
of lease payments. <span style="background-color: white">Determining the incremental borrowing rate applied in calculating lease liabilities
requires the use of certain methodologies and assumptions. When determining the rate, management assesses various factors including the
lease term, nature of the asset and the level of security for the right-of-use asset. For the years ended December 31, 2022 and 2021,
the estimated weighted average discount rates used in</span> determining the present value of lease payments was 5.78% and 5.80%, respectively.</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>Valuation of deferred tax assets</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">Deferred income taxes are provided using assets
and liabilities method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on
the basis of the differences between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. Deferred tax assets are recognized to the extent that these assets are more
likely than not to be realized. In making such a determination, the management consider all positive and negative evidence, including
future reversals of projected future taxable income and results of recent operation. Deferred tax assets are then reduced by a valuation
allowance through a charge to income tax expense when, in the opinion of management, it is more likely than not that a portion of or all
of the deferred tax assets will not be realized.</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 ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management
considers the cumulative earnings and projected future taxable income in making this assessment. Recovery of substantially all of the
Company&#8217;s deferred tax assets is dependent upon the generation of future income, exclusive of reversing taxable temporary differences.
Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax
assets are recoverable, valuation allowances of nil were provided for the Company&#8217;s certain subsidiaries with continuous losses
as of December 31, 2022 and 2021. As of December 31, 2022 and 2021, there were approximately $9.5 million and $16.8 million net operating
losses carryforwards in certain subsidiaries, respectively. The net operating tax loss carryforwards will expire from 2023 to 2027.</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: 114; 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 -->110<!-- 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"></p><div>

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

</div><div><a id="a_009"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</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">A. <span style="text-decoration:underline">Directors and Senior Management</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; text-align: justify">The following table sets forth information regarding
our directors and executive officers as of the date of this annual report. The business address of all of our directors and executive
officers is Shengfeng Building, No. 478 Fuxin East Road, Jin&#8217;an District, Fuzhou City, Fujian Province, People&#8217;s Republic
of China, 350001.</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="border-bottom: Black 1.5pt solid; font-weight: bold">Name</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">Age</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#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: center">Position(s)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 20%; text-align: left">Yongxu Liu</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: center">&#160;</td><td style="width: 9%; text-align: center">50</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 67%; text-align: left">Chief Executive Officer, Director, President and Chairman</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Guoping Zheng</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">35</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Chief Financial Officer and Vice President</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Zhiping Yang</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">39</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>Director</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Dan Liu</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">54</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Independent Director</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Wen Li</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">54</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Independent Director</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">John F. Levy</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">66</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Independent Director</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">The following is a brief biography of each of the executive officers
and directors listed above:</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"><b>Yongxu Liu</b> has been our chief executive
officer, president and chairman since May 20, 2021 and director since July 16, 2020. Mr. Liu is the founder of Shengfeng Logistics and
has served as its chairman and chief executive officer since December 2001. Mr. Liu served as the vice chairman of Fujian Province Logistics
Association in 2006 and the vice chairman of Fuzhou City Logistics Association in 2007. Mr. Liu also served as the deputy to Fuzhou Municipal
People&#8217;s Congress in 2011. Prior to founding Shengfeng Logistics, Mr. Liu was the manager of Department of Vehicle Management of
Shenghui Logistics Group Co., Ltd. from 1997 to 2001. Before the formal formation of Shenghui Logistics Group Co., Ltd., Mr. Liu worked
for such entity from 1992 to 1997 as a self-employed individual of logistics transportation. Mr. Liu received his master&#8217;s degree
in Executive Master of Business Administration from Tsinghua University in 2016. Mr. Liu has been chosen as a director and our chairman
because of his knowledge and extensive experience in logistics industry and 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"><b>Guoping Zheng</b> has been our chief financial
officer and vice president since May 20, 2021. Mr. Zheng has served as the vice president and chief financial officer of Shengfeng Logistics,
principal of its Strategy Department and its Finance&#8194;Department since 2016. Prior to that, Mr. Zheng served as the senior director
of the Financial Management Department of East China and North China in Deppon Logistics Co., Ltd. from 2008 to 2016. Mr. Zheng received
his bachelor&#8217;s degree in Financial Management from Xiamen University in 2008.</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"><b>Zhiping Yang</b> has been our director since
April 7, 2021. Mr. Yang joined Shengfeng Logistics in 2001. He has served as the vice president of Shengfeng Logistics since 2020 and
the general manager of the Operation Center in Shengfeng Logistics since 2014. Mr. Yang has served as the director of Shengfeng Logistics
from December 2018 to April 2021. From 2001 to 2013, he served as the General Manager of Beijing Shengfeng Supply Chain Management Co.,
Ltd., a subsidiary wholly owned by Shengfeng Logistics. Mr. Yang received his bachelor&#8217;s degree in Applied Psychology from Xi &#8216;an
Institute of Political Science of the People&#8217;s Liberation Army in 2015. He also completed a Human Resources Advanced Training Class
conducted by Tsinghua University in 2014. Mr. Yang has been chosen as a director because of his knowledge and extensive experience in
logistics industry and 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"><b>Dan Liu&#160;</b>is an independent director.
Ms. Liu has been a professor in the School of Economics and Management of Fuzhou University since 2017. Prior to that, she served as an
associate&#160;professor in the same school of Fuzhou University from 2006 to 2017. From 2001 to 2006, Ms. Liu served as an associate&#160;professor
in Fuzhou Polytechnic. From 2000 to 2001, she was a senior&#160;lecturer of the Department of Vocational Education of Fujian Economics
and Management Cadre Institute after being a lecturer in the same department from 1994 to 2000. From 1987 to 1994, she served as a teaching
assistant under the same department. Ms. Liu received her bachelor&#8217;s degree in Material Management Engineering from Huazhong University
of Science &amp; Technology (formerly named Huazhong Institute of Technology) in 1987, her master&#8217;s degree in Business Management
from Fuzhou University in 2005 and her Ph.D. in Logistics Management from Fuzhou University in 2012. Ms. Liu has been chosen as a director
appointee because of her extensive knowledge and experience in economics and management.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Wen Li </b>is an independent director. Ms.
Li has served as a financial director of Fujian Qunsheng Property Limited Company in China since 2013 and an independent director of Shenzhen
Coship Electronics Co., Ltd. since March 2021. From 2006 to 2012, she served as an independent director of Fufa Group Co., Ltd. in Fujian
Province. She also served as the financial director of Fuzhou TV Station from 2008 to 2013 and the financial director of Fujian Zhongcheng
Group from 2006 to 2008. Prior to that, she was the general manager of Department of Finance of Fujian Huafu Securities Company from 1997
to 2005 and the general manager of Department of Finance of Fujian Huafu Real Estate Company from 1989 to 1997. Ms. Li received her bachelor&#8217;s
degree in Economics from Fuzhou&#160;University in 1989. She also completed a Master course in Finance conducted by Xiamen University
in 1999. She has been certified as a Senior Accountant in China since 2001, obtained Securities Practitioner qualification in China since
2002 and Independent Director qualification in Shenzhen Stock Exchange since 2007. Ms. Li has been chosen as a director appointee because
of her knowledge and extensive experience in finance.</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>John F. Levy</b> is an independent director.
Mr. Levy currently serves as the chief executive officer and principal consultant for Board Advisory (the &#8220;Levy Company&#8221;).
He has held this role since May 2005. He also served as the chief executive officer of Sticky Fingers Restaurants, LLC from 2019 to 2020.
Mr. Levy is a recognized corporate governance and financial reporting expert with over 30 years of progressive financial, accounting and
business experience; including nine years in public accounting with three national accounting firms and having served as chief financial
officer of both public and private companies for over 13 years. Mr. Levy currently serves on the board of directors and audit committee
chair of Paranovus Entertainment Technology Ltd. (formerly Happiness Development Group Limited). Mr. Levy served on the board of directors
of Applied Minerals, Inc. from January 2008 to August 2022), Washington Prime Group, Inc. from June 2016 to October 2021), Singularity
Future Technology Limited (from November 2021 to February 2023), Takung Art Co., Ltd. (from March 2016 to June 2019), China Commercial
Credit, Inc. (from August 2013 to December 2016), Applied Energetics, Inc. (from June 2009 to February 2016), as well as several other
publicly held companies prior to 2016. Mr. Levy is a frequent lecturer and has written several articles and courses on accounting, finance
business and governance. Mr. Levy is a Certified Public Accountant. Mr. Levy is a graduate of the Wharton School of Business at the University
of Pennsylvania, and received his MBA from St. Joseph&#8217;s University in Philadelphia, Pennsylvania. Mr. Levy has been chosen as a
director appointee because of his knowledge and extensive experience in financial, accounting, governance and 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"><b>Board Diversity</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">The table below provides certain information regarding
the diversity of our board of directors as of the date of this&#160;annual report.</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; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top; background-color: #D9D9D9">
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Non- </b></p>
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Disclose<br/>
Gender</b></span></td></tr>
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    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt"><b>Part I: Gender Identity</b></span></td>
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  <tr style="vertical-align: top">
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    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.25pt; text-align: center"><span style="font-size: 10pt">2</span></td>
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  <tr style="vertical-align: top; background-color: #D9D9D9">
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt"><b>Part II: Demographic Background</b></span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.25pt; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt">Underrepresented Individual in Home Country Jurisdiction</span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.25pt; text-align: center"><span style="font-size: 10pt">0</span></td></tr>
  <tr style="vertical-align: top">
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.25pt; padding-right: 0.5pt; padding-left: 0.5pt"><span style="font-size: 10pt">LGBTQ+</span></td>
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  <tr style="vertical-align: top">
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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"></p><div>

</div><!-- Field: Page; Sequence: 116; 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 -->112<!-- 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: justify"><b>Family Relationships</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">None of our directors or executive officers has
a family relationship as defined in Item 401 of Regulation S-K.</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"><b>Controlled Company</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">Mr. Yongxu Liu, our chief executive officer, president
and chairman of the board of directors, currently beneficially owns approximately 91.18% of the aggregate voting power of our outstanding
ordinary shares. As a result, we are a &#8220;controlled company&#8221; within the meaning of the Nasdaq listing rules. As a controlled
company, we are permitted to elect to rely on certain exemptions from the obligations to comply with certain corporate governance requirements,
including:</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the requirement that a majority of the board of directors consist of independent directors;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the requirement that our director nominees be selected or recommended solely by independent directors; and</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the requirement that we have a nominating and corporate governance committee and a compensation committee that are composed entirely of independent directors with a written charter addressing the purposes and responsibilities of the committees.</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">Although we do not intend to rely on the controlled
company exemptions under the Nasdaq listing rules even if we are a controlled company, we could elect to rely on these exemptions in the
future, and if so, you would not have the same protection afforded to shareholders of companies that are subject to all of the corporate
governance requirements of Nasdaq.</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, our biggest shareholder, Shengfeng
International Limited, has the ability to control the outcome of matters submitted to the shareholders for approval, including the election
of directors and any merger, consolidation, or sale of all or substantially all of our assets.</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. <span style="text-decoration:underline">Compensation</span></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="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left">Yongxu Liu</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">89,430</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Guoping Zheng</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">82,062</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">Zhiping Yang</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">89,267</td><td style="text-align: left">&#160;</td></tr>
  </table><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>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">C. <span style="text-decoration:underline">Board Practices</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; text-align: justify"><b>Board of Directors</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">Our board of directors consists of five (5) directors.
Our board of directors has determined that our three independent director, Dan Liu, Wen Li, and John F. Levy, satisfy the &#8220;independence&#8221;
requirements of the Nasdaq corporate governance rules.</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 our amended and restated articles
of association, the minimum number of directors shall consist of not less than one person unless otherwise determined by the shareholders
in a general meeting. Unless removed or re-appointed, each director shall be appointed for a term expiring at the next-following annual
general meeting, if any is held. At any annual general meeting held, our directors will be elected by a majority vote of shareholders
eligible to vote at that meeting. At each annual general meeting, each director so elected shall hold office for a one-year term and until
the election of their respective successors in office or removed.</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 -->113<!-- 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"><b>Duties of Directors</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">Under Cayman Islands law, all of our directors
owe three types of duties to us: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties. The Companies Act (2021 Revision)
of the Cayman Islands imposes a number of statutory duties on a director. A Cayman Islands director&#8217;s fiduciary duties are not codified,
however the courts of the Cayman Islands have held that a director owes the following fiduciary duties: (a) a duty to act in what the
director <i>bona fide</i> considers to be in the best interests of the company, (b) a duty to exercise their powers for the purposes they
were conferred, (c) a duty to avoid fettering his or her discretion in the future and (d) a duty to avoid conflicts of interest and of
duty. The common law duties owed by a director are those to act with skill, care and diligence that may reasonably be expected of a person
carrying out the same functions as are carried out by that director in relation to the company and, also, to act with the skill, care
and diligence in keeping with a standard of care commensurate with any particular skill they have which enables them to meet a higher
standard than a director without those skills. In fulfilling their duty of care to us, our directors must ensure compliance with our articles
of association, as amended and restated from time to time. We have the right to seek damages if a duty owed by any of our directors is
breached.</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 functions and powers of our board of directors
include, among others:</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">appointing officers and determining the term of office of the officers;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">exercising the borrowing powers of the company and mortgaging the property of the company; and</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">maintaining or registering a register of mortgages, charges, or other encumbrances of the company.</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"><b>Terms of Directors and Executive Officers</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">Each of our directors holds office until a successor
has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office
until the next following annual meeting of shareholders at which time such director is eligible for reelection. All of our executive officers
are appointed by and serve at the discretion of our board of 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; text-align: justify"><b>Qualification</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">There is currently no shareholding qualification
for directors, although a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution.</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"><b>Employment Agreements</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 have entered into employment agreements with
each of our executive officers. Pursuant to such employment agreements, we have agreed to employ each of our executive officers for a
specified time period, which may be renewed upon both parties&#8217; agreement 30 days before the end of the current employment term.
We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, including,
but not limited to, the commitments of any serious or persistent breach or non-observance of the terms and conditions of the employment,
conviction of a criminal offense, willful disobedience of a lawful and reasonable order, fraud or dishonesty, receipt of bribery, or severe
neglect of his or her duties. An executive officer may terminate his or her employment at any time with a one-month prior written notice.
Each executive officer agrees to hold, both during and after the employment agreement expires, in strict confidence and not to use or
disclose to any person, corporation or other entity without written consent, any confidential information.</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: 118; 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 -->114<!-- 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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have also entered into indemnification agreements
with each of our directors and executive officers. Under these agreements, we have agreed 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.</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"><b>Insider Participation Concerning Executive
Compensation</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">Our chief executive officer, president and chairman,
Mr. Yongxu Liu, has been making all determinations regarding executive officer compensation from the inception of the Company. When our
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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"><b>Committees of the Board of Directors</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 have established three committees under the
board of directors: an audit committee, a compensation committee, and a nominating and corporate governance committee. Our independent
directors serve on each of the committees. We have adopted a charter for each of the three committees. Each committee&#8217;s members
and functions are described below.</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>Audit Committee</i>. Our audit committee consists
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We have determined that each of our independent director also satisfy the &#8220;independence&#8221; requirements of Rule 10A-3 under
the Securities Exchange Act. Our board also has determined that John F. Levy qualifies as an audit committee financial expert within the
meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq listing rules. 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:</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>&#160;</td>
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    <td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Compensation Committee</i>. Our compensation
committee consists of our three independent director appointees, Dan Liu, Wen Li, and John F. Levy. Dan Liu is the chairperson of our
compensation committee. 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. The compensation committee is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

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  <tr style="vertical-align: top">
    <td>&#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>

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    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#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"><i>Nominating and Corporate Governance Committee.
</i>Our nominating and corporate governance committee consists of our three independent director appointees, Dan Liu, Wen Li, and John
F. Levy. Wen Li is be the chairperson of our nominating and corporate governance committee. The nominating and corporate governance committee
assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board
and its committees. The nominating and corporate governance committee is responsible for, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="text-align: justify"><span style="font-size: 10pt">identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
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    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">identifying and recommending to our board the directors to serve as members of committees;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
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    <td><span style="font-size: 10pt">&#9679;</span></td>
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</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">D. <span style="text-decoration:underline">Employees</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; text-align: justify">See &#8220;Item 4. Information on the Company&#8212;B.
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">E. <span style="text-decoration:underline">Share Ownership</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; text-align: justify">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 Class A Ordinary Shares and Class
B Ordinary Shares as of the date of this annual report for:</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; width: 100%">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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</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"></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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 Class A Ordinary Shares or and Class B Ordinary Shares shown as
beneficially owned by them. Percentage of beneficial ownership of each listed person is based on 40,520,000 Class A Ordinary Shares outstanding,
and 41,880,000 Class B Ordinary Shares outstanding as of the date of this annual report.</p><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: justify">Information with respect to beneficial ownership
has been furnished by each director, officer, or beneficial owner of 5% or more of our Class A Ordinary Shares or Class B 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 Class A Ordinary Shares beneficially owned by a person listed below and the
percentage ownership of such person, Class A Ordinary Shares underlying options, warrants, or convertible securities, including Class
B Ordinary Shares, 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. As of the date of the annual report,
we have 13 shareholders of record, none of whom are located in the United States.</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="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: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</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">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</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">3,784,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">9.34</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</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">0.79</td><td style="text-align: left">%</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">3,088,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">7.62</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</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">0.67</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2,880,000</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: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-size: 10pt">*</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Represents the voting power with respect to all of our Class A Ordinary Shares and Class B Ordinary Shares, voting as a single class. Each holder of Class A Ordinary Shares is entitled to one vote per one Class A Ordinary Share and each holder of Class B Ordinary Shares is entitled to ten votes per one Class B Ordinary Share.</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"></p><div>

</div><!-- Field: Page; Sequence: 121; Value: 1 --><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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.35in"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Unless otherwise indicated, the business address of each of the individuals is Shengfeng Building, No. 478 Fuxin East Road, Jin&#8217;an District, Fuzhou City, Fujian Province, People&#8217;s Republic of China, 350001</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(2)</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(3)</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(4)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The number of Class A Ordinary Shares beneficially owned represents 3,928,000 Class A Ordinary Shares held by Double Sun Capital Limited, a British Virgin Islands company, which is 100% owned by Yiping Wu. The registered address of Double Sun Capital Limited is 4th Floor, Water&#8217;s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.</span></td></tr>
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    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(5)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The number of Class A Ordinary Shares beneficially owned represents 3,904,000 Class A Ordinary Shares held by Changle International Limited, a British Virgin Islands company, which is 100% owned by Rong Zheng. The registered address of Changle International Limited is 4th Floor, Water&#8217;s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(6)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The number of Class A Ordinary Shares beneficially owned represents 3,784,000 Class A Ordinary Shares held by Yuansheng International Limited, a British Virgin Islands company, which is 100% owned by Yusheng Yang. The registered address of Yuansheng International Limited is 4th Floor, Water&#8217;s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(7)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The number of Class A Ordinary Shares beneficially owned represents 3,648,000 Class A Ordinary Shares held by Mid-Castle Development Limited, a British Virgin Islands company, which is 100% owned by Qing Lin. The registered address of Mid-Castle Development Limited is 4th Floor, Water&#8217;s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(8)</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(9)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The number of Class A Ordinary Shares beneficially owned represents 2,880,000 Class A Ordinary Shares held by Sky Top Capital International Limited, a British Virgin Islands company, which is 100% owned by Qiang Lin. The registered address of Sky Top Capital International Limited is 4th Floor, Water&#8217;s Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.</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">As of the date of this annual report, none of
our outstanding Class A Ordinary Shares or Class B Ordinary Shares are held by record holders in the United States.</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 are not aware of any arrangement that may,
at a subsequent date, result in a change of control of our Company.</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: 122; 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 -->118<!-- 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_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</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">A. <span style="text-decoration:underline">Major Shareholders</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; text-align: justify">See &#8220;Item 6. Directors, Senior Management
and Employees&#8212;E. Share Ownership.&#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. <span style="text-decoration:underline">Related Party Transactions</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"><b>The VIE Agreements</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">See &#8220;Item 3. Key Information&#8212;Our VIE
Agreements.&#8221;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Material Transactions with Related Parties</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">The relationship and the nature of related party
transactions are summarized as follow:</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; background-color: white">The table below sets forth the major related
parties and their relationships with the Company as of December&#160;31, 2022 and 2021, and for the years ended December 31, 2022, 2021
and 2020:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white">&#160;</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="border-bottom: black 1.5pt solid; width: 53%; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Name of related parties</b></span></td>
    <td style="width: 2%; padding-left: 7.1pt"></td>
    <td style="text-align: justify; border-bottom: black 1.5pt solid; width: 45%; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Relationship with the Company</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Fujian Bafang</b></span></td>
    <td style="padding-left: 7.1pt"></td>
    <td style="text-align: justify; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt">An equity investee of the Company</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Fuzhou Tianyu Shengfeng Industrial Co., Ltd (&#8220;Fuzhou Tianyu&#8221;)</b></span></td>
    <td style="padding-left: 7.1pt"></td>
    <td style="text-align: justify"><span style="font-size: 10pt">A company controlled by Yongteng Liu, who is the brother of Yongxu Liu, CEO and Chairman of the Company </span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Fuzhou Tianyu Shengfeng Property Management Co., Ltd<br/>
 (&#8220;Fuzhou Tianyu Management&#8221;)</b></span></td>
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    <td style="text-align: justify; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt">A company under the control of a shareholder</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Fuzhou Tianyu Yuanmei Catering Co., Ltd (&#8220;Fuzhou Tianyu Catering&#8221;)</b></span></td>
    <td style="padding-left: 7.1pt"></td>
    <td style="text-align: justify; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt">A company under the control of a shareholder</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Beijing Union Logistics Co., Ltd (&#8220;Beijing Banglian&#8221;) (1)</b></span></td>
    <td style="padding-left: 7.1pt"></td>
    <td style="text-align: justify; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt">A company under the control of a shareholder</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Fujian Desheng Logistics Co., Ltd (&#8220;Fujian Desheng&#8221;)</b></span></td>
    <td style="padding-left: 7.1pt"></td>
    <td style="text-align: justify; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt">A company under the control of a shareholder</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Dongguan Suxing New Material Co., Ltd (&#8220;Suxing&#8221;) (2)</b></span></td>
    <td style="padding-left: 7.1pt"></td>
    <td style="text-align: justify; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt">A company under the control of a non-controlling shareholder</span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Hainan Tianyi Logistics Distribution Co., Ltd (&#8220;Hainan Tianyi&#8221;) (3)</b></span></td>
    <td style="padding-left: 7.1pt"></td>
    <td style="text-align: justify; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt">An equity investee of the Company</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt"><b>Yongteng Liu</b></span></td>
    <td style="padding-left: 7.1pt"></td>
    <td style="text-align: justify; padding-left: 10pt; text-indent: -10pt"><span style="font-size: 10pt">CEO&#8217;s brother</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white">&#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="width: 0.35in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">In January 2022, the Company&#8217;s
shareholder sold the equity interest in Beijing Banglian.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="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><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: 0in">&#160;</td>
    <td style="width: 0.35in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">On July 14, 2021, Shengfeng Logistics entered into a share transfer agreement with Dongguan Suxing New Material Co., Ltd (&#8220;Dongguan Suxing&#8221;), a related party, to transfer its 51% equity interest in Fuzhou Shengfeng New Material Technology Co., Ltd. (&#8220;New Material Technology&#8221;) to Dongguan Suxing. After the transaction, Suxing became a non-related party to the Company.</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><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: 0.35in; text-align: left"><span style="font-size: 10pt">(3)</span></td><td style="text-align: justify"><span style="font-size: 10pt">On September 15, 2021, the Company
signed a share purchase agreement with a third party. According to such agreement, the Company sold its 5% equity interests in Hainan
Tianyi to such third party. After the transaction, Hainan Tianyi became a non-related party to the Company.</span></td>
</tr></table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white"></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 -->119<!-- 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 7.1pt; background-color: white"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 3%"><span style="font-size: 10pt"><i>i)</i></span></td>
    <td style="width: 97%"><span style="font-size: 10pt"><i>Significant transactions with related parties were as follows:</i></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white"><i>&#160;</i></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="white-space: nowrap">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December 31,<br/>
</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>2022</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; white-space: nowrap; text-align: center"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Year ended<br/>
</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December 31,<br/>
</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>2021</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; white-space: nowrap; text-align: center"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Year ended<br/>
</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December 31,<br/>
</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>2020</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; font-weight: bold; text-align: left">Transportation services to Fujian Bafang</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">18</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">7</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Transportation services to Fujian Desheng</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">349</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Sales of material to Suxing</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">49</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">18</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">$</td><td style="border-bottom: Black 4pt double; text-align: right">349</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">56</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; background-color: white"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><i>&#160;</i></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="white-space: nowrap">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December&#160;31,</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>2022</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; white-space: nowrap; text-align: center"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Year ended<br/>
</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December&#160;31,</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>2021</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December&#160;31,</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>2020</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; font-weight: bold; text-align: left">Transportation services from Beijing Banglian</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Transportation services from Hainan Tianyi</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">1,207</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,109</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Transportation services from Fujian Bafang</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,196</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">157</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">144</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Purchase raw materials from Suxing</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">577</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">781</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Lease services from Fuzhou Tianyu</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">305</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">358</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">296</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Lease services from Fuzhou Tianyu Management</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">35</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 3%"><span style="font-size: 10pt"><i>ii)</i></span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company&#8217;s shareholder,
CEO and Chairman, Yongxu Liu, his spouse, Xiying Yang, and his brother, Yongteng Liu, were the guarantors of the Company&#8217;s short-term
bank loans.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 3%"><span style="font-size: 10pt"><i>iii)</i></span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white"><i>&#160;&#160;</i></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="white-space: nowrap">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December 31,<br/> 2022</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December 31,<br/> 2021</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-style: normal; font-weight: normal; text-align: left; text-decoration: none"><span style="text-decoration:underline">Due from related parties</span></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%; font-weight: bold; text-align: left">Fuzhou Tianyu</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">42</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">46</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <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">$</td><td style="border-bottom: Black 4pt double; text-align: right">42</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">50</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 0pt 7.1pt; background-color: white"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; background-color: white">&#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="white-space: nowrap">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December&#160;31,<br/> 2022</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December&#160;31,<br/> 2021</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; font-style: italic"><span style="text-decoration:underline">Due to related parties</span></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: right">&#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: 76%; font-weight: bold; text-align: left">Fujian Bafang (a)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,694</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,574</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Fuzhou Tianyu</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">84</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">29</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">Beijing Banglian</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">246</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Fuzhou Tianyu Management</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">36</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">24</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">Hainan Tianyi</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></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Yongteng Liu</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">600</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; background-color: rgb(204,238,255)">
    <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">$</td><td style="border-bottom: Black 4pt double; text-align: right">2,414</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,877</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 0pt 7.1pt; background-color: white">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white">
  <tr style="vertical-align: top">
    <td style="width: 3%"><span style="font-size: 10pt">(a)</span></td>
    <td style="text-align: justify; width: 97%"><span style="font-size: 10pt">On December 10, 2007, the Company entered into an interest-free loan agreement with Fujian Bafang for a principal amount of approximately $1.4 million (RMB 9.6 million). Such loan is due on demand.</span></td></tr>
  </table><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>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">C. <span style="text-decoration:underline">Interests of Experts and Counsel</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; text-align: justify">Not applicable.</p><div>

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

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

</div><!-- Field: Page; Sequence: 124; 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 -->120<!-- 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="a_011"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 8. FINANCIAL INFORMATION</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">A. <span style="text-decoration:underline">Consolidated Statements and Other Financial
Information</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; text-align: justify">We have appended consolidated financial statements
filed as part of this annual report. See &#8220;Item 18. Financial Statements.&#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; text-align: justify"><b>Legal Proceedings</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">From time to time, we may become a party to various
legal or administrative proceedings arising in the ordinary course of our business, including actions with respect to intellectual property
infringement, violation of third-party licenses or other rights, breach of contract, and labor and employment claims. We are currently
not a party to, and we are not aware of any threat of, any legal or administrative proceedings that, in the opinion of our management,
are likely to have any material and adverse effect on our business, financial condition, cash flow, or results of operations.</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"><b>Dividend 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">See &#8220;Item 3. Key Information&#8212;Dividend
Distributions, Cash Transfer, and Tax Consequences.&#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; text-align: justify">B. <span style="text-decoration:underline">Significant Changes</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; text-align: justify">Except as disclosed elsewhere in this annual report,
we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual
report.</p><div>

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

</div><div><a id="a_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 9. THE OFFER AND LISTING</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">A. <span style="text-decoration:underline">Offer and Listing Details.</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"></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 Class A Ordinary Shares have been listed on
the Nasdaq Capital Market since March 31, 2023 under the symbol &#8220;SFWL.&#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; text-align: justify">B. <span style="text-decoration:underline">Plan of Distribution</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; text-align: justify">Not applicable.</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">C. <span style="text-decoration:underline">Markets</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; text-align: justify">Our Class A Ordinary Shares have been listed on
the Nasdaq Capital Market since March 31, 2023 under the symbol &#8220;SFWL.&#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; text-align: justify">D. <span style="text-decoration:underline">Selling Shareholders</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; text-align: justify">Not applicable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">E. <span style="text-decoration:underline">Dilution</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; text-align: justify">Not applicable.</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">F. <span style="text-decoration:underline">Expenses of the Issue</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; text-align: justify">Not applicable.</p><div>

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

</div><div><a id="a_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 10. ADDITIONAL INFORMATION</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">A. <span style="text-decoration:underline">Share Capital</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; text-align: justify">Not applicable.</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. <span style="text-decoration:underline">Memorandum and Articles of Association</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; text-align: justify">We incorporate by reference into this annual report
the description of our amended and restated memorandum and articles of association, Exhibit 3.1, and the description of differences in
corporate laws contained in our registration statement on Form F-1 (File No.&#160;333-267367), as amended, initially filed with the SEC
on September 9, 2022.</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">C. <span style="text-decoration:underline">Material Contracts</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; text-align: justify">We have not entered into any material contracts
other than in the ordinary course of business and other than those described in &#8220;Item 4. Information on the Company&#8221; or elsewhere
in this annual report.</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><!-- Field: Page; Sequence: 125; 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 -->121<!-- 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: justify">D. <span style="text-decoration:underline">Exchange Controls</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; text-align: justify">See &#8220;Item 4. Information on the Company&#8212;B.
Business Overview&#8212;Regulations&#8212;Regulations Relating to Foreign Exchange.&#8221;&#160;</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">E. <span style="text-decoration:underline">Taxation</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; text-align: justify"><b><span style="text-decoration:underline">People&#8217;s Republic of China Enterprise
Taxation (for the purpose of this paragraph, PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau)</span></b>&#160;</p><div>

</div><p style="font: 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">The following brief description of Chinese enterprise
income taxation is designed to highlight the enterprise-level taxation on our earnings, which will affect the amount of dividends, if
any, we are ultimately able to pay to our shareholders. See &#8220;Item 3. Key Information&#8212;Dividend Distributions, Cash Transfer,
and Tax Consequences<i>.</i>&#8221;</p><div>
</div><p style="font: 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">According to the EIT Law, which was promulgated
by the SCNPC on March 16, 2007, became effective on January 1, 2008, and was last amended on December 29, 2018, and the <i>Implementation
Rules of the EIT Law</i>, which were promulgated by the State Council on December 6, 2007, and became effective on January 1, 2008, enterprises
are divided into resident enterprises and non-resident enterprises. Resident enterprises pay enterprise income tax on their incomes obtained
in and outside the PRC at the rate of 25%. Non-resident enterprises setting up institutions in the PRC pay enterprise income tax on the
incomes obtained by such institutions in and outside the PRC at the rate of 25%. Non-resident enterprises with no institutions in the
PRC, and non-resident enterprises with income having no substantial connection with their institutions in the PRC, pay enterprise income
tax on their income obtained in the PRC at a reduced rate of 10%.</p><div>

</div><p style="font: 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">We are a holding company incorporated in the Cayman
Islands and we gain substantial income by way of dividends paid to us from our PRC subsidiary. The EIT Law and its implementation rules
provide that China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that are non-resident
enterprises, will normally be subject to PRC withholding tax at a rate of 10%, unless any such foreign investor&#8217;s jurisdiction of
incorporation has a tax treaty with China that provides for a preferential tax rate or a tax exemption.</p><div>

</div><p style="font: 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">Under the EIT Law, an enterprise established outside
of China with a &#8220;de facto management body&#8221; within China is considered a &#8220;resident enterprise,&#8221; which means that
it is treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the
EIT Law define &#8220;de facto management body&#8221; as a managing body that actually, comprehensively manage and control the production
and operation, staff, accounting, property, and other aspects of an enterprise, the only official guidance for this definition currently
available is set forth in SAT Notice 82, which provides guidance on the determination of the tax residence status of a Chinese-controlled
offshore incorporated enterprise, defined as an enterprise that is incorporated under the laws of a foreign country or territory and that
has a PRC enterprise or enterprise group as its primary controlling shareholder. Although Shengfeng Cayman does not have a PRC enterprise
or enterprise group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise
within the meaning of SAT Notice 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth
in SAT Notice 82 to evaluate the tax residence status of Shengfeng Cayman and its subsidiaries organized outside the PRC.</p><div>

</div><p style="font: 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">According to SAT Notice 82, a Chinese-controlled
offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a &#8220;de facto management body&#8221; in
China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following criteria are met: (i) the
places where senior management and senior management departments that are responsible for daily production, operation and management of
the enterprise perform their duties are mainly located within the territory of China; (ii) financial decisions (such as money borrowing,
lending, financing and financial risk management) and personnel decisions (such as appointment, dismissal and salary and wages) are decided
or need to be decided by organizations or persons located within the territory of China; (iii) main property, accounting books, corporate
seal, the board of directors and files of the minutes of shareholders&#8217; meetings of the enterprise are located or preserved within
the territory of China; and (iv) one half (or more) of the directors or senior management staff having the right to vote habitually reside
within the territory of China.</p><div>

</div><p style="font: 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; text-indent: 0.5in"></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; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe that we do not meet some of the conditions
outlined in the immediately preceding paragraph. For example, as a holding company, the key assets and records of Shengfeng Cayman, including
the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located
and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a corporate structure similar to
ours that has been deemed a PRC &#8220;resident enterprise&#8221; by the PRC tax authorities. Accordingly, we believe that Shengfeng Cayman
and its offshore subsidiaries should not be treated as a &#8220;resident enterprise&#8221; for PRC tax purposes if the criteria for &#8220;de
facto management body&#8221; as set forth in SAT Notice 82 were deemed applicable to us. However, as the tax residency 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;de
facto management body&#8221; as applicable to our offshore entities, we will continue to monitor our tax status.</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 implementation rules of the EIT Law provide
that, (i) if the enterprise that distributes dividends is domiciled in the PRC or (ii) if gains are realized from transferring equity
interests of enterprises domiciled in the PRC, then such dividends or gains are treated as China-sourced income. It is not clear how &#8220;domicile&#8221;
may be interpreted under the EIT Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore,
if we are considered as a PRC tax resident enterprise for PRC tax purposes, any dividends we pay to our overseas shareholders which are
non-resident enterprises as well as gains realized by such shareholders from the transfer of our shares may be regarded as China-sourced
income and as a result become subject to PRC withholding tax at a rate of up to 10%. AllBright, our PRC counsel, is unable to provide
a &#8220;will&#8221; opinion because it believes that it is more likely than not that we and our offshore subsidiaries would be treated
as non-resident enterprises for PRC tax purposes because we do not meet some of the conditions outlined in SAT Notice 82. Therefore, AllBright
believes that it is possible but highly unlikely that the income received by overseas shareholders who are not PRC residents will be regarded
as China-sourced income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 15pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">See &#8220;Item 3. Key Information&#8212;D.Risk
Factors&#8212;Risks Relating to Doing Business in the PRC&#8212;Under the PRC Enterprise Income Tax Law, we may be classified as a PRC
&#8216;resident enterprise&#8217; for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences
to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment.&#8221;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 15pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Currently, as resident enterprises in the PRC,
Tianyu as well as Shengfeng Logistics and its subsidiaries in PRC are subject to the enterprise income tax at the rate of 25%, except
that once an enterprise meets certain requirements and is identified as a small-scale minimal profit enterprise, the part of its taxable
income not more than RMB1 million is subject to a reduced rate of 5% and the part between RMB1 million and RMB3 million is subject to
a reduced rate of 10%. The EIT is calculated based on the entity&#8217;s global income as determined under PRC tax laws and accounting
standards. If the PRC tax authorities determine that Shengfeng Cayman is a PRC resident enterprise for enterprise income tax purposes,
we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises. In addition,
non-resident enterprise shareholders may be subject to a 10% PRC withholding tax on gains realized on the sale or other disposition of
our Class A Ordinary Shares or Class B Ordinary Shares, if such income is treated as sourced from within the PRC. It is unclear whether
our non-PRC individual shareholders would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders
in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to dividends or gains realized by non-PRC
individuals, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. However, it
is also unclear whether our non-PRC shareholders would be able to claim the benefits of any tax treaties between their country of tax
residence and the PRC in the event that we are treated as a PRC resident enterprise. There is no guidance from the PRC government to indicate
whether or not any tax treaties between the PRC and other countries would apply in circumstances where a non-PRC company was deemed to
be a PRC tax resident, and thus there is no basis for expecting how tax treaty between the PRC and other countries may impact non-resident
enterprises.</p><div>

</div><p style="font: 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; text-indent: 0.5in"></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; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><span style="text-decoration:underline">Hong Kong Taxation</span></b></p><div>

</div><p style="font: 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">Entities incorporated in Hong Kong are subject
to profits tax in Hong Kong at the rate of 16.5%.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><span style="text-decoration:underline">Cayman Islands Taxation</span></b></p><div>

</div><p style="font: 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">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 us 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. No stamp
duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those
which hold interests in land in the Cayman Islands). There are no exchange control regulations or currency restrictions in the Cayman
Islands.</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">Payments of dividends and capital in respect of
our Class A Ordinary Shares or Class B Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be
required on the payment of a dividend or capital to any holder of our Class A Ordinary Shares or Class B Ordinary Shares, as the case
may be, nor will gains derived from the disposal of our Class A Ordinary Shares or Class B Ordinary Shares be subject to Cayman Islands
income or corporation tax.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><span style="text-decoration:underline">United States Federal Income Taxation</span></b>&#160;</p><div>

</div><p style="font: 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">The following does not address the tax consequences
to any particular investor or to persons in special tax situations such as:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&#160;</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">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">banks;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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    <td>&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">financial institutions;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">insurance companies;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">real estate investment trusts;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">broker-dealers;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">persons that elect to mark their securities to market;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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</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="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">persons liable for alternative minimum tax;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 15pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The discussion set forth below is addressed only
to U.S. Holders that purchase Class A Ordinary Shares. Prospective purchasers are urged to consult their own tax advisors about the application
of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences
to them of the purchase, ownership and disposition of our Class A Ordinary Shares.</p><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: justify"><b><i>Material Tax Consequences Applicable to
U.S. Holders of Our Class A Ordinary Shares</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">The following sets forth the material U.S. federal
income tax consequences related to the ownership and disposition of our Class A Ordinary Shares. It is directed to U.S. Holders (as defined
below) of our Class A Ordinary Shares and 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 description does not deal with all possible tax consequences relating to ownership and
disposition of our Class A Ordinary Shares or U.S. tax laws, other than the U.S. federal income tax laws, such as the tax consequences
under non-U.S. tax laws, state, local and other tax laws.</p><div>
</div><p style="font: 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">The following brief description applies only to
U.S. Holders (defined below) that hold Class A Ordinary Shares as capital assets and that have the U.S. dollar as their functional currency.
This brief description is based on the federal income tax laws of the United States in effect as of the date of this annual report and
on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report, as well as judicial and administrative
interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply
retroactively and could affect the tax consequences described below.</p><div>
</div><p style="font: 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">The brief description below of the U.S. federal
income tax consequences to &#8220;U.S. Holders&#8221; will apply to you if you are a beneficial owner of Class A Ordinary Shares and you
are, for U.S. federal income tax purposes,</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</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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    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</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; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If a partnership (or other entities treated as
a partnership for United States federal income tax purposes) is a beneficial owner of our Class A Ordinary Shares, the tax treatment of
a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners
of a partnership holding our Class A Ordinary Shares are urged to consult their tax advisors regarding an investment in our Class A Ordinary
Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><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>Taxation of Dividends and Other Distributions
on our Class A Ordinary Shares</i></b></p><div>

</div><p style="font: 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">Subject to the PFIC (defined below) rules discussed
below, the gross amount of distributions made by us to you with respect to the Class A Ordinary Shares (including the amount of any taxes
withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the
extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax
principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction allowed to
corporations in respect of dividends received from other U.S. corporations. During the fiscal year ended December 31, 2022, we did not
declare any dividends.</p><div>

</div><p style="font: 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">With respect to non-corporate U.S. Holders, including
individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that
(1) the Class A Ordinary Shares are readily tradable on an established securities market in the United States, or we are eligible for
the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2)
we are not a PFIC (defined below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain
holding period requirements are met. Because there is no income tax treaty between the United States and the Cayman Islands, clause (1)
above can be satisfied only if the Class A Ordinary Shares are readily tradable on an established securities market in the United States.
Under U.S. Internal Revenue Service authority, Class A Ordinary Shares are considered for purpose of clause (1) above to be readily tradable
on an established securities market in the United States if they are listed on certain exchanges, which presently include the NYSE and
the Nasdaq Stock Market. On March 31, 2023, our Class A Ordinary Shares were listed and started to be traded on the Nasdaq Capital Market.
You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our Class A
Ordinary Shares, including the effects of any change in law after the date of this annual report.</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">Dividends will constitute foreign source income
for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of
the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the
dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign
taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed
by us with respect to our Class A Ordinary Shares will constitute &#8220;passive category income&#8221; but could, in the case of certain
U.S. Holders, constitute &#8220;general category income.&#8221;</p><div>

</div><p style="font: 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">To the extent that the amount of the distribution
exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated
first as a tax-free return of your tax basis in your Class A Ordinary Shares, and to the extent the amount of the distribution exceeds
your tax basis, the excess will be taxed as capital gain. We did not calculate our earnings and profits under U.S. federal income tax
principles and did not declare or pay any dividends for the fiscal year ended December 31, 2022. Therefore, a U.S. Holder should expect
that a distribution, if any will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return
of capital or as capital gain under the rules described above.</p><div>

</div><p style="font: 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"></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Taxation of Dispositions of Class A Ordinary
Shares</i></b></p><div>

</div><p style="font: 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">Subject to the passive foreign investment company
rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to
the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the Class A Ordinary
Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who
has held the Class A Ordinary Shares for more than one year, you will generally be eligible for reduced tax rates. The deductibility
of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source
income or loss for foreign tax credit limitation purposes which will generally limit the availability of foreign tax credits.</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>Passive Foreign Investment Company (&#8220;PFIC&#8221;)
Consequences</i></b></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">A non-U.S. corporation is considered a PFIC, as
defined in Section 1297(a) of the US Internal Revenue Code, for any taxable year if either:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 15pt">&#160;</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">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">at least 75% of its gross income for such taxable year is passive income; or</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the &#8220;asset test&#8221;).</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 15pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Passive income generally includes dividends, interest,
rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition
of passive assets. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income
of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In determining the value and composition
of our assets for purposes of the PFIC asset test, (1) the cash we raise in this offering will generally be considered to be held for
the production of passive income and (2) the value of our assets must be determined based on the market value of our Class A Ordinary
Shares from time to time, which could cause the value of our non-passive assets to be less than 50% of the value of all of our assets
(including the cash raised in this offering) on any particular quarterly testing date for purposes of the asset test.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Based on our operations and the composition of our assets, we have
determined that we are not a PFIC under the current PFIC rules for the fiscal year ended December 31, 2022. We must make a separate determination
each year as to whether we are a PFIC, however, and there can be no assurance with respect to our status as a PFIC for our current taxable
year or any future taxable year. Depending on the amount of cash we raised in our offering, together with any other assets held for the
production of passive income, it is possible that, for any subsequent taxable year, more than 50% of our assets may be assets held for
the production of passive income. We will make the determination following the end of any particular tax year. Although the law in this
regard is unclear, we are treating the VIE as being owned by us for United States federal income tax purposes, not only because we control
their management decisions, but also because we are entitled to the economic benefits associated with the VIE, and as a result, we are
treating the VIE as our wholly owned subsidiary for U.S. federal income tax purposes. If we are not treated as owning the VIE for United
States federal income tax purposes, we would likely be treated as a PFIC. In addition, because the value of our assets for purposes of
the asset test will generally be determined based on the market price of our Class A Ordinary Shares and because cash is generally considered
to be an asset held for the production of passive income, our PFIC status will depend in large part on the market price of our Class A
Ordinary Shares and the amount of cash we raise in this offering. Accordingly, fluctuations in the market price of the Class A Ordinary
Shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and
the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. We are
under no obligation to take steps to reduce the risk of our being classified as a PFIC, and as stated above, the determination of the
value of our assets will depend upon material facts (including the market price of our Class A Ordinary Shares from time to time and the
amount of cash we raise in this offering) that may not be within our control. If we are a PFIC for any year during which you hold Class
A Ordinary Shares, we will continue to be treated as a PFIC for all succeeding years during which you hold Class A Ordinary Shares. If
we cease to be a PFIC and you did not previously make a timely &#8220;mark-to-market&#8221; election as described below, however, you
may avoid some of the adverse effects of the PFIC regime by making a &#8220;purging election&#8221; (as described below) with respect
to the Class A Ordinary Shares.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we are a PFIC for your taxable year(s) during
which you hold Class A Ordinary Shares, you will be subject to special tax rules with respect to any &#8220;excess distribution&#8221;
that you receive and any gain you realize from a sale or other disposition (including a pledge) of the Class A Ordinary Shares, unless
you make a &#8220;mark-to-market&#8221; election as discussed below. Distributions you receive in a taxable year that are greater than
125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for
the Class A Ordinary Shares will be treated as an excess distribution. Under these special tax rules:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</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">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the excess distribution or gain will be allocated ratably over your holding period for the Class A Ordinary Shares;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the amount allocated to your current taxable year, and any amount allocated to any of your taxable year(s) prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the amount allocated to each of your other taxable year(s) will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.</span></td></tr>
  </table><div>
</div><p style="font: 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">The tax liability for amounts allocated to years
prior to the year of disposition or &#8220;excess distribution&#8221; cannot be offset by any net operating losses for such years, and
gains (but not losses) realized on the sale of the Class A Ordinary Shares cannot be treated as capital, even if you hold the Class A
Ordinary Shares as capital assets.</p><div>

</div><p style="font: 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">A U.S. Holder of &#8220;marketable stock&#8221;
(as defined below) in a PFIC may make a mark-to-market election under Section 1296 of the US Internal Revenue Code for such stock to elect
out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed to
hold) Class A Ordinary Shares and for which we are determined to be a PFIC, you will include in your income each year an amount equal
to the excess, if any, of the fair market value of the Class A Ordinary Shares as of the close of such taxable year over your adjusted
basis in such Class A Ordinary Shares, which excess will be treated as ordinary income and not capital gain. You are allowed an ordinary
loss for the excess, if any, of the adjusted basis of the Class A Ordinary Shares over their fair market value as of the close of the
taxable year. Such ordinary loss, however, is allowable only to the extent of any net mark-to-market gains on the Class A Ordinary Shares
included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the
actual sale or other disposition of the Class A Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies
to any loss realized on the actual sale or disposition of the Class A Ordinary Shares, to the extent that the amount of such loss does
not exceed the net mark-to-market gains previously included for such Class A Ordinary Shares. Your basis in the Class A Ordinary Shares
will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to
distributions by corporations which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate
for qualified dividend income discussed above under &#8220;&#8212;Taxation of Dividends and Other Distributions on our Class A Ordinary
Shares&#8221; generally would not apply.</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 mark-to-market election is available only
for &#8220;marketable stock,&#8221; which is stock that is traded in other than de minimis quantities on at least 15 days during each
calendar quarter (&#8220;regularly traded&#8221;) on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations),
including the Nasdaq Capital Market. If the Class A Ordinary Shares are regularly traded on Nasdaq and if you are a holder of Class A
Ordinary Shares, the mark-to-market election would be available to you were we to be or become a PFIC.</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 -->128<!-- 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: justify">Alternatively, a U.S. Holder of stock in a PFIC
may make a &#8220;qualified electing fund&#8221; election under Section 1295(b) of the US Internal Revenue Code with respect to such PFIC
to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a
PFIC will generally include in gross income for a taxable year such holder&#8217;s pro rata share of the corporation&#8217;s earnings
and profits for the taxable year. The qualified electing fund election, however, is available only if such PFIC provides such U.S. Holder
with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently
intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold Class A Ordinary
Shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 in each such year
and provide certain annual information regarding such Class A Ordinary Shares, including regarding distributions received on the Class
A Ordinary Shares and any gain realized on the disposition of the Class A Ordinary Shares.</p><div>

</div><p style="font: 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">If you do not make a timely &#8220;mark-to-market&#8221;
election (as described above), and if we were a PFIC at any time during the period you hold our Class A Ordinary Shares, then such Class
A Ordinary Shares will continue to be treated as stock of a PFIC with respect to you even if we cease to be a PFIC in a future year, unless
you make a &#8220;purging election&#8221; for the year we cease to be a PFIC. A &#8220;purging election&#8221; creates a deemed sale of
such Class A Ordinary Shares at their fair market value on the last day of the last year in which we are treated as a PFIC. The gain recognized
by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described
above. As a result of the purging election, you will have a new basis (equal to the fair market value of the Class A Ordinary Shares on
the last day of the last year in which we are treated as a PFIC) and holding period (which new holding period will begin the day after
such last day) in your Class A Ordinary Shares for tax purposes.</p><div>

</div><p style="font: 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">IRC Section 1014(a) provides for a step-up in basis to the fair market
value for our Class A Ordinary Shares when inherited from a decedent that was previously a holder of our Class A Ordinary Shares. However,
if we are determined to be a PFIC and a decedent that was a U.S. Holder did not make either a timely qualified electing fund election
for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) our Class A Ordinary Shares, or a mark-to-market
election and ownership of those Class A Ordinary Shares are inherited, a special provision in IRC Section 1291 provides that the new U.S.
Holder&#8217;s basis should be reduced by an amount equal to the Section 1014 basis minus the decedent&#8217;s adjusted basis just before
death. As such if we are determined to be a PFIC at any time prior to a decedent&#8217;s passing, the PFIC rules will cause any new U.S.
Holder that inherits our Class A Ordinary Shares from a U.S. Holder to not get a step-up in basis under Section 1014 and instead will
receive a carryover basis in those Class A Ordinary Shares.</p><div>

</div><p style="font: 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">You are urged to consult your tax advisors regarding
the application of the PFIC rules to your investment in our Class A Ordinary Shares and the elections discussed above.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Information Reporting and Backup Withholding</i></b></p><div>

</div><p style="font: 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">Dividend payments with respect to our Class A
Ordinary Shares and proceeds from the sale, exchange or redemption of our Class A Ordinary Shares may be subject to information reporting
to the U.S. Internal Revenue Service and possible U.S. backup withholding under Section 3406 of the US Internal Revenue Code with at a
current flat rate of 24%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification
number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding.
U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service
Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup
withholding rules.</p><div>

</div><p style="font: 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; text-indent: 0.5in"></p><div>

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</div><p style="font: 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">Backup withholding is not an additional tax. Amounts
withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service
and furnishing any required information. We do not intend to withhold taxes for individual shareholders. Transactions effected through
certain brokers or other intermediaries, however, may be subject to withholding taxes (including backup withholding), and such brokers
or intermediaries may be required by law to withhold such taxes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the Hiring Incentives to Restore Employment
Act of 2010, certain U.S. Holders are required to report information relating to our Class A Ordinary Shares, subject to certain exceptions
(including an exception for Class A Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete
Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they
hold Class A Ordinary Shares. Failure to report such information could result in substantial penalties. You should consult your own tax
advisor regarding your obligation to file a Form 8938.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">F. <span style="text-decoration:underline">Dividends and Paying Agents</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">Not applicable.</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">G. <span style="text-decoration:underline">Statement by Experts</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">Not applicable.</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">H. <span style="text-decoration:underline">Documents on Display</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; text-align: justify">We are subject to the periodic reporting and other
informational requirements of 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&#160;20-F within four months after the end of each fiscal year. The SEC maintains
a website at <span style="text-decoration:underline">http://www.sec.gov</span> 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&#160;of the
Exchange Act prescribing, among other things, the furnishing and content of proxy statements to shareholders, and our executive officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section&#160;16
of the Exchange Act.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">I. <span style="text-decoration:underline">Subsidiary Information</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; text-align: justify">For a listing of our subsidiaries and the VIEs,
see &#8220;Item 3. Key Information&#8212;Our Corporate Structure&#8212;Corporate Structure.&#8221;</p><div>

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

</div><div><a id="a_014"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK</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"><b><i>Concentration of credit 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">Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash. As of December 31, 2022 and 2021, approximately $23.4 million and $18.9 million
were deposited with financial institutions located in the PRC, respectively, where there is a RMB 500,000 deposit insurance limit for
a legal entity's aggregated balance at each bank. While management believes that these financial institutions are of high credit quality,
it also continually monitors their credit worthiness.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is also exposed to risk from its accounts
receivable and other receivables. These assets are subjected to credit evaluations. An allowance has been made for estimated unrecoverable
amounts which have been determined by reference to past default experience and the current economic environment.</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>Concentration of customers and suppliers</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">Substantially all revenue was derived from customers
located in China. There are no customers from whom revenue individually represent greater than 10% of our total revenue in any of the
periods presented.</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; background-color: white">For the year ended December
31, 2022, Fujian Jinwang Yuntong Logistics Technology Co., Ltd. contributed approximately 23.5% of total cost of revenue of the Company.
For the year ended December 31, 2021, Anhui Luge Transportation Co., Ltd. contributed approximately 27.8% of total cost of revenue of
the Company. For the year ended December 31, 2020, Hubei Luge Logistics Co., Ltd. and Anhui Luge Transportation Co., Ltd. contributed
approximately 19.8% and 12.4% of total cost of revenue of the Company, respectively.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December 31, 2022
and 2021, no customers accounted more than 10% of the account receivables.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, Fujian Jinwang Yuntong
Logistics Technology Co., Ltd., contributed approximately 13.4% of total account payable balances. As of December 31, 2021, Anhui Luge
Transportation Co., Ltd. contributed approximately 14.4% of total account payable balances.&#160;&#160;</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>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">The Company&#8217;s exposure to changes in interest
rates relates primarily to the Company&#8217;s outstanding debt. While the Company is exposed to interest rate fluctuations, the Company&#8217;s
interest income and expense are most sensitive to fluctuations in China interest rates. Changes in rates affect the interest earned on
the Company&#8217;s cash as costs associated with interest paid on the Company&#8217;s bank loans. We have not been exposed to material
risks due to changes in interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure.</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 Currency Exchange 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">Our revenue is denominated in Renminbi. And our
costs are denominated in Renminbi as well. Our management considers that the business is not exposed to any significant foreign exchange
risk and we have not used any derivative financial instruments to hedge exposure to such 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">In July 2005, the PRC government changed its decades-old
policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over
the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the
U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly
and unpredictably. The RMB depreciated by 9.24% in the year ended December 31, 2022. The appreciation of the Renminbi against the U.S.
dollar was approximately 2.29% and 6.47% in fiscal year 2021 and 2020, respectively. It is difficult to predict how market forces or PRC
or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To the extent that we need to convert U.S. dollars
into RMB for our operations, appreciation of RMB against the U.S. dollar would reduce the RMB amount we receive from the conversion. Conversely,
if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares, servicing our outstanding
debt, or for other business purposes, appreciation of the U.S. dollar against the RMB 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">As of December 31, 2022, we had RMB-denominated
cash and restricted cash of approximately $23.3 million. A 10% depreciation of RMB against U.S. dollar based on the foreign exchange rate
on December 31, 2022 would result in a decrease of approximately $2.3 million in cash and restricted cash. A 10% appreciation of RMB against
U.S. dollar based on the foreign exchange rate on December 31, 2022 would result in an increase of approximately $2.3 million in cash
and restricted cash. As of December 31, 2021, we had RMB-denominated cash and restricted cash of approximately $18.9 million. A 10% depreciation
of RMB against U.S. dollar based on the foreign exchange rate on December 31, 2021 would result in a decrease of approximately $1.9 million
in cash and restricted cash. A 10% appreciation of RMB against U.S. dollar based on the foreign exchange rate on December 31, 2021 would
result in an increase of approximately $1.9 million in cash and restricted cash.</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">&#160;</p><div>

</div><div><a id="a_015"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</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">A. <span style="text-decoration:underline">Debt Securities</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">Not applicable.</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. <span style="text-decoration:underline">Warrants and Rights</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">Not applicable.</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">C. <span style="text-decoration:underline">Other Securities</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">Not applicable.</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">D. <span style="text-decoration:underline">American Depositary Shares</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">Not applicable.</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>

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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"></p><div>




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

</div><div><a id="a_016"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Part&#160;II</b></p><div>

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

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</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">None.</p><div>

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

</div><div><a id="a_018"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OF PROCEEDS</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">See &#8220;Item 10. Additional Information&#8221;
for a description of the rights of securities holders, which remain unchanged.</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>Use of Proceeds</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">The following &#8220;Use of Proceeds&#8221; information
relates to the registration statement on Form&#160;F-1, as amended (File Number 333-267367) for our initial public offering, which was
declared effective by the SEC on March 30, 2023. In April&#160;2023, we completed our initial public offering in which we issued and sold
an aggregate of 2,400,000 Class A Ordinary Shares, at a price of $4.00 per share for $9.60 million. Univest Securities, LLC was the representative
of the underwriters of our initial public offering.</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 incurred approximately $2.0 million in expenses
in connection with our initial public offering, which included approximately $672,000 in underwriting discounts, approximately $259,600
in expenses paid to or for underwriters, and approximately $1.1 million in other expenses. None of the transaction expenses included payments
to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates.
None of the net proceeds we received from the initial public offering were paid, directly or indirectly, to any of our directors or officers
or their associates, persons owning 10% or more of our equity securities or our affiliates.</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">The net proceeds raised from the initial public offering were approximately
$8.5 million after deducting underwriting discounts and the offering expenses payable by us.</p><div>

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

</div><div><a id="a_019"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 15. CONTROLS AND PROCEDURES</b>&#160;</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"><b>Disclosure Controls and Procedures</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">Under the supervision and with the participation
of our management, including our chief executive officer and chief financial officer, we carried out an evaluation of the effectiveness
of our disclosure controls and procedures, which is defined in Rules&#160;13a-15(e)&#160;of the Exchange Act, as of December 31, 2022.</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">Based on that evaluation, our management has concluded that, due to
the material weaknesses described below, as of December 31, 2022, our disclosure controls and procedures were not effective. Notwithstanding
management&#8217;s assessment that our internal control over financial reporting was ineffective as of December 31, 2022 due to the material
weakness described below, we believe that the consolidated financial statements included in this annual report on Form 20-F correctly
present our financial position, results of operations and cash flows for the fiscal years covered thereby in all material respects.</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 -->133<!-- 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"><b>Management&#8217;s Annual Report on Internal
Control over Financial Reporting</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: 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">This
annual report does not include a report of management&#8217;s assessment regarding internal control over financial reporting or an attestation
report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.&#160;However,
in the course of auditing our consolidated financial statements as of December 31, 2022, we and our independent registered public accounting
firm identified two material weaknesses </span>&#160;<span style="font-family: Times New Roman, Times, Serif">in our internal control
over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is
a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected
on a timely basis.</span></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"><span style="font-family: Times New Roman, Times, Serif">As
of December 31, 2022, we identified the material weaknesses</span>&#160; <span style="font-family: Times New Roman, Times, Serif">related
to (1) </span>&#160;<span style="font-family: Times New Roman, Times, Serif">lack of sufficient in-house personnel in our accounting department
with sufficient knowledge of the U.S. GAAP and SEC reporting rules, </span>&#160;<span style="font-family: Times New Roman, Times, Serif">and
(2) lack</span>&#160; <span style="font-family: Times New Roman, Times, Serif">of sufficient controls designed and implemented in IT environment
and IT general control activities, which mainly associated with areas of segregation of duties, program change and cybersecurity.</span></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"><span style="font-family: Times New Roman, Times, Serif">Our
management is currently in the process of evaluating the steps necessary to remediate the ineffectiveness, such as (i) hiring more qualified
accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function
and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting
training programs for our accounting and financial reporting personnel; and (iii) Strengthen</span>&#160;<span style="font-family: Times New Roman, Times, Serif">ing
the supervision and controls on the IT functions, including the enhancement of logical security and job management.</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"><b>Attestation Report of the 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">This annual report on Form 20-F does not include
an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management&#8217;s
report was not subject to attestation by our registered public accounting firm pursuant to rules&#160;of the SEC where domestic and foreign
registrants that are non-accelerated filers, which we are, and &#8220;emerging growth companies,&#8221; which we also are, are not required
to provide the auditor attestation report.</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"><b>Changes in Internal Control over Financial
Reporting</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">Other than as described above, there were no changes in our internal
controls over financial reporting that occurred during the period covered by this annual report on Form&#160;20-F that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.</p><div>

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

</div><div><a id="a_020"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16. RESERVED</b></p><div>

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

</div><div><a id="a_021"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT</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">Mr.&#160;John F. Levy qualifies as an &#8220;audit
committee financial expert&#8221; as defined in Item 16A of Form&#160;20-F. Mr.&#160;John F. Levy satisfies the &#8220;independence&#8221;
requirements of Section&#160;5605(a)(2)&#160;of the NASDAQ Listing Rules&#160;as well as the independence requirements of Rule&#160;10A-3
under the Exchange Act.</p><div>

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

</div><div><a id="a_022"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">I<b>tem 16B. CODE OF ETHICS</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 code of business
conduct and ethics, which is applicable to all of our directors, officers, and employees. Our code of business conduct and ethics is publicly
available on our website.</p><div>

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

</div><div><a id="a_023"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</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">The following table sets forth the aggregate fees by categories specified
below in connection with certain professional services rendered and billed by Marcum Asia CPAs LLP, our independent registered public
accounting firm, since November 11, 2022, and Friedman LLP, our independent registered public accounting firm before November 11, 2022,
for the periods indicated.&#160;</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="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: center">&#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><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">2020</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">Audit fees (1)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">315,000</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">380,000</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">480,000</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt; text-align: left">Audit-Related fees</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">50,000</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">46,000</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">365,000</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">$</td><td style="border-bottom: Black 4pt double; text-align: right">426,000</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">480,000</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">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.35in"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Audit fees include the aggregate fees billed for each of the fiscal years for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements or for the audits of our financial statements and review of the interim financial statements in connection with our initial public offering in 2023.</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; text-align: justify">The policy of our audit committee is to pre-approve
all audit and non-audit services provided by our independent registered public accounting firm, including audit services, audit-related
services, tax services, and other services as described above.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 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 -->134<!-- 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="a_024"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES</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">Not applicable.</p><div>

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

</div><div><a id="a_025"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16E. PURCHASES OF EQUITY SECURITIES BY
THE ISSUER AND AFFILIATED PURCHASERS</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">None.</p><div>

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

</div><div><a id="a_026"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16F. CHANGE IN REGISTRANT&#8217;S CERTIFYING
ACCOUNTANT</b>&#160;</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">There has been no change in independent accountants
for our Company during the two most recent fiscal years or any subsequent interim period except as previously reported in our registration
statement on Form F-1(File No. 333- 267367), as amended, initially filed with the SEC on September 9, 2022. There have been no disagreements
of the type required to be disclosed by Item 16F(b).</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_027"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16G. CORPORATE GOVERNANCE</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">As a Cayman Islands company listed on the Nasdaq
Capital Market, we are subject to the Nasdaq corporate governance listing standards. Nasdaq rules, however,&#160;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.</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">Nasdaq Listing Rule 5635 generally provides that
shareholder approval is required of U.S. domestic companies listed on Nasdaq prior to issuance (or potential issuance) of securities (i)
equaling 20% or more of the company&#8217;s common stock or voting power for less than the greater of market or book value (ii) resulting
in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase plan to be established or
materially amended or other equity compensation arrangement made or materially amended. Notwithstanding this general requirement, Nasdaq
Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home country practice rather than these shareholder approval
requirements. The Cayman Islands do not require shareholder approval prior to any of the foregoing types of issuances. We, therefore,
are not required to obtain such shareholder approval prior to entering into a transaction with the potential to issue securities as described
above. We intend to comply with the requirements of Nasdaq listing rules in determining whether shareholder approval is required on such
matters. We may, however, consider following home country practice in lieu of the requirements under Nasdaq listing rules with respect
to certain corporate governance standards which may afford less protection to investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Nasdaq Listing Rule 5605(b)(1) requires listed
companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted
to, and we may follow home country practice in lieu of the above requirements. The corporate governance practice in our home country,
the Cayman Islands, does not require a majority of our board to consist of independent directors. Currently, a majority of our board members
are independent. However, if we change our board composition such that independent directors do not constitute a majority of our board
of directors, our shareholders may be afforded less protection than they would otherwise enjoy under Nasdaq&#8217;s corporate governance
requirements applicable to U.S. domestic issuers. See &#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Relating to Our
Class A Ordinary Shares and the Trading Market&#8212;Because we are a foreign private issuer and are exempt from certain Nasdaq corporate
governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer.&#8221;</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"></p><div>

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

</div><div><a id="a_028"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16H. MINE SAFETY DISCLOSURE</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">Not applicable.</p><div>

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

</div><div><a id="a_029"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS.</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">Not applicable.</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 139; 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 -->135<!-- 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><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Part III</b></p><div>

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

</div><div><a id="a_031"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 17. FINANCIAL STATEMENTS</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 elected to provide financial statements
pursuant to Item 18.</p><div>

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

</div><div><a id="a_032"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 18. FINANCIAL STATEMENTS</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">The consolidated financial statements of Shengfeng Cayman, and its
operating entities are included at the end of this annual report.</p><div>

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

</div><div><a id="a_033"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 19. EXHIBITS</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: center"><b>EXHIBIT INDEX</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; width: 100%; border-collapse: collapse">
  <tr>
    <td style="border-bottom: black 1.5pt solid; vertical-align: top; width: 10%"><span style="font-size: 10pt"><b>Exhibit No.</b></span></td>
    <td style="vertical-align: top; width: 1%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; width: 89%; text-align: center"><span style="font-size: 10pt"><b>Description</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">1.1</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex3-1_shengfeng.htm">Amended and Restated Memorandum of Association (incorporated by reference to Exhibit 3.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt">2.1</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022055120/ea165404ex4-1_shengfeng.htm"><span style="font-size: 10pt">Specimen Certificate for Class A Ordinary Shares (incorporated by reference to Exhibit 4.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</span></a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">2.2</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390023005184/ea172103ex1-1_shengfeng.htm"><span style="font-size: 10pt">Form of Underwriter&#8217;s Warrants (incorporated by reference to Exhibit 1.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</span></a></td></tr>
  <tr style="vertical-align: top; background-color: White">
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.1</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-1_shengfeng.htm">Form of Employment Agreement by and between executive officers and the Registrant (incorporated by reference to Exhibit 10.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt">4.2</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-4_shengfeng.htm">English Translation of the Technical Consultation and Service Agreement between Tianyu and Shengfeng Logistics dated January 7, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.3</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-5_shengfeng.htm">English Translation of the form of Powers of Attorney granted by shareholders of Shengfeng Logistics, as currently in effect, and a schedule of all executed Powers of Attorney adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt">4.4</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-6_shengfeng.htm">English Translation of the form of Equity Pledge Agreement by and among Tianyu, Shengfeng Logistics, and shareholders of Shengfeng Logistics dated January 7, 2021, as currently in effect, and a schedule of all executed Equity Pledge Agreement adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.5</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-7_shengfeng.htm">English Translation of the form of Call Option Agreement by and among Tianyu, Shengfeng Logistics, and shareholders of Shengfeng Logistics dated January 7, 2021, as currently in effect, and a schedule of all executed Call Option Agreement adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt">4.6</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-8_shengfeng.htm">English Translation of the form of Spousal Consent granted by the spouse of each individual shareholder of Shengfeng Logistics, as currently in effect, and a schedule of all executed Spousal Consents adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>

<tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="width: 10%; text-align: justify"><span style="font-size: 10pt">4.7</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="width: 89%; text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-9_shengfeng.htm">English Translation of the form of Voting Rights Proxy Agreement by and among Tianyu, Shengfeng Logistics, and shareholders of Shengfeng Logistics dated January 7, 2021, as currently in effect, and a schedule of all executed Voting Rights Proxy Agreement adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.8</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-10_shengfeng.htm">English Translation of the form of Freight Transportation Agreement between the Registrant and its Clients (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.9</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-11_shengfeng.htm">English Translation of the form of Warehouse Service Contract between the Registrant and its Cloud Storage Service Clients (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.10</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-12_shengfeng.htm">English Translation of the form of Freight Transportation Contract between the Registrant and its Transportation Providers (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 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 -->136<!-- 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="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.11</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390023005184/ea172103ex10-13_shengfeng.htm"><span style="font-size: 10pt">English Translation of the form of House (Warehouse) / Site Lease Contract (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</span></a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.12</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-14_shengfeng.htm">English Translation of the Road Freight Transportation Cooperation Agreement by and between Shengfeng Logistics and Hubei Luge Logistics Co., Ltd. dated June 30, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.13</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><a href="f20f2022ex4-13_shengfeng.htm"><span style="font-size: 10pt">English Translation of the Road Freight Transportation Platform Cooperation Agreement by and between Shengfeng Logistics and Hefei Weitian Yuntong Information Technology Co., Ltd. dated January 1, 2022</span></a></td></tr>

<tr style="vertical-align: top; background-color: White">
    <td style="width: 10%; text-align: justify"><span style="font-size: 10pt">4.14</span></td>
    <td style="text-align: justify; width: 1%">&#160;</td>
    <td style="width: 89%; text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-16_shengfeng.htm">English Translation of the Short-term Loan Facility Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated May 31, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.15</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-17_shengfeng.htm">English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated June 27, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>

<tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.16</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-18_shengfeng.htm">English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated July 9, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.17</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-19_shengfeng.htm">English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated August 5 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.18</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-20_shengfeng.htm">English Translation of the Maximum Mortgage Agreement by and between Suzhou Shengfeng Logistics Co., Ltd. and Bank of China Fuzhou Jin&#8217;an Branch dated May 31, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.19</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-21_shengfeng.htm">English Translation of the Maximum Guarantee Agreement by and between Yongxu Liu and Bank of China Fuzhou Jin&#8217;an Branch dated May 31, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.20</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-22_shengfeng.htm">English Translation of the Short-term Loan Facility Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated June 22, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.21</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-23_shengfeng.htm">English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated July 3, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.22</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-24_shengfeng.htm">English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated July 15, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.23</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-25_shengfeng.htm">English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated August 5, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.24</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-26_shengfeng.htm">English Translation of the Maximum Mortgage Agreement by and between Suzhou Shengfeng Logistics Co., Ltd. and Bank of China Fuzhou Jin&#8217;an Branch dated June 22, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></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="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="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify; width: 10%"><span style="font-size: 10pt">4.24</span></td>
    <td style="text-align: justify; width: 1%">&#160;</td>
    <td style="text-align: justify; width: 89%"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-26_shengfeng.htm">English Translation of the Maximum Guarantee Agreement by and between Yongxu Liu and Bank of China Fuzhou Jin&#8217;an Branch dated June 22, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.25</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-28_shengfeng.htm">English Translation of the Lease Contract of Shengfeng Building by and between Shengfeng Logistics and Fuzhou Tianyu Shengfeng Industrial Co., Ltd. dated October 16, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.26</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-29_shengfeng.htm">English Translation of the Short-term Loan Facility Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated June 28, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.27</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-30_shengfeng.htm">English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated July 3, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.28</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-31_shengfeng.htm">English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin&#8217;an Branch dated July 16, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="text-align: justify"><span style="font-size: 10pt">4.29</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-32_shengfeng.htm">English Translation of the Maximum Mortgage Agreement by and between Suzhou Shengfeng Logistics Co., Ltd. and Bank of China Fuzhou Jin&#8217;an Branch dated July 5, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-size: 10pt">4.30</span></td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex10-33_shengfeng.htm">English Translation of the Maximum Guarantee Agreement by and between Yongxu Liu and Bank of China Fuzhou Jin&#8217;an Branch dated July 3, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>

<tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt">8.1</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex21-1_shengfeng.htm"><span style="font-size: 10pt">List of subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</span></a></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">11.1</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1863218/000121390022067752/ea167610ex99-1_shengfeng.htm">Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt">12.1*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="f20f2022ex12-1_shengfeng.htm">Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">12.2*</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="f20f2022ex12-2_shengfeng.htm">Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt">13.1**</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="f20f2022ex13-1_shengfeng.htm">Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">13.2**</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="f20f2022ex13-2_shengfeng.htm">Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt">101*</span></td>
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    <td style="text-align: justify"><span style="font-size: 10pt">The following financial statements from the Company&#8217;s Annual Report on Form 20-F for the year ended December 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Changes in Shareholders&#8217; Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td style="text-align: justify"><span style="font-size: 10pt">Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)</span></td></tr>
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</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; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="padding-right: 0.8pt; text-align: justify"><span style="font-size: 10pt">Filed with this annual report on Form&#160;20-F</span></td></tr>
  <tr style="vertical-align: top">
    <td style="padding-right: 0.8pt"><span style="font-size: 10pt">**</span></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"></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>SIGNATURES</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">The registrant hereby certifies that it meets
all of the requirements for filing on Form&#160;20-F and that it has duly caused and authorized the undersigned to sign this annual report
on its behalf.</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; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td colspan="2"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shengfeng Development Limited</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="width: 60%">&#160;</td>
    <td style="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; width: 36%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/ <i>Yongxu Liu</i></span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Yongxu Liu</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Date: May 1, 2023</span></td>
    <td>&#160;</td>
    <td>&#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="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</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; text-align: center"><b>SHENGFENG DEVELOPMENT LIMITED</b></p><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"><b>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

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

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr> <td style="border-bottom: black 1.5pt solid; vertical-align: top; width: 85%; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt"><b>CONTENTS</b></span></td> <td style="vertical-align: top; width: 1%; text-align: center">&#160;</td> <td style="border-bottom: black 1.5pt solid; white-space: nowrap; vertical-align: bottom; width: 14%; text-align: center"><span style="font-size: 10pt"><b>PAGE(S)</b></span></td></tr> <tr> <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt">&#160;</td> <td style="vertical-align: top; text-align: center">&#160;</td> <td style="white-space: nowrap; vertical-align: bottom; text-align: center">&#160;</td></tr> <tr> <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt"><b>CONSOLIDATED FINANCIAL STATEMENTS</b></span></td> <td style="vertical-align: top; text-align: center">&#160;</td> <td style="white-space: nowrap; vertical-align: bottom; text-align: center">&#160;</td></tr> <tr> <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt">&#160;</td> <td style="vertical-align: top; text-align: center">&#160;</td> <td style="white-space: nowrap; vertical-align: bottom; text-align: center">&#160;</td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><a href="#f_001"><span style="font-size: 10pt">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM <span style="text-decoration:underline;font-style: normal; font-weight: normal; text-decoration: none">(PCAOB ID <ix:nonNumeric contextRef="c4" name="dei:AuditorFirmId">5395</ix:nonNumeric>)</span></span></a></td> <td style="vertical-align: top; text-align: center">&#160;</td> <td style="white-space: nowrap; vertical-align: bottom; text-align: center"><span style="font-size: 10pt">F-2</span></td></tr> <tr style="background-color: White"> <td style="vertical-align: top; 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vertical-align: bottom; text-align: center">&#160;</td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><a href="#f_003"><span style="font-size: 10pt">AUDITED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 </span></a></td> <td style="vertical-align: top; text-align: center">&#160;</td> <td style="white-space: nowrap; vertical-align: bottom; text-align: center"><span style="font-size: 10pt">F-4</span></td></tr> <tr style="background-color: White"> <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt">&#160;</td> <td style="vertical-align: top; text-align: center">&#160;</td> <td style="white-space: nowrap; vertical-align: bottom; text-align: center">&#160;</td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><a href="#f_004"><span style="font-size: 10pt">AUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 <span style="text-decoration:underline;font-style: normal; font-weight: normal; text-decoration: none">AND 2020</span></span></a></td> <td style="vertical-align: top; text-align: center">&#160;</td> <td style="white-space: nowrap; vertical-align: bottom; text-align: center"><span style="font-size: 10pt">F-5</span></td></tr> <tr style="background-color: White"> <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt">&#160;</td> <td style="vertical-align: top; text-align: center">&#160;</td> <td style="white-space: nowrap; vertical-align: bottom; text-align: center">&#160;</td></tr> <tr style="background-color: rgb(204,238,255)"> <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><a href="#f_005"><span style="font-size: 10pt">AUDITED CONSOLIDAED STATEMENTS OF CHANGES IN SHAREHOLDERS&#8217; EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020 </span></a></td> <td style="vertical-align: top; text-align: center">&#160;</td> <td style="white-space: nowrap; vertical-align: bottom; text-align: center"><span style="font-size: 10pt">F-6</span></td></tr> <tr style="background-color: White"> <td style="vertical-align: top; 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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; text-align: center">&#160;</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="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"><img alt="" src="image_010.jpg"/>&#160;</p><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="f_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: 0">&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">To the Board of Directors and Shareholders of</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Shengfeng Development Limited</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"><b>Opinion on the Financial Statements</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have audited the accompanying consolidated balance
sheet of Shengfeng Development Limited (the &#8220;Company&#8221;) as of December 31, 2022, the related consolidated statement of income
and comprehensive loss, shareholder&#8217; equity and cash flows for the year in the period ended December 31, 2022, and the related notes
(collectively referred to as the &#8220;consolidated financial statements&#8221;). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations
and its cash flows for the year 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: 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Basis for Opinion</b></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">These consolidated 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
audit. 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: 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit 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 audit, 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: 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our audit 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 audit 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 audit provides a reasonable basis for our opinion.</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">/s/ <ix:nonNumeric contextRef="c4" name="dei:AuditorName">Marcum Asia CPAs LLP</ix:nonNumeric></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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have served as the Company&#8217;s auditor since
2020 (such date takes into account the acquisition of certain assets of Friedman LLP by Marcum Asia CPAs LLP effective September 1, 2022).</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><ix:nonNumeric contextRef="c4" name="dei:AuditorLocation">New York, New York</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">May 1, 2023</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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">NEW YORK OFFICE &#8226; 7 Penn Plaza &#8226; Suite 830
&#8226; New York, New York &#8226; 10001</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Phone 646.442.4845 &#8226; Fax 646.349.5200 &#8226; www.marcumasia.com</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></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"><img alt="" src="image_011.jpg"/><b>&#160;</b></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="f_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM</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">To the Board of Directors and Shareholders of</p><div>

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

</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 Shengfeng Development Limited (the &#8220;Company&#8221;) as of December 31, 2021 and 2020, and the related consolidated
statements of income and comprehensive income, changes in shareholders&#8217; equity and cash flows for each of the years in the two-year
period ended December 31, 2021, and the related notes (collectively referred to as the &#8220;consolidated financial statements&#8221;).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended
December 31, 2021, 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; text-align: justify"><b>Basis for Opinion </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">These consolidated financial statements are the
responsibility of the Company&#8217;s management. Our responsibility is to express an opinion on the Company&#8217;s consolidated 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 and the auditing standards generally accepted in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 consolidated 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
consolidated 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 consolidated 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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">/s/ <ix:nonNumeric contextRef="c0" name="dei:AuditorName">Friedman LLP</ix:nonNumeric></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 have served as the Company&#8217;s auditor
since 2020 through 2022</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"><ix:nonNumeric contextRef="c0" name="dei:AuditorLocation">New York, New York</ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">July 25, 2022, except for Notes 1, 11, 17 and
18 which are dated September 9, 2022; Notes 5 and 6 which are dated October 31, 2022.</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: center"></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.1in; text-align: center; background-color: white"><b>SHENGFENG
DEVELOPMENT LIMITED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.1in; text-align: center; background-color: white"><span style="font-size: 6pt">&#160;</span></p><div>

</div><div><a id="f_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: center; background-color: white"><b>CONSOLIDATED
BALANCE SHEETS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: center; background-color: white"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>(All amounts in thousands
of USD, except for share and per share data, unless otherwise noted)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><span style="font-size: 6pt">&#160;</span></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-indent: -0.125in; padding-left: 0.125in">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 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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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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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>
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  <tr style="vertical-align: bottom; background-color: White">
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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: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; font-weight: bold">Deposit for investment</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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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="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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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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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: White">
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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: White">
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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: White">
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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: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 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></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: left">Other non-current liabilities</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 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></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: left">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-3">&#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-4">&#160;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 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></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in; font-weight: bold; text-align: left">Shareholders&#8217; Equity</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-indent: -0.125in; padding-left: 0.25in; font-weight: bold">Class A Ordinary share, $<ix:nonFraction contextRef="c2" decimals="4" format="ixt:num-dot-decimal" id="ix_8_fact" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares"><ix:nonFraction contextRef="c7" decimals="4" format="ixt:num-dot-decimal" id="ix_9_fact" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares">0.0001</ix:nonFraction></ix:nonFraction> par value, <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" id="ix_2_fact" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares"><ix:nonFraction contextRef="c7" decimals="INF" format="ixt:num-dot-decimal" id="ix_3_fact" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares">400,000,000</ix:nonFraction></ix:nonFraction> shares authorized; <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" id="ix_4_fact" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c7" decimals="INF" format="ixt:num-dot-decimal" id="ix_5_fact" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" id="ix_6_fact" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares"><ix:nonFraction contextRef="c7" decimals="INF" format="ixt:num-dot-decimal" id="ix_7_fact" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares">38,120,000</ix:nonFraction></ix:nonFraction></ix:nonFraction></ix:nonFraction> shares issued and outstanding as of December 31, 2022 and 2021*</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" id="ix_0_fact" name="us-gaap:CommonStockValue" scale="3" unitRef="usd">4</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="c7" decimals="-3" format="ixt:num-dot-decimal" id="ix_1_fact" name="us-gaap:CommonStockValue" scale="3" unitRef="usd">4</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; font-weight: bold">Class B Ordinary share, $<ix:nonFraction contextRef="c3" decimals="4" format="ixt:num-dot-decimal" id="ix_18_fact" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares"><ix:nonFraction contextRef="c8" decimals="4" format="ixt:num-dot-decimal" id="ix_19_fact" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares">0.0001</ix:nonFraction></ix:nonFraction> par value, <ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" id="ix_12_fact" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares"><ix:nonFraction contextRef="c8" decimals="INF" format="ixt:num-dot-decimal" id="ix_13_fact" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares">100,000,000</ix:nonFraction></ix:nonFraction> shares authorized; <ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" id="ix_14_fact" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c8" decimals="INF" format="ixt:num-dot-decimal" id="ix_15_fact" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" id="ix_16_fact" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares"><ix:nonFraction contextRef="c8" decimals="INF" format="ixt:num-dot-decimal" id="ix_17_fact" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares">41,880,000</ix:nonFraction></ix:nonFraction></ix:nonFraction></ix:nonFraction> shares issued and outstanding as of December 31, 2022 and 2021*</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; font-weight: bold; text-align: left">Additional paid-in capital</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; font-weight: bold; text-align: left">Statutory reserves</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; font-weight: bold; text-align: left">Retained earnings</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Accumulated other comprehensive income (loss)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><span style="font-size: 6pt">&#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: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">*</span></td><td style="text-align: justify"><ix:footnote id="ix_0_footnote" xml:lang="en-US"><span style="font-size: 10pt">Shares and per share data are
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</tr></table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#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"></p><div>

</div><!-- Field: Page; Sequence: 147; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></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: center; background-color: white"><b>SHENGFENG DEVELOPMENT
LIMITED</b></p><div>

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

</div><div><a id="f_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>CONSOLIDATED STATEMENTS
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><b>(All amounts in thousands
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white">&#160;</p><div>

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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: White">
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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: White">
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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: White">
    <td style="text-indent: -10pt; padding-left: 10pt">&#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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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -10pt; padding-left: 10pt">&#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: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; text-indent: -10pt; padding-left: 10pt">Less: Income (loss) attributable to non-controlling interests</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="font-weight: bold; text-align: left; padding-bottom: 4pt; text-indent: -10pt; padding-left: 10pt">Net income attributable to Shengfeng Development Limited&#8217;s shareholders</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -10pt; padding-left: 10pt">&#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: -10pt; padding-left: 10pt">Comprehensive income (loss)</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: White">
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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: White">
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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: White">
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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; background-color: White">
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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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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#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="width: 0.25in; text-align: left"><span style="font-size: 10pt">*</span></td><td style="text-align: justify"><ix:footnote id="ix_1_footnote" xml:lang="en-US"><span style="font-size: 10pt">Shares and per share data are
presented on a retroactive basis to reflect the reorganization.</span></ix:footnote></td>
</tr></table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&#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>

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




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

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

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

</div><div><a id="f_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS&#8217;
EQUITY</b></p><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; background-color: white"><b>(All amounts in thousands
of USD, except for share and per share data, unless otherwise noted)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white">&#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"><span style="font-size: 8pt">&#160;</span></td><td style="font-weight: bold; padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></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; background-color: White">
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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: White">
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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: White">
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  <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"><span style="font-size: 8pt">Capital contribution
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Net income</span></td><td><span style="font-size: 8pt">&#160;</span></td>
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c18" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="3" unitRef="usd">6,644</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-54; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-55; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-56; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt"><ix:nonFraction contextRef="c46" decimals="-3" format="ixt:num-dot-decimal" name="sfwl:StatutoryReserves" scale="3" unitRef="usd">275</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-57; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-size: 8pt">(<ix:nonFraction contextRef="c48" decimals="-3" format="ixt:num-dot-decimal" name="sfwl:StatutoryReserves" scale="3" sign="-" unitRef="usd">275</ix:nonFraction></span></td><td style="text-align: left"><span style="font-size: 8pt">)</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-58; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></td>
    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-59; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Foreign
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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: White">
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  <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"><span style="font-size: 8pt">Currency translation
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Dividend to non-controlling
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    <td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-77; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-size: 8pt">&#160;</span></td><td><span style="font-size: 8pt">&#160;</span></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: 1.5pt; text-indent: -9pt; padding-left: 9pt"><span style="font-size: 8pt">Appropriations
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    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 8pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="-sec-ix-hidden: hidden-fact-80; font-size: 8pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="border-bottom: Black 1.5pt solid; text-align: right"><span style="font-size: 8pt">-</span></td><td style="padding-bottom: 1.5pt; text-align: left"><span style="font-size: 8pt">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="font-size: 8pt">&#160;</span></td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white">&#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="width: 0.25in; text-align: left"><span style="font-size: 10pt">*</span></td><td style="text-align: justify"><ix:footnote id="ix_2_footnote" xml:lang="en-US"><span style="font-size: 10pt">Shares and per share data are
presented on a retroactive basis to reflect the reorganization.</span></ix:footnote></td>
</tr></table><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">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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><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 -->6<!-- 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"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 6pt"><b>&#160;</b></span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt">&#160;</span></p><div>

</div><div><a id="f_006"></a></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"><span style="font-size: 6pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(All amounts in thousands of USD, except
for share and per share data, unless otherwise noted)</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-size: 6pt"><b>&#160;</b></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">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</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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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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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: White">
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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: White">
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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: White">
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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: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 20pt">Notes payable</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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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="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInEmployeeRelatedLiabilities" scale="3" sign="-" unitRef="usd">965</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 20pt">Operating lease liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOperatingLeaseLiability" scale="3" sign="-" unitRef="usd">11,294</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 20pt">Tax payables</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPropertyAndOtherTaxesPayable" scale="3" sign="-" unitRef="usd">453</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="c18" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherNoncurrentLiabilities" scale="3" unitRef="usd">4</ix:nonFraction></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: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -10pt; padding-left: 10pt">&#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: White">
    <td style="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">Cash flows from investing activities:</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>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-left: 10pt">Purchase of intangible assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireIntangibleAssets" scale="3" unitRef="usd">340</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="c18" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireIntangibleAssets" scale="3" unitRef="usd">284</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-left: 10pt">Purchase of property and equipment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" scale="3" unitRef="usd">6,908</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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  <tr style="vertical-align: bottom; background-color: White">
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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: White">
    <td style="text-indent: -10pt; padding-left: 10pt">&#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></tr>
  <tr style="vertical-align: bottom; background-color: White">
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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: White">
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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: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-left: 10pt">Dividend to non-controlling shareholders</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-94">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; padding-left: 10pt">Payment of deferred issuance costs</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"><div style="-sec-ix-hidden: hidden-fact-95">-</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-96">-</div></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: 1.5pt; text-indent: -10pt; padding-left: 10pt">Net cash provided by (used in) financing activities</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">(<ix:nonFraction contextRef="c18" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="3" sign="-" unitRef="usd">2,127</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="c19" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="3" unitRef="usd">13,144</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -10pt; padding-left: 10pt">&#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: -10pt; padding-left: 10pt">Effects of exchange rate changes on cash and restricted cash</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="3" sign="-" unitRef="usd">1,814</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -10pt; padding-left: 10pt">&#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"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect" scale="3" unitRef="usd">4,450</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="c18" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect" scale="3" sign="-" unitRef="usd">8,866</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="c19" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect" scale="3" unitRef="usd">9,369</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -10pt; padding-left: 10pt">&#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: -10pt; padding-left: 10pt">Cash and restricted cash, beginning of year</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt; text-indent: -10pt; padding-left: 10pt">&#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; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; text-indent: -10pt; padding-left: 10pt">Cash and restricted cash, end of year</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: center"><span style="font-size: 6pt">&#160;</span></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"><span style="font-size: 6pt">&#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: 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 -->7<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>





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

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

</div><div><a id="f_007"></a></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"><b>(All amounts in thousands of USD, except for
share and per share data, unless otherwise noted)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></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; width: 100%">
  <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 NATURE OF OPERATIONS</b></span></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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_2" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shengfeng Development Limited (&#8220;Shengfeng&#8221;
or the &#8220;Company&#8221;), is a holding company incorporated under the laws of the Cayman Islands on July 16, 2020, as an exempted
company with limited liability. The Company has no substantive operations other than holding all of the outstanding share capital of Shengfeng
Holding Limited (&#8220;Shengfeng HK&#8221;) established under the laws of Hong Kong on August 18, 2020.</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_3" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shengfeng HK is also a holding company holding
all of the outstanding equity of Fujian Tianyu Shengfeng Logistics Co., Ltd. (&#8220;Tianyu&#8221; or &#8220;Shengfeng WFOE&#8221; or
&#8220;WFOE&#8221;), which was established on December 16, 2020 under the laws of 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; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_4" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company, through its variable interest entity
(&#8220;VIE&#8221;), Shengfeng Logistics Group Co., Ltd. (&#8220;Shengfeng VIE&#8221; or &#8220;VIE&#8221;), and its subsidiaries, operates
as a transportation and warehouse storage management services provider in the PRC. Shengfeng VIE was incorporated on December 7, 2001
under the laws of the PRC. Paid-in capital of Shengfeng VIE was approximately $<ix:nonFraction contextRef="c0" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:AdjustmentsToAdditionalPaidInCapitalOther" scale="6" unitRef="usd">27.17</ix:nonFraction> million (approximately RMB <ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AdjustmentsToAdditionalPaidInCapitalOther" scale="6" unitRef="cny">189.6</ix:nonFraction> million) as of December
31, 2022.</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_5" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 18, 2020, the Company completed a
reorganization of entities under common control of its then existing shareholders, who collectively owned all of the equity interests
of the Company prior to the reorganization. The Company, and Shengfeng HK were established as the holding companies of Shengfeng WFOE.
Shengfeng WFOE is the primary beneficiary of Shengfeng VIE and its subsidiaries, and all of these entities included in the Company are
under common control which results in the consolidation of Shengfeng VIE and its subsidiaries which have been accounted for as a reorganization
of entities under common control at carrying value. The consolidated financial statements are prepared on the basis as if the reorganization
became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of the Company.</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_6" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_5"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The accompanying consolidated financial statements reflect the activities
of the Company and each of the following entities, including its WFOE&#160; and VIE:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>



</div><div>

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 indirect</b></span></td>
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    <td style="vertical-align: bottom; width: 1%; text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top; background-color: White">
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<tr style="vertical-align: top; background-color: White">
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  <tr style="vertical-align: top; background-color: White">
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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into a share transfer agreement with Dongguan Suxing New Material Co., Ltd (&#8220;Dongguan Suxing&#8221;), a related party, to transfer
its <ix:nonFraction contextRef="c71" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentOwnershipPercentage" scale="-2" unitRef="pure">51</ix:nonFraction>% equity interest in Fuzhou Shengfeng New Material Technology Co., Ltd. (&#8220;New Material Technology&#8221;) to Dongguan Suxing
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The Company has continued to operate the transportation business through the VIE&#8217;s other subsidiaries. Since New Material Technology&#8217;s
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would have a major effect on the Company&#8217;s operations and financial results. The results of operations for New Material Technology
were not reported as discontinued operations in the consolidated financial statements.</ix:footnote>&#160;</td></tr> <tr style="vertical-align: top"> <td style="text-align: justify">&#160;</td> <td>&#160;</td></tr> <tr style="vertical-align: top"> <td style="text-align: justify"><span style="font-size: 10pt">(b)</span></td> <td> <ix:footnote id="ix_4_footnote" xml:lang="en-US">On July 8, 2021, Suzhou Shengfeng Supply
Chain Management Co, Ltd. became a wholly owned subsidiary of Shengfeng Logistics.</ix:footnote>&#160;</td></tr>
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</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_13" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_12"><ix:continuation id="_ScheduleOfCondensedFinancialStatementsTableTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">(f)</span></td> <td style="text-align: justify"><ix:footnote id="ix_8_footnote" xml:lang="en-US"><span style="font-size: 10pt">On September 23, 2022, Shengfeng Logistics Group (Ningde) Supply Chain Management Co., Ltd.&#160;was set up in Fujian, China. This entity is fully owned by Shengfeng Logistics Group Co., Ltd. and will provide supply chain service in the future.</span></ix:footnote></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation></ix:continuation><div>
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</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; text-align: justify"><span style="background-color: white"><span style="text-decoration:underline">Contractual
Agreements</span></span>&#160;</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_15" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company conducts
its operations through a series of agreements with the VIE and its subsidiaries as stated above. The VIE and its subsidiaries are utilized
solely to facilitate the Company&#8217;s participation in transportation and warehouse storage management services in the PRC where foreign
ownership is restricted. As such, Shengfeng VIE is controlled through contractual arrangements in lieu of direct equity ownership by the
Company or any of its subsidiaries. Such contractual arrangements were made effective by a series of six agreements (&#8220;Contractual
Arrangements&#8221;, or VIE Agreements, which were signed on January 7, 2021).&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#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; text-align: justify; background-color: white">As a result of the direct
ownership in Tianyu and the Contractual Arrangements, the Company is regarded as the primary beneficiary of the VIE and its subsidiaries.
Therefore, the VIE and its subsidiaries were treated as the consolidated entities under U.S. GAAP.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</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; text-align: justify">The significant terms of the Contractual Arrangements
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</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; text-align: justify"><i>Equity Pledge Agreements&#160;</i></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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_19" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each equity holder of the VIE Company has pledged
all of his/her shares in the VIE Company and all other rights relevant to the shares to WFOE, as a collateral security for his/her and/or
the VIE Company&#8217;s obligations to pay off all debt to WFOE, including consulting and services fees payable to WFOE. In the event
of default of any payment obligation, WFOE will be entitled to certain rights, including transferring the pledged shares to itself and
disposing the pledged shares through a sale or auction.&#160;</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_20" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Equity Pledge Agreement is effective until
the full payment of the service fees under the Technical Consultation and Service Agreement and upon termination of Shengfeng Logistics&#8217;
obligations under the Technical Consultation and Service Agreement, or upon the transfer of shares of the Equity Shareholders.&#160;</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_21" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The purposes of the Equity Pledge Agreement are
to (1) guarantee the performance of Shengfeng Logistics&#8217; obligations under the Technical Consultation and Service Agreement, (2)
make sure the Equity Shareholders do not transfer or assign the pledged shares, or create or allow any encumbrance that would prejudice
Tianyu&#8217;s interests without Tianyu&#8217;s prior written consent, and (3) provide Tianyu control over Shengfeng Logistics under certain
circumstances. In the event Shengfeng Logistics breaches its contractual obligations under the Technical Consultation and Service Agreement,
Tianyu will be entitled to dispose of the pledged shares in accordance with relevant PRC laws.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><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><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_22" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the date of this annual report, the share
pledges under the Equity Pledge Agreement have been registered with the competent PRC regulatory authority.</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_23" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Exclusive Technical Consultation and Service
Agreements&#160;</i></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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_24" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The VIE Company has entered into an exclusive
technical consultation and service agreement with WFOE, pursuant to which, WFOE is engaged to provide certain technical services to the
VIE, depending on the licenses obtained and held by the VIE. This technical consultation and service agreement will remain effective for
<ix:nonNumeric contextRef="c0" format="ixt-sec:duryear" name="sfwl:EffectiveServiceAgreement">20</ix:nonNumeric> years and it can be extended by WFOE unilaterally. WFOE is entitled to collect service fees for the services it provides to the VIE,
and the service fees are adjusted annually through written agreements. Technical service fees are composed of the basic annual fee, which
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paid basic annual fees. Due to its control over the VIE Company, WFOE has the right to determine the service fees to be charged to the
VIE Company by considering, among others, the technical complexity of the services, the actual costs that may be incurred for providing
the services and the VIE Company&#8217;s revenue.&#160;&#160;</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_25" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Technical Consultation and Service Agreement
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of extension to Shengfeng Logistics unilaterally prior to the expiration date of this agreement. Shengfeng Logistics shall use its best
efforts to renew its business license and extend its operation term until and unless otherwise instructed by Tianyu.</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_26" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Technical Consultation and Service Agreement
does not prohibit related party transactions. Upon the establishment of the audit committee at the consummation of this offering, the
Company&#8217;s audit committee will be required to review and approve in advance any related party transactions, including transactions
involving Tianyu or Shengfeng Logistics.</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_27" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Exclusive Call Option Agreements&#160;</i></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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_28" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The equity shareholders of the VIE (the &#8220;Equity
Shareholders&#8221;) have granted WFOE the exclusive and irrevocable right to purchase or to designate one or more person(s) at their
discretion to purchase part or all of the equity interests in the VIE from the Equity Shareholders for a purchase price at any time, subject
to the lowest price permitted by PRC laws and regulations. The VIE and its Equity Shareholders have agreed that without prior written
consent of WFOE, the respective Equity Shareholders cannot sell, transfer, pledge or dispose their equity interests, and the VIE cannot
sell, transfer, pledge or dispose, including but not limited to, the equity interests, significant assets, significant revenue and significant
business. Also as agreed, the VIE cannot declare any dividend or change capitalization structure of the VIE and cannot enter into any
loan or investment agreements without prior written consent of WFOE. Furthermore, the Equity Shareholders of the VIE have agreed that
any proceeds from, including but not limited to, the sales of the Equity Shareholders&#8217; equity interests in the VIE should be gratuitously
paid to WFOE or one or more person(s) at their discretion. The Call Option Agreement will remain effective until all equity options in
VIE held by such Equity Shareholders are transferred or assigned to WFOE or their designated representatives.&#160;</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_29" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Call Option Agreement remains effective until
all the equity of Shengfeng Logistics is legally transferred under the name of Tianyu and/or other entity or individual designated by
it.</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="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_30" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Voting Rights Proxy Agreement</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_31" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Pursuant to the irrevocable
power of attorney, each of the Equity Shareholders of the VIE appointed WFOE as his or her attorney-in-fact to exercise such shareholder&#8217;s
rights under PRC law and the relevant articles of association, including but not limited to, attending shareholders meetings, voting on
their behalf on all matters requiring shareholders&#8217; approval, including but not limited to, sale, transfer, pledge, or disposition
of all or part of the Equity Shareholders&#8217; equity interests, and designating and appointing the legal representative, directors,
supervisors, chief executive officer and other senior management members of the VIE. Each power of attorney will remain in force until
such Equity Shareholder ceases to be a shareholder of the VIE. Each shareholder has waived all his or her rights in connection with his
or her equity interests, and confirmed that such rights have been authorized to WFOE under each power of attorney.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

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

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

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Agreement became effective on January 7, 2021 and will remain effective for <ix:nonNumeric contextRef="c79" format="ixt-sec:duryear" name="sfwl:VotingRightsProxyAgreement">20</ix:nonNumeric> years. Such agreement can be extended if Tianyu provides
its notice of extension unilaterally prior to the expiration date of this agreement. All other parties shall agree with such extension
without reserve.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#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; text-align: justify; background-color: white"><i>Power of attorney</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#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; text-align: justify; background-color: white">Each of the Equity Shareholders
has signed a power of attorney (the &#8220;Power of Attorney&#8221;), pursuant to which, each of the Equity Shareholders has authorized
WFOE to act as his or her exclusive agent and attorney with respect to all rights of such individual as a shareholder of the VIE, including
but not limited to: (a) attending shareholders&#8217; meetings; (b) exercising all the shareholder&#8217;s rights that shareholders are
entitled to under PRC laws and the Articles of Association of VIE, including but not limited to, sale, transfer, pledge and disposition
of the equity interests of the VIE; and (c) designating and appointing the legal representative, chairperson, directors, supervisors,
chief executive officer and other senior management members of the VIE. The Power of Attorney has the same term as the Voting Rights Proxy
Agreement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#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; text-align: justify; background-color: white">The Powers of Attorney
is irrevocable and continuously valid from the date of execution of the Powers of Attorney, so long as the Equity Shareholders are shareholders
of Shengfeng Logistics.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_36" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i>Spouse consent letter</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</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; text-align: justify; background-color: white">Each of the respective
spouse of the individual Equity Shareholders has executed an additional spousal consent letter which contains terms as described below.
Pursuant to the spousal consent letters, each of the respective spouse of the individual Equity Shareholders, unconditionally and irrevocably
agreed that the equity interests in the VIE held by and registered in the name of his/her spouse will be disposed of pursuant to the equity
pledge agreement, the exclusive call option agreement and the shareholders&#8217; voting rights proxy agreement. The spouse agreed not
to assert any rights over the equity interests in the VIE held by his/her spouse.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_37"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Based on the foregoing
Contractual Arrangements, which grant Shengfeng WFOE the effective control of Shengfeng VIE and enable Shengfeng WFOE to receive all of
their expected residual returns, the Company accounts for Shengfeng VIE as a VIE. Accordingly, the Company consolidates the accounts of
Shengfeng VIE for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission
(&#8220;SEC&#8221;), and Accounting Standards Codification (&#8220;ASC&#8221;) 810-10, Consolidation.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#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="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>2.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></span></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="_SignificantAccountingPoliciesTextBlock-c0_cont_2" id="_SignificantAccountingPoliciesTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_1" escape="true" name="us-gaap:BasisOfPresentationAndSignificantAccountingPoliciesTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Basis of presentation</span></p><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="_SignificantAccountingPoliciesTextBlock-c0_cont_3" id="_SignificantAccountingPoliciesTextBlock-c0_cont_2"><ix:continuation id="_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying audited consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (&#8220;U.S.
GAAP&#8221;) for information pursuant to the rules and regulations of the SEC.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_4" id="_SignificantAccountingPoliciesTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" continuedAt="_ConsolidationPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ConsolidationPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Principles of Consolidation</span></p><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="_SignificantAccountingPoliciesTextBlock-c0_cont_5" id="_SignificantAccountingPoliciesTextBlock-c0_cont_4"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_2" id="_ConsolidationPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements include
the financial statements of the Company, its subsidiaries, VIE and VIE&#8217;s subsidiaries over which the Company exercises control and,
where applicable, entities for which the Company has a controlling financial interest or is the primary beneficiary. All significant transactions
and balances between the Company, its subsidiaries, VIE and VIE&#8217;s subsidiaries have been eliminated upon consolidation.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_6" id="_SignificantAccountingPoliciesTextBlock-c0_cont_5"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_3" id="_ConsolidationPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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.</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: 155; 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>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_7" id="_SignificantAccountingPoliciesTextBlock-c0_cont_6"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_4" id="_ConsolidationPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A VIE is an entity in which the Company, or its
subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with, ownership of the entity,
and therefore the Company or its subsidiary is the primary beneficiary of the entity.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_8" id="_SignificantAccountingPoliciesTextBlock-c0_cont_7"><ix:continuation continuedAt="_ConsolidationPolicyTextBlock-c0_cont_5" id="_ConsolidationPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Non-controlling interest represents the portion
of the net assets of subsidiaries attributable to interests that are not owned or controlled by the Company. The non-controlling interest
is presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Non-controlling
interest&#8217;s operating results are presented on the face of the consolidated statements of income and comprehensive income as an allocation
of the total income for the year between non-controlling shareholders and the shareholders of the Company.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_9" id="_SignificantAccountingPoliciesTextBlock-c0_cont_8"><ix:continuation id="_ConsolidationPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All significant transactions and balances between
the Company, its subsidiaries, VIE and VIE&#8217;s subsidiaries have been eliminated upon consolidation.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_10" id="_SignificantAccountingPoliciesTextBlock-c0_cont_9"><ix:nonNumeric contextRef="c0" continuedAt="_UseOfEstimates-c0_cont_1" escape="true" name="us-gaap:UseOfEstimates"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Use of Estimate and Assumptions</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_11" id="_SignificantAccountingPoliciesTextBlock-c0_cont_10"><ix:continuation id="_UseOfEstimates-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of the Company&#8217;s consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting periods presented. Estimates are adjusted to reflect actual experience when necessary. Significant
accounting estimates reflected in the Company&#8217;s consolidated financial statements include allowance for doubtful accounts, provision
for prepayments and other assets, discount rate used in operating lease right-of-use assets and valuation allowance for deferred tax asset.
Actual results could differ from these estimates.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_12" id="_SignificantAccountingPoliciesTextBlock-c0_cont_11"><ix:nonNumeric contextRef="c0" continuedAt="_ConsolidationVariableInterestEntityPolicy-c0_cont_1" escape="true" name="us-gaap:ConsolidationVariableInterestEntityPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Variable Interest Entities</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_13" id="_SignificantAccountingPoliciesTextBlock-c0_cont_12"><ix:continuation continuedAt="_ConsolidationVariableInterestEntityPolicy-c0_cont_2" id="_ConsolidationVariableInterestEntityPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company applies the guidance codified in Accounting
Standard Codification 810, Consolidations (&#8220;ASC 810&#8221;) on accounting for the VIE and its respective subsidiaries, which requires
certain variable interest entities to be consolidated by the primary beneficiary of the entity in which it has a controlling financial
interest. A VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient
to permit the entity to finance its activities without additional financial support; (b) as a group, the holders of the equity investment
at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual
returns, or (c) an equity investor has voting rights that are disproportionate to its economic interest and substantially all of the entity&#8217;s
activities are on behalf of the investor. The accompanying consolidated financial statements include the financial statements of the Company,
its subsidiaries and the VIE.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

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variants in early 2022. For example, 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. From April to May, 2022, our Shanghai office was shut down and
all the businesses in Shanghai were closed, which negatively affected our operational and financial results. Our shanghai office resumed
full operation in June 2022. Since December 2022, many of the restrictive measures previously adopted by the PRC governments at various
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long-term negative impact on the Chinese economy. The pandemic caused temporary disruptions in the supply chains for companies in China
and elsewhere, including us and our customers and suppliers. As a result, we have experienced lower efficiency, increased aging of our
trade receivable, longer collection period and more bad debts. which could adversely affect our business operation. However, by leveraging
our advantages in the logistics fields and our networks. Our results of operation for the year ended December 31, 2022 have not been materially
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_22" id="_SignificantAccountingPoliciesTextBlock-c0_cont_21"><ix:nonNumeric contextRef="c0" continuedAt="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Foreign currencies translation and transaction</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

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are translated at the unified exchange rate as quoted by the People&#8217;s Bank of China at the end of the period. The statement of income
accounts is translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments
resulting from this process are included in accumulated other comprehensive income (loss). Transaction gains and losses that arise from
exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of
operations as incurred.</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>

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

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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_27" id="_SignificantAccountingPoliciesTextBlock-c0_cont_26"><ix:nonNumeric contextRef="c0" continuedAt="_CashAndCashEquivalentsRestrictedCashAndCashEquivalentsPolicy-c0_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsRestrictedCashAndCashEquivalentsPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Restricted cash</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

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designated bank accounts as security for payment processing and lawsuit. Restriction on the use of such cash and the interest earned thereon
is imposed by the banks and remains effective throughout the term of the security period. Upon maturities of the security period, the
bank&#8217;s deposits are available for general use by the Company.</span>&#160;</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_29" id="_SignificantAccountingPoliciesTextBlock-c0_cont_28"><ix:nonNumeric contextRef="c0" continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:FairValueMeasurementPolicyPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Fair value of financial instruments</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_30" id="_SignificantAccountingPoliciesTextBlock-c0_cont_29"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_2" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ASC 825-10 requires certain disclosures regarding
the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes
the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of
unobservable inputs. The three levels of inputs used to measure fair value are as follows:</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_31" id="_SignificantAccountingPoliciesTextBlock-c0_cont_30"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_32" id="_SignificantAccountingPoliciesTextBlock-c0_cont_31"><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; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_33" id="_SignificantAccountingPoliciesTextBlock-c0_cont_32"><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; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_34" id="_SignificantAccountingPoliciesTextBlock-c0_cont_33"><ix:continuation id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Unless otherwise disclosed, the fair value of
the Company&#8217;s financial instruments, including cash, restricted cash, accounts receivable, prepayments and other current assets,
due from related parties, accounts payable, due to a related party, short-term bank loans, salary and welfare payables, accrued expenses
and other current liabilities, current operating lease liabilities and taxes payable, approximates their recorded values due to their
short-term maturities. The carrying value of long-term lease liabilities approximated its fair value as of December 31, 2022 and 2021
as the interest rates applied reflect the current market yield for comparable financial instruments.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_35" id="_SignificantAccountingPoliciesTextBlock-c0_cont_34"><ix:nonNumeric contextRef="c0" continuedAt="_ReceivablesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ReceivablesPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Notes receivable</span></p><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="_SignificantAccountingPoliciesTextBlock-c0_cont_36" id="_SignificantAccountingPoliciesTextBlock-c0_cont_35"><ix:continuation id="_ReceivablesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">Notes receivable
represents trade accounts receivable due from various customers where the customers&#8217; banks have guaranteed the payments. The notes
are non-interest bearing and normally paid within three to twelve months. The Company has the ability to submit request for payment to
the customer&#8217;s bank earlier than the scheduled payment date but will incur an interest charge and a processing fee. As of December
31, 2022 and 2021, no notes were pledged&#160;</span>for the Company&#8217;s notes payable<span style="background-color: white">.</span></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: 158; 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>
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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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_37" id="_SignificantAccountingPoliciesTextBlock-c0_cont_36"><ix:nonNumeric contextRef="c0" continuedAt="_TradeAndOtherAccountsReceivablePolicy-c0_cont_1" escape="true" name="us-gaap:TradeAndOtherAccountsReceivablePolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Accounts receivable, net</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_38" id="_SignificantAccountingPoliciesTextBlock-c0_cont_37"><ix:continuation id="_TradeAndOtherAccountsReceivablePolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accounts receivable represents the Company&#8217;s
right to consideration in exchange for goods and services that the Company has transferred to the customer before payment is due. Accounts
receivable is stated at the historical carrying amount, net of an estimated allowance for uncollectible accounts. The Company reviews
on a periodic basis for doubtful accounts for the outstanding trade receivable balances based on historical collection trends, aging of
receivables and other information available. Additionally, the Company evaluates individual customer&#8217;s financial condition, credit
history, and the current economic conditions to make specific bad debt provisions when it is considered necessary, based on (i) the Company&#8217;s
specific assessment of the collectability of all significant accounts; and (ii) any specific knowledge we have acquired that might indicate
that an account is uncollectible. The facts and circumstances of each account may require the Company to use substantial judgment in assessing
its collectability. The allowance is based on management&#8217;s best estimates of specific losses on individual exposures, as well as
a provision on historical trends of collections. Account balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote. The Company&#8217;s management continues to evaluate the reasonableness
of the valuation allowance policy and update it if necessary. The allowance for doubtful accounts was approximately $<ix:nonFraction contextRef="c118" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent" scale="6" unitRef="usd">3.1</ix:nonFraction> million and $<ix:nonFraction contextRef="c119" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AllowanceForDoubtfulAccountsReceivableCurrent" scale="6" unitRef="usd">2.4</ix:nonFraction>
million as of December 31, 2022 and 2021, respectively.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_39" id="_SignificantAccountingPoliciesTextBlock-c0_cont_38"><ix:nonNumeric contextRef="c0" continuedAt="sfwl_PrepaymentsAndOtherAssetsNetPolicyTextBlock-c0_cont_1" escape="true" name="sfwl:PrepaymentsAndOtherAssetsNetPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Prepayments and other assets, net</span><b><i>&#160;</i></b></p><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="_SignificantAccountingPoliciesTextBlock-c0_cont_40" id="_SignificantAccountingPoliciesTextBlock-c0_cont_39"><ix:continuation id="sfwl_PrepaymentsAndOtherAssetsNetPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prepayment and other assets primarily consist of VAT recoverable, advances
to vendors for purchasing goods, long-lived assets or services that have not been received or provided, advances to employees, security
deposits made to customers and advances to employees. Prepayment and other assets are classified as either current or non-current based
on the terms of the respective agreements. These advances are unsecured and are reviewed periodically to determine whether their carrying
value has become impaired. The Company considers the assets to be impaired if the collectability of the advance becomes doubtful. The
Company uses the aging method to estimate the allowance for uncollectible balances. The allowance is also based on management&#8217;s
best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections and utilizations.
Actual amounts received or utilized may differ from management&#8217;s estimate of credit worthiness and the economic environment. The
provisions for prepayments and other assets were approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromMaturitiesPrepaymentsAndCallsOfOtherInvestments" scale="6" unitRef="usd">0.5</ix:nonFraction> million and $<ix:nonFraction contextRef="c18" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromMaturitiesPrepaymentsAndCallsOfOtherInvestments" scale="6" unitRef="usd">0.4</ix:nonFraction> million as of December 31, 2022 and 2021, respectively.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_41" id="_SignificantAccountingPoliciesTextBlock-c0_cont_40"><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Property and equipment, net</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_42" id="_SignificantAccountingPoliciesTextBlock-c0_cont_41"><ix:continuation continuedAt="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives,
taking into account any estimated residual value.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_43" id="_SignificantAccountingPoliciesTextBlock-c0_cont_42"><ix:nonNumeric contextRef="c0" 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; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  <tr style="background-color: #CCEEFF">
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  <tr style="background-color: white">
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acquisition of such property and equipment are capitalized. Depreciation is recorded at the time assets are ready for their intended use.
Such properties are classified to the appropriate categories of property and equipment when completed and ready for intended use. Depreciation
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</div><div>

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statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions,
renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods
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</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>

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</div><div>

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</div><div>

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adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not
be fully recoverable. When these events occur, the Company evaluates the recoverability of long-lived assets by comparing the carrying
amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition.
If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment
loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting
the cash flows expected to be generated by the assets, when the market prices are not readily available. The adjusted carrying amount
of the assets become new cost basis and are depreciated over the assets&#8217; remaining useful lives. Long-lived assets are grouped with
other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other
assets and liabilities. Given no events or changes in circumstances indicating the carrying amount of long-lived assets may not be recovered
through the related future net cash flows, the Company did not recognize any impairment loss on long-lived assets for the years ended
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</div><div>

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</div><div>

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using the equity method. On January 1, 2019, the Company adopted ASU 2016-01 Financial Instruments-Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial Liabilities. According to the guidance, the Company started to record equity investments
at fair value, with gains and losses recorded through net earnings. And the Company elected to measure certain equity investments without
readily determinable fair value at cost, less impairments, plus or minus observable price changes and assess for impairment quarterly.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

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</div><div>

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Company adjusts the carrying amount of the investment and recognizes investment income or loss for its share of the earnings or loss of
the investee after the date of investment. The Company assesses its equity investment for other-than-temporary impairment by considering
factors including, but not limited to, current economic and market conditions, operating performance of the entity, including current
earnings trends and undiscounted cash flows, and other entity-specific information. The fair value determination, particularly for investments
in a privately held entity, requires judgment to determine appropriate estimates and assumptions. Changes in these estimates and assumptions
could affect the calculation of the fair value of the investment and determination of whether any identified impairment is other-than-temporary.</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>

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

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</div><div>

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attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction
of additional paid-in capital. These costs include legal fees related to the registration drafting and counsel, consulting fees related
to the registration preparation, SEC filing and print related costs, exchange listing costs, and road show related costs.</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>

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paid within three to twelve months. The Company shall keep sufficient cash in designated bank accounts or notes receivable pledged to
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_61" id="_SignificantAccountingPoliciesTextBlock-c0_cont_60"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_2" id="_RevenueRecognitionPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company adopted ASC Topic 606, Revenue from
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December 31, 2022, 2021 and 2020 are presented under ASC 606. The core principle of the guidance is that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. Revenue is the transaction price the Company expects to be entitled to in exchange
for the promised services in a contract in the ordinary course of the Company&#8217;s activities and is recorded net of value-added tax
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_63" id="_SignificantAccountingPoliciesTextBlock-c0_cont_62"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_4" id="_RevenueRecognitionPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 0.25in; text-align: justify">Step 2: Identify the performance obligations
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</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>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_69" id="_SignificantAccountingPoliciesTextBlock-c0_cont_68"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_10" id="_RevenueRecognitionPolicyTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company derives its transportation service
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as the customer can only obtain benefits when the goods are delivered to the destination. The transaction price is predetermined according
to the distance of the transportation as well as the volume of the goods. Generally, the credit term is within two months. There is no
other obligation in our contracts, such as return, refund or warranties. Revenue is recognized at the point in time when delivery of goods
is made and customer has accepted delivery.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></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"><i>&#160;</i></p><div>

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</div><div>

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in a contract are not distinct and are considered as a significant integrated service. The consideration is predetermined in the contract
according to the unit price, space and term as well as the services used with no other obligations such as return, refund or warranties.
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only incurred as a result of obtaining a contract, are capitalized when the incremental costs are expected to be recovered over the contract
period. All other costs incurred regardless of obtaining a contract are expensed as incurred. Contract acquisition costs are amortized
over the period the costs are expected to contribute directly or indirectly to future cash flows, which is generally over the contract
term, on a basis consistent with the transfer of goods or services to the customer to which the costs relate. Contract fulfillments costs
consist of costs incurred by the Company to fulfill a contract with a customer and are capitalized when the costs generate or enhance
resources that will be used in satisfying future performance obligations of the contract and the costs are expected to be recovered. Capitalized
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resources required to fulfill the contract. Contract fulfillment costs are recognized in cost of revenue during the period that the related
costs are expected to contribute directly or indirectly to future cash flows, which is generally over the contract term, on a basis consistent
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</div><div>

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  <tr style="vertical-align: bottom; background-color: White">
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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><div>

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</div><div>

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from certain local governments. The Company&#8217;s government subsidies consisted of specific subsidies and other subsidies. Specific
subsidies are subsidies that the local government has provided for a specific purpose, such as truck station subsidies. Other subsidies
are the subsidies that the local government has not specified its purpose for and are not tied to future trends or performance of the
Company; receipt of such subsidy income is not contingent upon any further actions or performance of the Company and the amounts do not
have to be refunded under any circumstances. The Company recorded specific subsidies as accrued expenses and other current liabilities
when received. For specific subsidies, they are recognized as other income on a straight-line method within the useful life of relevant
assets. Other subsidies are recognized as other income which is included in the consolidated statements of income upon receipt as further
performance by the Company is not required. The government subsidies were $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:CharityCareReimbursementsReceived" scale="6" unitRef="usd">0.8</ix:nonFraction> million, $<ix:nonFraction contextRef="c18" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:CharityCareReimbursementsReceived" scale="6" unitRef="usd">0.6</ix:nonFraction> million and $<ix:nonFraction contextRef="c19" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:CharityCareReimbursementsReceived" scale="6" unitRef="usd">2.2</ix:nonFraction> million for the years ended
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</div><div>

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</div><div>

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expenses amounted to approximately $<ix:nonFraction contextRef="c0" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:AdvertisingExpense" scale="6" unitRef="usd">0.05</ix:nonFraction> million, $<ix:nonFraction contextRef="c18" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:AdvertisingExpense" scale="6" unitRef="usd">0.08</ix:nonFraction> million and $<ix:nonFraction contextRef="c19" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:AdvertisingExpense" scale="6" unitRef="usd">0.06</ix:nonFraction> million, respectively.</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>

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

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</div><div>

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participate in a government-mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care,
unemployment insurance, employee housing fund and other welfare benefits are provided to them. Chinese labor regulations require that
the Company make contributions to the government for these benefits based on government prescribed percentage of the employee&#8217;s
salaries. The Company has no legal obligation for the benefits beyond the contributions. The total amount was expensed as incurred. For
the years ended December 31, 2022, 2021 and 2020, employee welfare contribution expenses amounted to approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DefinedContributionPlanAdministrativeExpenses" scale="6" unitRef="usd">1.3</ix:nonFraction> million, $<ix:nonFraction contextRef="c18" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DefinedContributionPlanAdministrativeExpenses" scale="6" unitRef="usd">2.4</ix:nonFraction>
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_93" id="_SignificantAccountingPoliciesTextBlock-c0_cont_92"><ix:continuation continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_2" id="_LesseeLeasesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has elected the package of practical
expedients permitted which allows the Company not to reassess the following at adoption date: (i) whether any expired or existing contracts
are or contains a lease, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for any expired
or existing leases (i.e. whether those costs qualify for capitalization under ASU 2016-02). The Company also elected the short-term lease
exemption for certain classes of underlying assets including office space, warehouses and equipment, with a lease term of <ix:nonNumeric contextRef="c5" format="ixt-sec:durmonth" name="us-gaap:LesseeOperatingLeaseRemainingLeaseTerm">12</ix:nonNumeric> months or
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</div><div>

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is or contain a lease at inception. A lease for which substantially all the benefits and risks incidental to ownership remain with the
lessor is classified by the lessee as an operating lease. All leases of the Company are currently classified as operating leases. Operating
leases are included in operating lease right-of-use (&#8220;ROU&#8221;) assets, operating lease liability, current, and operating lease
liability, non-current in the Company&#8217;s consolidated balance sheets. Please refer to Note 12 for the disclosures regarding the Company&#8217;s
method of adoption of ASC 842 and the impacts of adoption on its financial position, results of operations and cash flows.</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>

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to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.
The operating lease ROU assets and lease liabilities are recognized at lease commencement date based on the present value of lease payments
over the lease term. As most of the Company&#8217;s leases do not provide an implicit rate, the Company uses its incremental borrowing
rate based on the information available at lease commencement date in determining the present value of lease payments. The operating lease
ROU assets also includes any lease payments made and excludes lease incentives. The Company&#8217;s lease terms may include options to
extend or terminate the lease. Renewal options are considered within the ROU assets and lease liabilities when it is reasonably certain
that the Company will exercise that option. Lease expenses for lease payments are recognized on a straight-line basis over the lease term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

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less, the Company has elected not to recognize a lease liability or ROU asset on its consolidated balance sheet. Instead, it recognizes
the lease payments as expenses on a straight-line basis over the lease term. Short-term lease costs are immaterial to its consolidated
statements of operations and cash flows. The Company has operating lease agreements with insignificant non-lease components and have elected
the practical expedient to combine and account for lease and non-lease components as a single lease component.</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>

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assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived
assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment
of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax
cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested
asset group and include the associated operating lease payments in the undiscounted future pre-tax cash flows.</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>

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</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">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_100" id="_SignificantAccountingPoliciesTextBlock-c0_cont_99"><ix:continuation id="sfwl_ValueAddedTaxPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue represents the invoiced value of goods
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services provided. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output
VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes payable. All of the VAT returns filed by the Company&#8217;s
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_102" id="_SignificantAccountingPoliciesTextBlock-c0_cont_101"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c0_cont_2" id="_IncomeTaxPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company follows the liability method of accounting
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with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases
of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_103" id="_SignificantAccountingPoliciesTextBlock-c0_cont_102"><ix:continuation id="_IncomeTaxPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An uncertain tax position is recognized as a benefit
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&#8220;more likely than not&#8221; test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income
tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes have been
incurred during the years ended December 31, 2022, 2021 and 2020. All of the tax returns of the Company&#8217;s subsidiaries in PRC remain
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</div><div>

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</div><div>

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and regulations. The allocation to the general reserve will cease if such reserve has reached to <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure">50</ix:nonFraction>% of the registered capital of respective
company. Appropriations to discretionary surplus reserve are at the discretion of the board of directors of the VIE. These reserves can
only be used for specific purposes and are not transferable to the Company in form of loans, advances, or cash dividends. There is no
such regulation of providing statutory reserve in Hong Kong.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_106" id="_SignificantAccountingPoliciesTextBlock-c0_cont_105"><ix:nonNumeric contextRef="c0" continuedAt="_ComprehensiveIncomePolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ComprehensiveIncomePolicyPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Comprehensive income (loss)</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

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that under GAAP are recorded as an element of equity but are excluded from net income. Other comprehensive income (loss) consists of a
foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies.</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>

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</div><div>

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in accordance with ASC 260, &#8220;Earnings per Share.&#8221; ASC 260 requires companies to present basic and diluted EPS. Basic EPS is
measured as net income divided by the weighted average common share outstanding for the period. Diluted EPS presents the dilutive effect
on a per-share basis of the potential Ordinary Shares (e.g., convertible securities, options and warrants) as if they had been converted
at the beginning of the periods presented, or issuance date, if later. Potential Ordinary Shares that have an anti-dilutive effect (i.e.,
those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.</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>

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rights, of the holders of the Company&#8217;s Class A and Class B Ordinary Shares are identical, except with respect to voting and conversion
rights. Each Class A Ordinary Share is entitled to one vote; and each Class B Ordinary Share is entitled to ten votes and is convertible
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under any circumstances. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate
basis. For the years ended December 31, 2022, 2021 and 2020, the net earnings per share amounts are the same for Class A and Class B Ordinary
Shares because the holders of each class are entitled to equal per share dividends or distributions in 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>

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

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_111" id="_SignificantAccountingPoliciesTextBlock-c0_cont_110"><ix:nonNumeric contextRef="c0" continuedAt="_ConcentrationRiskCreditRisk-c0_cont_1" escape="true" name="us-gaap:ConcentrationRiskCreditRisk"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><span style="text-decoration:underline">Risks and Concentration</span></span></p><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="_SignificantAccountingPoliciesTextBlock-c0_cont_112" id="_SignificantAccountingPoliciesTextBlock-c0_cont_111"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_2" id="_ConcentrationRiskCreditRisk-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Interest rate risk</span></td></tr>
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_113" id="_SignificantAccountingPoliciesTextBlock-c0_cont_112"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_3" id="_ConcentrationRiskCreditRisk-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Interest rate risk is
the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Company&#8217;s interest rate risk arises primarily from short-term borrowings. Borrowings issued at variable rates and fixed rates
expose the Company to cash flow interest rate risk and fair value interest rate risk respectively.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_114" id="_SignificantAccountingPoliciesTextBlock-c0_cont_113"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_4" id="_ConcentrationRiskCreditRisk-c0_cont_3"><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: 24px; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">b)</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Concentration of credit risk</span></td></tr>
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_115" id="_SignificantAccountingPoliciesTextBlock-c0_cont_114"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_5" id="_ConcentrationRiskCreditRisk-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Financial instruments
that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of December 31, 2022 and
2021, approximately $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DepositsWithOtherFederalHomeLoanBanks" scale="6" unitRef="usd">23.4</ix:nonFraction> million and $<ix:nonFraction contextRef="c6" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DepositsWithOtherFederalHomeLoanBanks" scale="6" unitRef="usd">18.9</ix:nonFraction> million were deposited with financial institutions located in the PRC, respectively, where
there is a RMB <span style="-sec-ix-hidden: hidden-fact-97">500, 000</span> deposit insurance limit for a legal entity's aggregated balance at each bank. While management believes that these
financial institutions are of high credit quality, it also continually monitors their credit worthiness.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_116" id="_SignificantAccountingPoliciesTextBlock-c0_cont_115"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_6" id="_ConcentrationRiskCreditRisk-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company is also exposed
to risk from its accounts receivable and other receivables. These assets are subjected to credit evaluations. An allowance has been made
for estimated unrecoverable amounts which have been determined by reference to past default experience and the current economic environment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_117" id="_SignificantAccountingPoliciesTextBlock-c0_cont_116"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_7" id="_ConcentrationRiskCreditRisk-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">A majority of the Company&#8217;s
expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries&#8217; assets and liabilities
are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required
by law to be transacted only by authorized financial institutions at the exchange rates set by the People&#8217;s Bank of China (&#8220;PBOC&#8221;).
Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory
bodies which require certain supporting documentation in order to process the remittance.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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currency is the RMB, and its consolidated financial statements are presented in U.S. dollars. The RMB depreciated by <ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="sfwl:PercentageDepreciated" scale="-2" unitRef="pure">9.24</ix:nonFraction>% in the year
ended December 31, 2022. The RMB appreciated by <ix:nonFraction contextRef="c18" decimals="4" format="ixt:num-dot-decimal" name="sfwl:PercentageDepreciated" scale="-2" unitRef="pure">2.29</ix:nonFraction>% in the year ended December 31, 2021 from December 31, 2020 to December 31, 2021.
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 its financial results reported in the
U.S. dollar terms without giving effect to any underlying changes in its business or results of operations. Currently, the Company&#8217;s
assets, liabilities, revenues and costs are denominated in RMB.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_119" id="_SignificantAccountingPoliciesTextBlock-c0_cont_118"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_9" id="_ConcentrationRiskCreditRisk-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">To the extent that the
Company needs to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes, appreciation
of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if
the Company decides to convert RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition or investments
or other business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to
the Company.</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: 166; 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">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_120" id="_SignificantAccountingPoliciesTextBlock-c0_cont_119"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_10" id="_ConcentrationRiskCreditRisk-c0_cont_9"><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: 24px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">c)</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Concentration of customers and suppliers</span></td></tr>
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_121" id="_SignificantAccountingPoliciesTextBlock-c0_cont_120"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_11" id="_ConcentrationRiskCreditRisk-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Substantially all revenue
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revenue of the Company in any of the periods presented.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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For the year ended December 31, 2021, Anhui Luge Transportation Co., Ltd. contributed approximately <ix:nonFraction contextRef="c6" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:RevenueRemainingPerformanceObligationPercentage" scale="-2" unitRef="pure">27.8</ix:nonFraction>% of total cost of revenue of
the Company. For the year ended December 31, 2020, Hubei Luge Logistics Co., Ltd. and Anhui Luge Transportation Co., Ltd. contributed
approximately <ix:nonFraction contextRef="c125" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:RevenueRemainingPerformanceObligationPercentage" scale="-2" unitRef="pure">19.8</ix:nonFraction>% and <ix:nonFraction contextRef="c42" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:RevenueRemainingPerformanceObligationPercentage" scale="-2" unitRef="pure">12.4</ix:nonFraction>% of total cost of revenue of the Company, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_125" id="_SignificantAccountingPoliciesTextBlock-c0_cont_124"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_15" id="_ConcentrationRiskCreditRisk-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_126" id="_SignificantAccountingPoliciesTextBlock-c0_cont_125"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_16" id="_ConcentrationRiskCreditRisk-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Under the Contractual
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through the Company&#8217;s relevant PRC subsidiaries, and can have assets transferred freely out of the consolidated VIE and VIE&#8217;s
subsidiaries without restrictions. Therefore, the Company considers that there is no asset of the consolidated VIE that can only be used
to settle obligations of the respective consolidated VIE, except for the registered capital of the consolidated VIE amounting to approximately
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_127" id="_SignificantAccountingPoliciesTextBlock-c0_cont_126"><ix:continuation continuedAt="_ConcentrationRiskCreditRisk-c0_cont_17" id="_ConcentrationRiskCreditRisk-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company believes
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are in compliance with PRC laws and regulations, as applicable, and are legally binding and enforceable. However, uncertainties in the
PRC legal system could limit the Company&#8217;s ability to enforce these Contractual Arrangements.</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>

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structure or any of the Contractual Arrangements were found to be in violation of any existing or future PRC law, the Company may be subject
to penalties, which may include, but not limited to, cancellation or revocation of the Company&#8217;s business and operating licenses
and being required to restructure the Company&#8217;s operations or terminate the Company&#8217;s operating activities. The imposition
of any of these or other penalties may result in a material and adverse effect on the Company&#8217;s ability to conduct its operations.
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</div><div>

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</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_130" id="_SignificantAccountingPoliciesTextBlock-c0_cont_129"><ix:continuation id="_CommitmentsAndContingenciesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From time to time, the Company is a party to various
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and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company&#8217;s
management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have
a material adverse impact on the Company&#8217;s consolidated financial position, results of operations and cash flows.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

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are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject
to common control or common significant influence, such as a family member or relative, shareholder, or a related corporation.</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>

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</div><div>

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allocating resources and assessing the performance of the Company as a whole and hence, the Company has only <ix:nonFraction contextRef="c0" decimals="0" format="ixt-sec:numwordsen" name="us-gaap:NumberOfReportingUnits" scale="0" unitRef="pure">one</ix:nonFraction> reportable segment. The
Company does not distinguish between markets or segments for the purpose of internal reporting. The Company&#8217;s long-lived assets
are all located in the PRC and substantially all of the Company&#8217;s revenues are derived from the PRC. Therefore, no geographical
segments are presented.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_135" id="_SignificantAccountingPoliciesTextBlock-c0_cont_134"><ix:nonNumeric contextRef="c0" continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:NewAccountingPronouncementsPolicyPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Recent Accounting Pronouncements</span></p><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="_SignificantAccountingPoliciesTextBlock-c0_cont_136" id="_SignificantAccountingPoliciesTextBlock-c0_cont_135"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_2" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company considers the applicability and impact
of all accounting standards updates (&#8220;ASUs&#8221;). Management periodically reviews new accounting standards that are issued. Under
the Jumpstart Our Business Startups Act of 2012, as amended (the &#8220;JOBS Act&#8221;), the Company meets the definition of an emerging
growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays
the adoption of these accounting standards until they would apply to private companies.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_137" id="_SignificantAccountingPoliciesTextBlock-c0_cont_136"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_3" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2016, the FASB amended guidance related
to the impairment of financial instruments as part of ASU2016-13 Financial Instruments &#8211; Credit Losses (Topic&#160;326):&#160;Measurement
of Credit Losses on Financial Instruments, which will be effective January&#160;1, 2020. The guidance replaces the incurred loss impairment
methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss.
In November 2018, the FASB issued ASU No. 2018-19,&#160;Codification Improvements to Topic 326, Financial Instruments - Credit Losses,&#160;which
clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising
from operating leases should be accounted for in accordance with Topic 842.&#160;On May 15, 2019, the FASB issued ASU 2019-05, which provides
transition relief for entities adopting the Board&#8217;s credit losses standard, ASU 2016-13. Specifically, ASU 2019-05 amends ASU 2016-13
to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for financial instruments that (1) were previously
recorded at amortized cost and (2) are within the scope of the credit losses guidance in ASC 326-20, (3) are eligible for the fair value
option under ASC 825-10, and (4) are not held-to-maturity debt securities. For entities that have adopted ASU 2016-13, the amendments
in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early
adopt the ASU in any interim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date
will be the same as the effective date of ASU 2016-13. In November 2019, the FASB issued ASU 2019-11, &#8220;Codification Improvements
to Topic 326, Financial Instruments &#8211; Credit Losses.&#8221; ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13,
&#8220;Financial Instruments &#8211; Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.&#8221; The ASU
2019-11 amendment provides clarity and improves the codification to ASU 2016-03. The pronouncement would be effective concurrently with
the adoption of ASU 2016-03. The pronouncement is effective for fiscal years beginning after December 15, 2019 and interim periods within
those fiscal years. In February 2020, the FASB issued ASU No. 2020-02, which provides clarifying guidance and minor updates to ASU No.
2016-13 &#8211; Financial Instruments &#8211; Credit Loss (Topic 326) (&#8220;ASU 2016-13&#8221;) and related to ASU No. 2016-02 - Leases
(Topic 842). ASU 2020-02 amends the effective date of ASU 2016-13, such that ASU 2016-13 and its amendments will be effective for the
Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact
this ASU will have on its consolidated financial statements and related disclosures.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_138" id="_SignificantAccountingPoliciesTextBlock-c0_cont_137"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_4" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740)&#8212;Simplifying the Accounting for Income Taxes. The guidance in this ASU eliminates certain exceptions for
recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU
also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to
members of a consolidated group. For public entities, the amendments in this Update are effective for fiscal years, beginning after December
15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods
within fiscal years beginning after December 15, 2022. Early adoption of the amendment is permitted. The Company adopt this guidance effective
January 1, 2022. The adoption of the new guidance did not have a significant impact on its consolidated financial statements.&#160;</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_139" id="_SignificantAccountingPoliciesTextBlock-c0_cont_138"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_5" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2020, the FASB issued ASU 2020-10,
Codification Improvements &#8211; Disclosures (&#8220;ASU 2020-10&#8221;) to align with the SEC&#8217;s regulations. This ASU improves
consistency by amending the codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application
of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting
terminology. The Company adopted ASU 2020-10 effective January 1, 2022. The adoption of the new guidance did not have a significant impact
on its consolidated financial statements.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_140" id="_SignificantAccountingPoliciesTextBlock-c0_cont_139"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_6" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2021, the FASB issued ASU 2021-04,&#160;<i>Earnings
Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives
and Hedging-Contracts in Entity&#8217;s Own Equity (Subtopic 815-40)</i>. The ASU addresses issuer&#8217;s accounting for certain modifications
or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning
after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance
effective January 1, 2022. The adoption of the new guidance did not have a significant impact on its consolidated financial statements.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_141" id="_SignificantAccountingPoliciesTextBlock-c0_cont_140"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_7" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2021, the FASB issued ASU No. 2021-08,
, &#8220;'Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers&#8221;
(&#8220;ASU 2021-08&#8221;). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities
in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and
measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not
acquired in a business combination. The amendments are effective for the Company beginning after December 15, 2023 and are applied prospectively
to business combinations that occur after the effective date. The Company does not expect the adoption of ASU 2021-04 will have a material
effect on the consolidated financial statements.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_142" id="_SignificantAccountingPoliciesTextBlock-c0_cont_141"><ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_8" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In November 2021, the FASB issued Accounting Standards
Update No 2021-10, Government Assistance (Topic 832)&#8201;&#8212;&#8201;Disclosures by Business Entities about Government Assistance
(&#8220;ASU 2021-10&#8221;). ASU 2021-10 requires additional disclosures regarding the nature of government assistance, the related accounting
policy used to account for assistance, the affected line items and applicable amounts within the consolidated financial position and results
of operations, and significant terms and conditions related to the assistance. Government assistance within the scope of ASC 832 includes
assistance that is administered by domestic, foreign, local, state, national governments, as well as departments, independent agencies
and intergovernmental organizations. The updated guidance increases transparency of government assistance including, 1) the type of assistance,
2) the entity&#8217;s accounting for assistance, and 3) the effect of assistance on the entity&#8217;s financial statements. The new standard
is effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2021-10 effective January 1, 2022. The adoption
of this guidance did not have a material impact on the Company&#8217;s consolidated financial statements.</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>

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

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there are no new recent issued accounting standards that will have a material impact on the consolidated financial position, statements
of operations and cash flows.</p></ix:continuation></ix:continuation><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; text-align: left"><span style="font-size: 10pt"><b>3.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Accounts receivable, net</b></span></td>
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</div><div>

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</div><ix:continuation continuedAt="_AccountsAndNontradeReceivableTextBlock-c0_cont_4" id="_AccountsAndNontradeReceivableTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Movement of allowance
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</div><div>

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December 31,<br/> 2022</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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December 31,<br/> 2021</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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December 31,<br/>
2020</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
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    <td colspan="2" style="text-align: justify">&#160;</td><td>&#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="-3" format="ixt:num-dot-decimal" name="us-gaap:ProvisionForDoubtfulAccounts" scale="3" unitRef="usd">1,130</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)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; font-weight: bold; text-align: justify; padding-bottom: 1.5pt">Exchange rate effect</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="-3" format="ixt:num-dot-decimal" name="us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsDisposalGroupIncludingDiscontinuedOperations" scale="3" sign="-" unitRef="usd">235</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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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:AllowanceForDoubtfulAccountsReceivable" scale="3" unitRef="usd">3,115</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white"><b>&#160;</b></p><div>

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<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>4.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Prepayments and other assets,
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</div><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsDisclosureTextBlock-c0_cont_2" id="_GoodwillAndIntangibleAssetsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The prepayments and other
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</div><div>

</div><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsDisclosureTextBlock-c0_cont_3" id="_GoodwillAndIntangibleAssetsDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfOtherAssetsAndOtherLiabilitiesTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfOtherAssetsAndOtherLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p><div>

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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="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_4" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December 31, 2022
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</div><div>

</div><ix:continuation id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_4"><p style="text-align: justify; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Depreciation and amortization expenses for the years ended December&#160;31,
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p><div>

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

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</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"><span style="font-size: 10pt"><b>6.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Intangible assets, net</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_2" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company&#8217;s intangible
assets with definite useful lives primarily consisted of land use rights and licensed software. The following table summarizes the components
of acquired intangible asset balances.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_3" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_2"><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">
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    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#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: justify">Land use rights</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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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)">
    <td style="font-weight: bold; text-align: justify; padding-bottom: 4pt">Intangible assets, net</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_4" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_3"><p style="text-align: justify; margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">As of December 31, 2022 and 2021, land use rights&#160; with net book
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Short-term bank loans).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_5" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Amortization expenses
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respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_6" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The future amortization
for the intangible assets is expected to be as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_IntangibleAssetsDisclosureTextBlock-c0_cont_6"><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%">
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  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td></tr>
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    <td style="font-weight: bold; text-align: justify">2024</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="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:FiniteLivedIntangibleAssetsAmortizationExpenseYearThree" scale="3" unitRef="usd">327</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify">2026</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: justify">2027</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"><ix:nonFraction contextRef="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:FiniteLivedIntangibleAssetsAmortizationExpenseAfterYearFive" scale="3" unitRef="usd">4,680</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)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 28.1pt; text-align: justify; background-color: white"><b>&#160;</b></p><div>

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<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>7.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Long-term investments</b></span></td>
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</div><div>

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  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p><div>

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</div><div>

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</div><div>

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    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td></tr>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_7" id="_LongTermDebtTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">In 2007, the Company
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</div><div>

</div><ix:continuation id="_LongTermDebtTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">No impairment loss was
recognized for the long-term investments for the years ended December 31, 2022, 2021 and 2020.</p></ix:continuation><div>

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

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<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>8.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Deposit for investment</b></span></td>
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</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_2" id="_InvestmentTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On August 16, 2019, the
Company signed a Share Purchase Agreement (&#8220;2019 SPA&#8221;) with Huasheng Group Limited (the &#8220;Huasheng&#8221;), an unrelated
third party to the Company. Pursuant to the SPA, Huasheng agreed to sell and the Company agreed to buy <ix:nonFraction contextRef="c181" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:NoncashOrPartNoncashAcquisitionNoncashFinancialOrEquityInstrumentConsiderationRate" scale="-2" unitRef="pure">100</ix:nonFraction>% of the equity interests of
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of Huasheng. The total consideration is approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:TotalConsideration" scale="6" unitRef="usd">28.7</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c0" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:TotalConsideration" scale="6" unitRef="cny">200</ix:nonFraction> million). The Company paid approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:InvestmentCompanyFeePaidIndirectly" scale="6" unitRef="usd">14.3</ix:nonFraction> million (RMB
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to the SPA. Huasheng is requested to pay <ix:nonFraction contextRef="c183" decimals="2" format="ixt:num-dot-decimal" name="sfwl:DepositReceivedInterest" scale="-2" unitRef="pure">8</ix:nonFraction>% of the deposit received as interest to the Company if the transaction is not consummated by
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</div><div>

</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_3" id="_InvestmentTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The 2019 SPA was terminated
later based on mutual agreement of all parties and a new share purchase agreement (&#8220;2020 SPA&#8221;) has been entered into on December
18, 2020. Pursuant to the 2020 SPA, the Company will buy a newly established subsidiary of Yingfu with a land use right for the same consideration.
The deposit for the 2020 SPA is approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherDeposits" scale="6" unitRef="usd">14.3</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c0" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherDeposits" scale="6" unitRef="cny">100</ix:nonFraction> million). As a result, approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentPeriodicPayment" scale="6" unitRef="usd">8.6</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c0" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentPeriodicPayment" scale="6" unitRef="cny">60</ix:nonFraction> million)
from the initial payment made has been returned to the Company in December 2020. Additionally, pursuant to the 2020 SPA, any party who
unilaterally terminates the agreement shall pay the other party a breakage fee in the amount of approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AdministrativeFeesExpense" scale="6" unitRef="usd">3.1</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c0" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AdministrativeFeesExpense" scale="6" unitRef="cny">20</ix:nonFraction> million)
and Huasheng agreed to make interest payment of approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToMinorityShareholders" scale="6" unitRef="usd">1.2</ix:nonFraction> million (approximately RMB <ix:nonFraction contextRef="c0" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToMinorityShareholders" scale="6" unitRef="cny">8.36</ix:nonFraction> million) to the Company before December
31, 2020 based on the term stated in SPA 2019 and is requested to pay <ix:nonFraction contextRef="c19" decimals="2" format="ixt:num-dot-decimal" name="sfwl:DepositReceivedInterest" scale="-2" unitRef="pure">8</ix:nonFraction>% of the deposit received as interest to the Company if the transaction
is not consummated by December 15, 2021. The interest payment was received in full by the Company on December 29, 2020.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_4" id="_InvestmentTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Due to the delay of the
government&#8217;s approval on this transaction involved with the land use right, the 2020 SPA agreement expired in December 2021. A new
agreement (&#8220;2021 SPA&#8221;) has been entered into to replace the 2020 SPA on December 31, 2021. There were no other changes for
the consideration nor the deposit. Moreover, Huasheng agreed to make an interest payment of RMB <ix:nonFraction contextRef="c184" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToMinorityShareholders" scale="6" unitRef="cny">8</ix:nonFraction> million (approximately $<ix:nonFraction contextRef="c184" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToMinorityShareholders" scale="6" unitRef="usd">1.2</ix:nonFraction> million)
before January 30, 2022 based on the term stated in SPA 2020 and is requested to pay <ix:nonFraction contextRef="c185" decimals="2" format="ixt:num-dot-decimal" name="sfwl:DepositReceivedInterest" scale="-2" unitRef="pure">8</ix:nonFraction>% of the deposit received payable to the Company
if the transaction is not consummated by December 15, 2022. The Company received the interest of approximately $<ix:nonFraction contextRef="c186" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:ReceivedInterest" scale="6" unitRef="usd">1.2</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c186" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:ReceivedInterest" scale="6" unitRef="cny">8.0</ix:nonFraction> million)
on January 19, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_InvestmentTextBlock-c0_cont_5" id="_InvestmentTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On December 23, 2022,
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changes for the consideration nor the deposit, expect that Yingfu agreed to make an interest payment of RMB <ix:nonFraction contextRef="c187" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToMinorityShareholders" scale="6" unitRef="cny">8</ix:nonFraction> million (approximately $<ix:nonFraction contextRef="c187" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToMinorityShareholders" scale="6" unitRef="usd">1.2</ix:nonFraction>
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</div><div>

</div><ix:continuation id="_InvestmentTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Interest income has been
recorded by the Company for the years ended December 31, 2022, 2021 and 2020. This transaction is still pending for the government&#8217;s
approval as of the issuance date of this report. Huasheng has performed its obligations according to the 2021 SPA and there is no evidence
of impairment noted by the Company as of December 31, 2022 and 2021. As of December 31, 2022 and 2021, the deposit for investment was
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b>&#160;</b></p><div>

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

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

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<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>9.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Related party transactions</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b>&#160;</b></p></ix:nonNumeric><div>
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</div><div>

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December 31,<br/>
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December 31,<br/>
2021</b></td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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December 31,<br/>
2020</b></td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></p><div>

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

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December 31,<br/>
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December 31,<br/>
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December 31,<br/>
2020</b></p></td><td style="padding-bottom: 1.5pt">&#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; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_8" id="_RelatedPartyTransactionsDisclosureTextBlock-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; text-align: left"><span style="font-size: 10pt"><i>ii)</i></span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>Guarantees</i></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_9" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company&#8217;s shareholder,
CEO and Chairman, Yongxu Liu, his spouse, Xiying Yang, and his brother, Yongteng Liu, were the guarantors of the Company&#8217;s short-term
bank loans (See Note 10).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_10" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_9"><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-size: 10pt"><i>iii)</i></span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>Significant balances with
related parties were as follows:</i></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white"><i>&#160;&#160;</i></p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_11" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_10"><ix:nonNumeric contextRef="c0" continuedAt="sfwl_ScheduleOfBalancesWithRelatedPartiesTableTextBlock-c0_cont_1" escape="true" name="sfwl:ScheduleOfBalancesWithRelatedPartiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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of<br/>
December 31,<br/> 2022</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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of<br/>
December 31,<br/> 2021</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; font-weight: bold; text-align: justify">Fuzhou Tianyu</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify; padding-bottom: 1.5pt">Beijing Banglian</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-111">-</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)">
    <td style="font-weight: bold; text-align: justify; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_12" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_11"><ix:continuation continuedAt="sfwl_ScheduleOfBalancesWithRelatedPartiesTableTextBlock-c0_cont_2" id="sfwl_ScheduleOfBalancesWithRelatedPartiesTableTextBlock-c0_cont_1"><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: justify">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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December 31,<br/> 2022</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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December 31,<br/> 2021</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; font-style: italic; text-align: justify"><span style="text-decoration:underline">Due to related parties</span></td><td style="padding-bottom: 1.5pt"><span style="text-decoration:underline">&#160;</span></td>
    <td colspan="2" style="text-align: justify"><span style="text-decoration:underline">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="text-decoration:underline">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="text-decoration:underline">&#160;</span></td>
    <td colspan="2" style="text-align: justify"><span style="text-decoration:underline">&#160;</span></td><td style="padding-bottom: 1.5pt"><span style="text-decoration:underline">&#160;</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; font-weight: bold; text-align: justify">Fujian Bafang (a)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c233" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">1,694</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c234" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">1,574</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify">Fuzhou Tianyu</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c229" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">84</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="c230" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">29</ix:nonFraction></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: justify">Beijing Banglian</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>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c232" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">246</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify">Fuzhou Tianyu Management</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c235" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">36</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="c236" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">24</ix:nonFraction></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: justify">Hainan Tianyi</td><td>&#160;</td>
    <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><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c238" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">4</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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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="c239" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">600</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"><div style="-sec-ix-hidden: hidden-fact-114">-</div></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: justify; 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="c5" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="3" unitRef="usd">2,414</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_12"><ix:continuation id="sfwl_ScheduleOfBalancesWithRelatedPartiesTableTextBlock-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; text-align: left"><span style="font-size: 10pt">(a)</span></td><td style="text-align: justify"><span style="font-size: 10pt">On December 10, 2007, the Company
entered into an interest-free loan agreement with Fujian Bafang for a principal amount of approximately $<ix:nonFraction contextRef="c192" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:InvestmentsInAndAdvancesToAffiliatesBalancePrincipalAmount" scale="6" unitRef="usd">1.4</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c192" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:InvestmentsInAndAdvancesToAffiliatesBalancePrincipalAmount" scale="6" unitRef="cny">9.6</ix:nonFraction> million).
Such loan is due on demand.</span></td>
</tr></table></ix:continuation></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#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"><b>&#160;</b></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; 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-size: 10pt"><b>10.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Short-term bank loans</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:nonNumeric><div>
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</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_2" id="_ShortTermDebtTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The following table presents
short-term bank loans from commercial banks as of December 31, 2022 and 2021:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white"></p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p><div>

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of<br/>
December 31,<br/> 2022</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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of<br/>
December 31,<br/> 2021</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: justify">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; font-weight: bold; text-align: justify">China Minsheng Bank Fuzhou Branch</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c375" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">11,487</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="font-weight: bold; text-align: justify">China Merchant Bank Fuzhou Branch</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c377" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">10,769</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify">Xiamen International Bank Co., Ltd. Fuzhou Branch of</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c379" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">7,179</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="c380" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">7,842</ix:nonFraction></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: justify">Haixia Bank of Fujian Fuzhou Jin&#8217;an Branch</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c381" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">1,436</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="c382" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">784</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify">Fujian Fuzhou Rural Commercial Bank Co., Ltd. Yuefeng Branch</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c383" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">1,436</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="c384" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">1,568</ix:nonFraction></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: justify">Shanghai Pudong Development Bank Co., Ltd. Fuzhou Branch</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c385" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">1,436</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="c386" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">1,568</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify">Industrial Bank Fuzhou Huqian Sub Branch</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c387" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">861</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="c388" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">941</ix:nonFraction></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: justify">Industrial Bank Fuzhou Branch</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c389" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">1,421</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="c390" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">1,568</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify; padding-bottom: 1.5pt">China Everbright Bank Co., Ltd Fuzhou Tongpan Branch</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="c391" decimals="-3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBankLoansAndNotesPayable" scale="3" unitRef="usd">861</ix:nonFraction></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)">
    <td style="font-weight: bold; text-align: justify; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_4" id="_ShortTermDebtTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December&#160;31,
2022 and 2021, the total short-term bank borrowings balance of the Company was approximately $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">47.7</ix:nonFraction> million and $<ix:nonFraction contextRef="c6" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">46.0</ix:nonFraction> million, respectively.
The short-term bank loans outstanding as of December&#160;31, 2022 and 2021 carried a weighted average interest rate of approximately
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</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_5" id="_ShortTermDebtTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">China Minsheng
Bank Fuzhou Branch</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_6" id="_ShortTermDebtTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On September 10, 2021
and September 22, 2021, respectively, the Company entered into short-term loan facility agreements with China Minsheng Bank Fuzhou Branch,
pursuant to which a facility of up to approximately $<ix:nonFraction contextRef="c241" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DebtDefaultShorttermDebtAmount" scale="6" unitRef="usd">5.8</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c241" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:DebtDefaultShorttermDebtAmount" scale="6" unitRef="cny">37</ix:nonFraction> million) and a facility of up to approximately $<ix:nonFraction contextRef="c242" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:DebtDefaultShorttermDebtAmount" scale="6" unitRef="usd">5.96</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c242" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:DebtDefaultShorttermDebtAmount" scale="6" unitRef="cny">38</ix:nonFraction>
million) were made available to the Company, <span style="background-color: white">at a fixed interest rate of <ix:nonFraction contextRef="c241" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DerivativeFixedInterestRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c242" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DerivativeFixedInterestRate" scale="-2" unitRef="pure">4.35</ix:nonFraction></ix:nonFraction>% per annum</span>.
These short-term loans were collateralized by&#160;the real estate amounted to approximately $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OtherRealEstate" scale="6" unitRef="usd">8.4</ix:nonFraction> million and the land use rights for
the property located at Dapu village, Honglu street, Fuqing City, Fuzhou City, Fujian Province, PRC, amounted to approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireLandHeldForUse" scale="6" unitRef="usd">1.0</ix:nonFraction> million,
owned by the Company and guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and his brother, Yongteng Liu.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_7" id="_ShortTermDebtTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="srt:BankLoans" scale="6" unitRef="usd">5.8</ix:nonFraction> million (RMB
<ix:nonFraction contextRef="c5" decimals="-6" format="ixt:num-dot-decimal" name="srt:BankLoans" scale="6" unitRef="cny">37</ix:nonFraction> million) loan matures on <ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-year-en" name="us-gaap:LineOfCreditFacilityExpirationDate1">September 10, 2022</ix:nonNumeric> and the $<ix:nonFraction contextRef="c243" decimals="-4" format="ixt:num-dot-decimal" name="srt:BankLoans" scale="6" unitRef="usd">5.96</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c243" decimals="-6" format="ixt:num-dot-decimal" name="srt:BankLoans" scale="6" unitRef="cny">38</ix:nonFraction>) loan matures on <ix:nonNumeric contextRef="c244" format="ixt:date-monthname-day-year-en" name="us-gaap:LineOfCreditFacilityExpirationDate1">September 22, 2022</ix:nonNumeric>. The Company made early
repayment for the loans of approximately $<ix:nonFraction contextRef="c245" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfOtherLongTermDebt" scale="6" unitRef="usd">5.8</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c245" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfOtherLongTermDebt" scale="6" unitRef="cny">37</ix:nonFraction> million) on July 7, 2022, $<ix:nonFraction contextRef="c246" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfOtherLongTermDebt" scale="6" unitRef="usd">2.82</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c246" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfOtherLongTermDebt" scale="6" unitRef="cny">18</ix:nonFraction> million) on July 14, 2022
and $<ix:nonFraction contextRef="c247" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfOtherLongTermDebt" scale="6" unitRef="usd">3.14</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c247" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfOtherLongTermDebt" scale="6" unitRef="cny">20</ix:nonFraction> million) on July 18, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_8" id="_ShortTermDebtTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">After the repayment,
the Company obtained additional loans of approximately $<ix:nonFraction contextRef="c245" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="usd">5.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c245" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="cny">37</ix:nonFraction> million) on July 7, 2022, $<ix:nonFraction contextRef="c246" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="usd">2.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c246" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="cny">18</ix:nonFraction> million) on July
14, 2022 and $<ix:nonFraction contextRef="c247" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="usd">2.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c247" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="cny">20</ix:nonFraction> million) on July 18, 2022 at a fixed interest rate of <ix:nonFraction contextRef="c248" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DerivativeFixedInterestRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c249" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DerivativeFixedInterestRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c250" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DerivativeFixedInterestRate" scale="-2" unitRef="pure">4</ix:nonFraction></ix:nonFraction></ix:nonFraction>% per annum.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_9" id="_ShortTermDebtTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December 31, 2022,
loan balance under the RMB<ix:nonFraction contextRef="c0" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShorttermDebtAverageOutstandingAmount" scale="6" unitRef="cny">75</ix:nonFraction> million credit line was $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLinesOfCredit" scale="6" unitRef="usd">10.8</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c0" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLinesOfCredit" scale="6" unitRef="cny">75</ix:nonFraction> million).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_10" id="_ShortTermDebtTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The aforementioned loans
were repaid on maturity on February 7, February 14 and February 18, 2023. After repayment of the loans of RMB<ix:nonFraction contextRef="c251" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="cny">75</ix:nonFraction> million, the Company obtained
the note payable amounted $<ix:nonFraction contextRef="c252" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OtherNotesPayableCurrent" scale="6" unitRef="usd">8.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c252" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:OtherNotesPayableCurrent" scale="6" unitRef="cny">60</ix:nonFraction> million) issued by the same bank on February 17, 2023 and February 20, 2023 to pay to its
suppliers.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;&#160;</p></ix:continuation><div>

</div><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 -->33<!-- 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 7.1pt; text-align: justify; background-color: white">&#160;</p><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_11" id="_ShortTermDebtTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">Bank of China Fuzhou
Jin&#8217;an Branch</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_12" id="_ShortTermDebtTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On June 28, 2021, the
Company entered into a short-term facility agreement with Bank of China Fuzhou Jin&#8217;an Branch pursuant to which a total facility
of up to approximately $<ix:nonFraction contextRef="c253" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DebtDefaultShorttermDebtAmount" scale="6" unitRef="usd">12.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c253" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:DebtDefaultShorttermDebtAmount" scale="6" unitRef="cny">80</ix:nonFraction> million) was made available to the Company <span style="background-color: white">at a fixed
interest rate of <ix:nonFraction contextRef="c253" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">4.35</ix:nonFraction>% per annum</span>. Loans from this facility are collateralized by&#160;the real estate and the land use rights,
amounted to approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:FacilityCost" scale="6" unitRef="usd">9.8</ix:nonFraction> million in total, for the property located at No. 50, Sun Road, Wangting Town, Xiangcheng District, Suzhou,
Jiangsu Province owned by the Company and guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company. Pursuant to the
loan facility agreement, the Company shall meet two financial covenants that: (i) its current ratio shall be no less than 1; and (ii)
the financing exposure balance shall be no more than approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:FinancingExposureBalance" scale="6" unitRef="usd">61.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="sfwl:FinancingExposureBalance" scale="0" unitRef="cny">400,000,000</ix:nonFraction>) or <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="sfwl:AnnualRevenuePercentage" scale="-2" unitRef="pure">25</ix:nonFraction>% of the annual revenue. If the
Company fails to meet either of the financial covenants, the total loan facility available will be reduced to approximately $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:TotalLoanFacilityAvailable" scale="6" unitRef="usd">7.7</ix:nonFraction> million
(RMB<ix:nonFraction contextRef="c5" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:TotalLoanFacilityAvailable" scale="6" unitRef="cny">50</ix:nonFraction> million). On July 14, July 21 and August 10, 2021, the Company drew down approximately $<ix:nonFraction contextRef="c254" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">2.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c254" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">17</ix:nonFraction> million), $<ix:nonFraction contextRef="c255" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">3.1</ix:nonFraction> million
(RMB <ix:nonFraction contextRef="c255" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">20</ix:nonFraction> million) and $<ix:nonFraction contextRef="c256" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">4.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c256" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">30</ix:nonFraction> million) loans from this facility, respectively. On March 21, 2022, the Company obtained approximately
$<ix:nonFraction contextRef="c257" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLinesOfCredit" scale="6" unitRef="usd">1.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c257" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLinesOfCredit" scale="6" unitRef="cny">13</ix:nonFraction> million) under this credit line.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_13" id="_ShortTermDebtTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company made early
repayment for the loans of approximately $<ix:nonFraction contextRef="c258" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="usd">2.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c258" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="cny">17</ix:nonFraction> million) on May 18, 2022, $<ix:nonFraction contextRef="c259" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="usd">3.0</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c259" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="cny">20</ix:nonFraction> million) on June 15, 2022 and
$<ix:nonFraction contextRef="c260" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="usd">4.6</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c260" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="cny">30</ix:nonFraction> million) on June 7, 2022. After the repayment, the Company obtained additional loans of approximately $<ix:nonFraction contextRef="c261" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="usd">2.4</ix:nonFraction> million
(RMB<ix:nonFraction contextRef="c261" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="cny">17</ix:nonFraction> million) on May 26, 2022, $<ix:nonFraction contextRef="c262" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="usd">4.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c262" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="cny">30</ix:nonFraction> million) on June 13, 2022, and $<ix:nonFraction contextRef="c263" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="usd">2.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c263" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:AdditionalLoan" scale="6" unitRef="cny">20</ix:nonFraction> million) on June 23, 2022, under
the same loan facility agreement entered in June 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_14" id="_ShortTermDebtTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December 31, 2022,
loan balance under the $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShorttermDebtAverageOutstandingAmount" scale="6" unitRef="usd">11.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c264" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShorttermDebtAverageOutstandingAmount" scale="6" unitRef="cny">80</ix:nonFraction> million) credit line was $<ix:nonFraction contextRef="c264" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLinesOfCredit" scale="6" unitRef="usd">11.5</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c264" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLinesOfCredit" scale="6" unitRef="cny">80</ix:nonFraction> million).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_15" id="_ShortTermDebtTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The aforementioned loan&#8217;s mature dates are March 20, 2023, May
25, 2023, June 12, 2023 and June 22, 2023, respectively. On October 21, 2022, the Company signed supplementary contracts with Bank of
China Fuzhou Jin&#8217;an Branch to change the interest rate of the loan obtained in May and June 2022, from <ix:nonFraction contextRef="c265" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">4</ix:nonFraction>% per annum to <ix:nonFraction contextRef="c266" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">2.5</ix:nonFraction>% per
annum benefited from the special refinancing policy for transportation and logistics industry created by the People&#8217;s Bank of China
and the Ministry of Transport, and the new interest rate is effective from the date of the contracts. The Company was in compliance with
the financial covenant as of December 31, 2022 and 2021. On March 21, 2023 and April 24, 2023, the Company repaid approximately $<ix:nonFraction contextRef="c267" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PrepaidExpenseAndOtherAssets" scale="6" unitRef="usd">1.9</ix:nonFraction> million
(RMB<ix:nonFraction contextRef="c267" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:PrepaidExpenseAndOtherAssets" scale="6" unitRef="cny">13</ix:nonFraction> million) and $<ix:nonFraction contextRef="c268" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PrepaidExpenseAndOtherAssets" scale="6" unitRef="usd">0.1</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c268" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:PrepaidExpenseAndOtherAssets" scale="6" unitRef="cny">1</ix:nonFraction> million) to the bank, respectively.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_16" id="_ShortTermDebtTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On March 15, 2023, the
Company entered into a short-term facility agreement with Bank of China Fuzhou Jin&#8217;an Branch pursuant to which a total facility
of up to approximately $<ix:nonFraction contextRef="c269" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:FacilityCosts" scale="6" unitRef="usd">11.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c269" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:FacilityCosts" scale="6" unitRef="cny">80</ix:nonFraction> million) was made available to the Company. Loans from this facility are collateralized by
the real estate and the land use rights, amounted to approximately $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RealEstateInvestments" scale="6" unitRef="usd">8.6</ix:nonFraction> million in total, for the property located at No. 50, Sun Road,
Wangting Town, Xiangcheng District, Suzhou, Jiangsu Province owned by the Company and guaranteed by Yongxu Liu, a shareholder, the CEO
and Chairman of the Company. <ix:nonNumeric contextRef="c0" name="sfwl:ShorttermFacilityAgreementDescription">Pursuant to the loan facility agreement, the Company shall meet two financial covenants that: (i) its current
ratio shall be no less than 0.85; and (ii) the financing exposure balance shall be no more than approximately $57.4 million (RMB400,000,000)
or 25% of the annual revenue. The unpaid loan balance under the prior loan agreements were transferred to this new loan facility agreement
according to the terms stated in the new agreement. On April 7, 2023, the Company drew down approximately $1.9 million (RMB13 million)
under this line at a fixed interest rate of 2.5% per annum.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_17" id="_ShortTermDebtTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">China Merchant
Bank Fuzhou Branch</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_18" id="_ShortTermDebtTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">During the year ended
December 31, 2020, the Company entered into a short-term loan facility agreement with China Merchant Bank Fuzhou Branch pursuant to which
a total facility of up to approximately $<ix:nonFraction contextRef="c270" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">9.2</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c270" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">60</ix:nonFraction> million) was made available to the Company. On September 25, October 12, 22,
26 and November 28, 2020, the Company drew down approximately $<ix:nonFraction contextRef="c271" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">2.1</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c271" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">14</ix:nonFraction> million), $<ix:nonFraction contextRef="c272" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">2.7</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c272" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">17.5</ix:nonFraction> million), $<ix:nonFraction contextRef="c273" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">1.4</ix:nonFraction> million
(RMB<ix:nonFraction contextRef="c273" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">9</ix:nonFraction> million), $<ix:nonFraction contextRef="c274" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">1.4</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c274" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">9.3</ix:nonFraction> million) and $<ix:nonFraction contextRef="c275" decimals="-4" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">0.03</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c275" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">0.2</ix:nonFraction> million) of loans, at a fixed interest rate of <ix:nonFraction contextRef="c276" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">4.5</ix:nonFraction>% per annum.
These short-term loans were collateralized by&#160;the real estate amounted to approximately $<ix:nonFraction contextRef="c277" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentCollateralAmount" scale="6" unitRef="usd">2.0</ix:nonFraction> million, and the land use rights for
the property located at No. 50, Sun Road, Wangting Town, Xiangcheng District, Suzhou, Jiangsu Province, amounted to approximately $<ix:nonFraction contextRef="c278" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireLandHeldForUse" scale="6" unitRef="usd">1.0</ix:nonFraction>
million, owned by the Company and guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and one of the VIE&#8217;s
subsidiaries. On August 3, August 26, 2021, the Company repaid approximately $<ix:nonFraction contextRef="c279" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="usd">4.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c279" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="cny">30</ix:nonFraction> million) and $<ix:nonFraction contextRef="c280" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="usd">3.1</ix:nonFraction> (RMB<ix:nonFraction contextRef="c280" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="cny">20</ix:nonFraction> million) to
the bank, respectively. After the repayments were made, the Company drew down approximately $<ix:nonFraction contextRef="c281" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">4.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c281" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">30</ix:nonFraction> million) on August 3,
2021, $<ix:nonFraction contextRef="c282" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">3.1</ix:nonFraction> (RMB<ix:nonFraction contextRef="c282" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">20</ix:nonFraction> million) on August 26, 2021 and $<ix:nonFraction contextRef="c283" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">1.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c284" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">10</ix:nonFraction> million) on September 7, 2021 under the same loan facility credit
line for a period of six months.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

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

</div><!-- Field: Page; Sequence: 177; 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; text-align: justify; background-color: white">&#160;</p><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_19" id="_ShortTermDebtTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On December 24, 2021,
the Company entered into a new short-term loan facility agreement with China Merchant Bank Fuzhou Branch to replace the short-term loan
facility agreement signed with China Merchant Bank Fuzhou Branch during fiscal year 2020. Pursuant to such new short-term loan facility
agreement, a total facility of up to an aggregate principal amount of approximately $<ix:nonFraction contextRef="c285" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">11.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c285" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">75</ix:nonFraction> million) was made available to
the Company. The loan facility term is from <ix:nonNumeric contextRef="c286" name="us-gaap:ShortTermDebtTerms">December 24, 2021 to December 23, 2022</ix:nonNumeric>. The short-term loans that may be drawn under this
loan facility are collateralized by&#160;the real estate valued at approximately $<ix:nonFraction contextRef="c287" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentCollateralAmount" scale="6" unitRef="usd">1.8</ix:nonFraction> million, and the land use rights for the property
located at No. 50, Sun Road, Wangting Town, Xiangcheng District, Suzhou, Jiangsu Province, valued at approximately $<ix:nonFraction contextRef="c288" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireLandHeldForUse" scale="6" unitRef="usd">0.9</ix:nonFraction> million, owned
by the Company, and are guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and one of the VIE&#8217;s subsidiaries.
The unpaid loan balance under the prior loan agreement was transferred to this new loan facility agreement according to the terms stated
in the new agreement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_20" id="_ShortTermDebtTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On January 14 and 21,
2022, approximately $<ix:nonFraction contextRef="c289" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="usd">2.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c289" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="cny">15</ix:nonFraction> million) and $<ix:nonFraction contextRef="c290" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="usd">2.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c290" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="6" unitRef="cny">15</ix:nonFraction> million) were repaid by the Company, which loans were originally
obtained in August 2021. On January 14 and 21, 2022, the Company drew down approximately $<ix:nonFraction contextRef="c291" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">2.4</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c291" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">17</ix:nonFraction> million) and $<ix:nonFraction contextRef="c292" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">2.2</ix:nonFraction> million
(RMB<ix:nonFraction contextRef="c292" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">15</ix:nonFraction> million) of loans under this new loan facility with an interest rate of <ix:nonFraction contextRef="c293" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c294" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">4.50</ix:nonFraction></ix:nonFraction>% per annum. On December 15, 2022 and December 16,
2022, the Company repaid approximately $<ix:nonFraction contextRef="c295" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="usd">2.4</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c295" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="cny">17</ix:nonFraction> million) and $<ix:nonFraction contextRef="c296" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="usd">2.2</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c296" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="cny">15</ix:nonFraction> million) to the bank, respectively. After
the repayments were made, the Company drew down approximately $<ix:nonFraction contextRef="c297" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">2.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c297" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">16</ix:nonFraction> million) and $<ix:nonFraction contextRef="c298" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">3.0</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c298" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">21</ix:nonFraction> million) of loans under
this new loan facility with an interest rate of <ix:nonFraction contextRef="c299" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c300" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">4.30</ix:nonFraction></ix:nonFraction>% per annum.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_21" id="_ShortTermDebtTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On January 28, February
28 and March 17, 2022, approximately $<ix:nonFraction contextRef="c301" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">2.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c301" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">15</ix:nonFraction> million), $<ix:nonFraction contextRef="c302" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">0.8</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c302" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">5</ix:nonFraction> million) and $<ix:nonFraction contextRef="c303" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c303" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">10</ix:nonFraction> million) were repaid
by the Company, respectively, which were loans were originally obtained in August and September, 2021. On February 22, March 8 and April
12, 2022, the Company drew down approximately $<ix:nonFraction contextRef="c304" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">1.4</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c304" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">10</ix:nonFraction> million), $<ix:nonFraction contextRef="c305" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">0.7</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c305" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">5</ix:nonFraction> million) and $<ix:nonFraction contextRef="c306" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">1.4</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c306" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">10</ix:nonFraction> million)
of loans, respectively, under this new loan facility with an interest rate of <ix:nonFraction contextRef="c307" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c308" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure"><ix:nonFraction contextRef="c309" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">4.50</ix:nonFraction></ix:nonFraction></ix:nonFraction>% per annum. On December 19, 2022, <ix:nonNumeric contextRef="c310" name="us-gaap:DebtInstrumentFee">the Company repaid
approximately $1.4 million (RMB10 million), $0.7 million (RMB5 million) and $1.4 million (RMB10 million) to the bank.</ix:nonNumeric> After the repayments
were made, the Company drew down approximately $<ix:nonFraction contextRef="c311" decimals="1" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="0" unitRef="usd">3.6</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c311" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">25</ix:nonFraction> million) on September 19, 2022 under this new loan facility with an
interest rate of <ix:nonFraction contextRef="c312" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">4.30</ix:nonFraction>% per annum. On December 22, 2022, the Company drew down approximately $<ix:nonFraction contextRef="c313" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">1.4</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c313" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">10</ix:nonFraction> million) of loans under
this new loan facility with an interest rate of <ix:nonFraction contextRef="c314" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">4.30</ix:nonFraction>% per annum.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_22" id="_ShortTermDebtTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On January 14, 2022,
Fujian Shengfeng Logistics Co., Ltd. drew down approximately $<ix:nonFraction contextRef="c315" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c315" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">10</ix:nonFraction> million) of loan with an interest rate of <ix:nonFraction contextRef="c315" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">4.50</ix:nonFraction>% per annum.
On December 21, 2022, the Company repaid approximately $<ix:nonFraction contextRef="c316" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c316" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="cny">10</ix:nonFraction> million) to the bank.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_23" id="_ShortTermDebtTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On January 14, 2022,
Fuqing Shengfeng Logistics Co., Ltd. drew down approximately $<ix:nonFraction contextRef="c317" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">0.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c318" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">3</ix:nonFraction> million) of loans under this loan facility with an interest
rate of <ix:nonFraction contextRef="c318" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">4.50</ix:nonFraction>% per annum. On December 21, 2022, the Company repaid approximately $<ix:nonFraction contextRef="c319" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="usd">0.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c320" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="cny">3</ix:nonFraction> million) to the bank. After the repayments
were made, On December 21, 2022, Fuqing Shengfeng Logistics Co., Ltd. drew down approximately $<ix:nonFraction contextRef="c321" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">0.4</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c321" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">3</ix:nonFraction> million) of loans under
this loan facility with an interest rate of <ix:nonFraction contextRef="c321" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingVariableInterestRate" scale="-2" unitRef="pure">4.30</ix:nonFraction>% per annum.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_24" id="_ShortTermDebtTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December 31, 2022,
loan balance under the RMB<ix:nonFraction contextRef="c322" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShorttermDebtAverageOutstandingAmount" scale="6" unitRef="cny">75</ix:nonFraction> million credit line was approximately $<ix:nonFraction contextRef="c322" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="usd">10.8</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c322" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="cny">75</ix:nonFraction> million).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_25" id="_ShortTermDebtTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">Xiamen International
Bank Co., Ltd. Fuzhou Branch</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_26" id="_ShortTermDebtTextBlock-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">During the year ended
December 31, 2019, the Company entered into a short-term loan facility agreement with Xiamen International Bank Co., Ltd. Fuzhou Branch
pursuant to which a total facility of up to approximately $<ix:nonFraction contextRef="c323" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">4.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c323" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">30</ix:nonFraction> million) was made available to the Company as a revolving
loan facility for a two-year period <ix:nonNumeric contextRef="c324" name="us-gaap:ShortTermDebtTerms">(From August 13, 2019 to August 13, 2021)</ix:nonNumeric>. On September 26, 2019, the Company made the first draw
down of the loan at a fixed interest rate of <ix:nonFraction contextRef="c325" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">6.2</ix:nonFraction>% per annum. The loan amount was required to be repaid every quarter; the Company can
withdraw and repay again for the next quarter until the end of the loan period. This short-term loan was guaranteed by Yongxu Liu, a shareholder,
the CEO and Chairman of the Company. On August 13, 2021, the Company repaid approximately $<ix:nonFraction contextRef="c326" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="usd">4.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c326" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="cny">30</ix:nonFraction> million) to the bank for
the final draw down.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

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

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

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_27" id="_ShortTermDebtTextBlock-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">During the year ended
December 31, 2020, the Company entered into a short-term loan facility agreement with Xiamen International Bank Co., Ltd. Fuzhou Branch
pursuant to which a total facility of up to approximately $<ix:nonFraction contextRef="c327" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">3.1</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c327" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">20</ix:nonFraction> million) was made available to the Company as a revolving
loan facility for a two-year period. On April 8, 2020, the Company drew down approximately $<ix:nonFraction contextRef="c328" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">3.1</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c329" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">20</ix:nonFraction> million) of loan at a fixed
interest rate of <ix:nonFraction contextRef="c329" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">5.6</ix:nonFraction>% per annum. The loan amount was required to be repaid every quarter; the Company can withdraw and repay again for
the next quarter until the end of the loan period. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman
of the Company. On April 8, 2022, the Company repaid approximately $<ix:nonFraction contextRef="c330" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="usd">3.1</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c330" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="cny">20</ix:nonFraction> million) to the bank for the final draw down.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_28" id="_ShortTermDebtTextBlock-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On August 11, 2021, the
Company entered into a short-term loan facility agreement with Xiamen International Bank Co., Ltd. Fuzhou Branch pursuant to which a total
facility of up to approximately $<ix:nonFraction contextRef="c331" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">4.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c331" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">30</ix:nonFraction> million) was made available to the Company as a revolving loan facility for a three-year
period (From August 13, 2021 to August 13, 2024). This is the extension of the revolving loan facility agreement signed back to August
2019. On August 19, 2021, the Company drew down approximately $<ix:nonFraction contextRef="c332" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">4.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c332" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">30</ix:nonFraction> million) of loan at a fixed interest rate of <ix:nonFraction contextRef="c332" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">5.6</ix:nonFraction>% per
annum. The principal amount outstanding is required to be repaid every quarter; the Company can withdraw and repay again for the next
quarter until the end of the loan period. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the
Company. As of December 31, 2022, loan balance under the $<ix:nonFraction contextRef="c333" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShorttermDebtAverageOutstandingAmount" scale="6" unitRef="usd">4.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c333" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShorttermDebtAverageOutstandingAmount" scale="6" unitRef="cny">30</ix:nonFraction> million) credit line was approximately $<ix:nonFraction contextRef="c333" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="usd">4.3</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c333" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="cny">30</ix:nonFraction>
million).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_29" id="_ShortTermDebtTextBlock-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On April 8, 2022, the Company entered into a short-term loan facility
agreement with Xiamen International Bank Co., Ltd. Fuzhou Branch, pursuant to which a total facility of up to approximately $<ix:nonFraction contextRef="c334" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">3.1</ix:nonFraction> million
(RMB<ix:nonFraction contextRef="c334" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">20</ix:nonFraction> million) was made available to the Company as a revolving loan facility for a two-year period from April 8, 2022 to April 8, 2024.
On April 15, 2022, the Company drew down approximately $<ix:nonFraction contextRef="c335" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">2.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c335" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">20</ix:nonFraction> million) of the loan at a fixed interest rate of <ix:nonFraction contextRef="c335" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">5.5</ix:nonFraction>% per annum.
The loan amount was required to be repaid every six months; the Company can withdraw and repay again for the next quarter until the end
of the loan period. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company. On April 15,
2023, the Company repaid approximately $<ix:nonFraction contextRef="c267" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:RepaidAmountToBank" scale="6" unitRef="usd">2.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c267" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:RepaidAmountToBank" scale="6" unitRef="cny">20</ix:nonFraction> million) to the bank. On April 17,2023, the Company drew down approximately
$<ix:nonFraction contextRef="c336" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LoansPayable" scale="6" unitRef="usd">2.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c336" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:LoansPayable" scale="6" unitRef="cny">20</ix:nonFraction> million) of the loan at a fixed interest rate of <ix:nonFraction contextRef="c336" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">5.5</ix:nonFraction>% per annum for a maturity to April 8, 2024.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_30" id="_ShortTermDebtTextBlock-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December 31, 2022,
loan balance under the RMB <ix:nonFraction contextRef="c337" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShorttermDebtAverageOutstandingAmount" scale="6" unitRef="cny">20</ix:nonFraction> million credit line was approximately $<ix:nonFraction contextRef="c337" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="usd">2.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c337" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="cny">20</ix:nonFraction> million).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_31" id="_ShortTermDebtTextBlock-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">Haixia Bank of
Fujian Fuzhou Jin&#8217;an Branch</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_32" id="_ShortTermDebtTextBlock-c0_cont_31"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On April 7, 2020, the Company entered into a short-term loan agreement
with Haixia Bank of Fujian Fuzhou Jin&#8217;an Branch for a principal amount of $<ix:nonFraction contextRef="c338" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c338" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">10</ix:nonFraction> million) at a fixed interest rate
of <ix:nonFraction contextRef="c338" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">5.0</ix:nonFraction>% per annum. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company. This borrowing
has been repaid in full on April 28, 2021. On April 2, 2021, the Company entered into a new loan agreement with Fujian Fuzhou Jin&#8217;an
Branch for a principal amount of approximately $<ix:nonFraction contextRef="c339" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:LoanAmount" scale="6" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c339" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:LoanAmount" scale="6" unitRef="cny">10</ix:nonFraction> million) at a fixed interest rate of <ix:nonFraction contextRef="c339" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">5.5</ix:nonFraction>% per annum. The terms of said
new loan agreement are substantially similar with the original short-term loan agreement. The said new loan will mature in one year. On
December 14, 2021, the Company made early repayment of approximately $<ix:nonFraction contextRef="c340" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="usd">0.75</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c340" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfBankDebt" scale="6" unitRef="cny">5</ix:nonFraction> million) to the bank. Subsequently on March 28,
2022, the Company made repayment for the rest of the loan. On June 16, 2022, the Company entered into a new short-term loan agreement
with Haixia Bank of Fujian Fuzhou Jin&#8217;an Branch for a principal amount of approximately $<ix:nonFraction contextRef="c341" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">1.4</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c341" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">10</ix:nonFraction> million) at a fixed
interest rate of <ix:nonFraction contextRef="c341" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">5</ix:nonFraction>% per annum. The short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company and
the VIE Shengfeng Logistic Group Co., Ltd. In addition, the short-term loan was further collateralized by 26 motor vehicles under one
of the VIE&#8217;s subsidiaries Fujian Shengfeng Logistic Co., Ltd. On March 27, 2023, the collateral was changed to 6 motor vehicles
under Fujian Shengfeng Logistic Co., Ltd. The Company received the loan proceeds on July 13, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_33" id="_ShortTermDebtTextBlock-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">Fujian Fuzhou Rural
Commercial Bank Co., Ltd. Yuefeng Branch</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_34" id="_ShortTermDebtTextBlock-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On November 10, 2020,
the Company entered into a short-term loan agreement with Fujian Fuzhou Rural Commercial Bank Co., Ltd. Yuefeng Branch for a principal
amount of $<ix:nonFraction contextRef="c342" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c342" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">10</ix:nonFraction> million) at a fixed interest rate of <ix:nonFraction contextRef="c343" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">3.35</ix:nonFraction>% per annum. This short-term loan was guaranteed by Yongxu Liu,
a shareholder, the CEO and Chairman of the Company, and Fujian Yunlian Shengfeng Industrial Co. Ltd. On November 3, 2021, the Company
made a repayment of the loan in full. After the repayment, the Company entered into a new short-term loan agreement with Fujian Fuzhou
Rural Commercial Bank Co., Ltd. Yuefeng Branch on the same day for the same amount of the original loan, with the same terms as the previous
agreement, except the fixed interest rate increased to <ix:nonFraction contextRef="c344" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">5.50</ix:nonFraction>% per annum. The aforementioned loan has been repaid on November 1, 2022 in
full. After the repayment, the Company entered into a new short-term loan agreement with Fujian Fuzhou Rural Commercial Bank Co., Ltd.
Yuefeng Branch on November 9, 2022 and drew down the loan on November 9, 2022 for the same amount of the original loan, with the same
terms as the previous agreement and the new loan will be mature on November 8, 2023.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

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

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_35" id="_ShortTermDebtTextBlock-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">Shanghai Pudong
Development Bank Co., Ltd. Fuzhou Branch</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_36" id="_ShortTermDebtTextBlock-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On September 17, 2021,
the Company entered into a short-term loan agreement with Shanghai Pudong Development Bank Co., Ltd. Fuzhou Branch for a principal amount
of approximately $<ix:nonFraction contextRef="c345" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c345" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">10</ix:nonFraction> million) at a fixed interest rate of <ix:nonFraction contextRef="c345" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">4.65</ix:nonFraction>% per annum. This short-term loan was guaranteed by Yongxu
Liu, a shareholder, the CEO and Chairman of the Company, and Fuqing Shengfeng Logistics Co., Ltd. The loan has been early repaid on August
18, 2022. On August 19, 2022, the Company entered into a new short-term loan agreement with Shanghai Pudong Development Bank Co., Ltd.
Fuzhou Branch for the same amount of the original loan, with the same terms as the previous agreement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_37" id="_ShortTermDebtTextBlock-c0_cont_36"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On February 19, 2023,
the Company made repayment in full. On February 20, 2023, the Company entered into a new short-term loan agreement with Shanghai Pudong
Development Bank Co., Ltd. Fuzhou Branch for the same amount of the original loan, with the same terms as the previous agreement and received
the proceeds on the same date.</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="_ShortTermDebtTextBlock-c0_cont_38" id="_ShortTermDebtTextBlock-c0_cont_37"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">Industrial Bank
Fuzhou Huqian SubBranch</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_39" id="_ShortTermDebtTextBlock-c0_cont_38"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On March 9, 2021, one
of the VIE&#8217;s subsidiaries, Fuqing Shengfeng Logistics Co., Ltd., entered into a short-term loan facility agreement with Industrial
Bank Fuzhou Huqian Sub-Branch pursuant to which a total facility of up to approximately $<ix:nonFraction contextRef="c346" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c346" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">10</ix:nonFraction> million) was made available
to Fuqing Shengfeng Logistics Co., Ltd. On March 26, 2021, Fuqing Shengfeng Logistics Co., Ltd. drew down approximately $<ix:nonFraction contextRef="c347" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">0.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c347" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">6</ix:nonFraction>
million) of the loan at a fixed interest rate of <ix:nonFraction contextRef="c347" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">3.35</ix:nonFraction>% per annum. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the
CEO and Chairman of the Company, and Shengfeng Logistics, the VIE. On January 20, 2022, Fuqing Shengfeng Logistics Co., Ltd. made repayment
in full.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_40" id="_ShortTermDebtTextBlock-c0_cont_39"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On January 21, 2022,
the Company drew down approximately $<ix:nonFraction contextRef="c348" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="usd">0.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c348" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="6" unitRef="cny">6</ix:nonFraction> million) of the loan at a fixed interest rate of <ix:nonFraction contextRef="c348" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">3.8</ix:nonFraction>% per annum. This short-term
loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and Shengfeng Logistics, the VIE. The new loan
will be mature on January 21, 2023.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_41" id="_ShortTermDebtTextBlock-c0_cont_40"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December 31, 2022,
loan balance under the $<ix:nonFraction contextRef="c349" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShorttermDebtAverageOutstandingAmount" scale="6" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c349" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShorttermDebtAverageOutstandingAmount" scale="6" unitRef="cny">10</ix:nonFraction> million) credit line was approximately $<ix:nonFraction contextRef="c349" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="usd">0.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c349" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityAverageOutstandingAmount" scale="6" unitRef="cny">6.0</ix:nonFraction> million).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_42" id="_ShortTermDebtTextBlock-c0_cont_41"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On January 28, 2023,
Fuqing Shengfeng Logistics Co., Ltd. made repayment in full. Subsequently on February 3, 2023, one of the VIE&#8217;s subsidiaries, Fuqing
Shengfeng Logistics Co., Ltd., entered into a short-term loan facility agreement with Industrial Bank Fuzhou Huqian sub-branch pursuant
to which a total facility of up to approximately $<ix:nonFraction contextRef="c350" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">0.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c350" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">6</ix:nonFraction> million) was made available to Fuqing Shengfeng Logistics Co., Ltd.
to January 18, 2024. On February 7, 2023, Fuqing Shengfeng Logistics Co., Ltd. drew down approximately $<ix:nonFraction contextRef="c351" decimals="1" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="0" unitRef="usd">0.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c351" decimals="0" format="ixt:num-dot-decimal" name="sfwl:WithdrawnOfLoan" scale="0" unitRef="cny">6</ix:nonFraction> million) of
the loan at a fixed interest rate of <ix:nonFraction contextRef="c351" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">3.7</ix:nonFraction>% per annum. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman
of the Company, and Shengfeng Logistics, the VIE.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_43" id="_ShortTermDebtTextBlock-c0_cont_42"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">Industrial Bank
Co., Ltd. Fuzhou Branch</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_44" id="_ShortTermDebtTextBlock-c0_cont_43"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On March 10, 2021, the
Company entered into a loan agreement Industrial Bank Co., Ltd. Fuzhou Branch for a principal amount of approximately $<ix:nonFraction contextRef="c352" decimals="1" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="0" unitRef="usd">1.5</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c352" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="0" unitRef="cny">10</ix:nonFraction>
million) at a fixed interest rate of <ix:nonFraction contextRef="c352" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">4.35</ix:nonFraction>% per annum. Approximately $<ix:nonFraction contextRef="c353" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:AmountReceived" scale="6" unitRef="usd">1.4</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c353" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:AmountReceived" scale="6" unitRef="cny">9</ix:nonFraction> million) and $<ix:nonFraction contextRef="c354" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:AmountReceived" scale="6" unitRef="usd">0.2</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c354" decimals="-6" format="ixt:num-dot-decimal" name="sfwl:AmountReceived" scale="6" unitRef="cny">1</ix:nonFraction> million) were received
on March 10, 2021 and March 12, 2021, respectively. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman
of the Company. The loan was scheduled to mature in one year from its date of origination. The loan was subsequently repaid in full on
March 17, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_45" id="_ShortTermDebtTextBlock-c0_cont_44"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On March 4, 2022, the
Company entered into a short-term loan credit line agreement with Industrial Bank Co., Ltd. Fuzhou Branch for a principal amount of approximately
$<ix:nonFraction contextRef="c355" decimals="1" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="0" unitRef="usd">1.4</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c355" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="0" unitRef="cny">10</ix:nonFraction> million) at a fixed interest rate of <ix:nonFraction contextRef="c355" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShortTermDebtPercentageBearingFixedInterestRate" scale="-2" unitRef="pure">4.35</ix:nonFraction>% per annum for the period from March 4, 2022 to November 11, 2022, and the
Company can withdraw from this credit line during the period. This short-term loan credit line was guaranteed by Yongxu Liu, a shareholder,
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</div><div>

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

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guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and Shengfeng Logistics, the VIE. The loan proceeds in the
amount of approximately $<ix:nonFraction contextRef="c368" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLoans" scale="6" unitRef="usd">0.9</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c368" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromLoans" scale="6" unitRef="cny">6</ix:nonFraction> million) were received by the Company on January 9, 2023. &#160;&#160;</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="_ShortTermDebtTextBlock-c0_cont_53" id="_ShortTermDebtTextBlock-c0_cont_52"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">Bank of Communications
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</div><div>

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of Communications Co., Ltd., Zhanjiang Branch. The proceeds of this financing were subsequently received on July 5, 2021. The Company
collected the full amount of the outstanding receivables from SDIC Guangdong Bioenergy Co., Ltd. on October 14, 2021. The financing was
settled on October 14, 2021.</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="_ShortTermDebtTextBlock-c0_cont_55" id="_ShortTermDebtTextBlock-c0_cont_54"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i><span style="text-decoration:underline">Guangxi Beibu Gulf
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</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_56" id="_ShortTermDebtTextBlock-c0_cont_55"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 17, 2023, one of the VIE&#8217;s subsidiaries,
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</div><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>11.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Accrued expenses and other
liabilities</b></span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p></ix:nonNumeric><div>
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p><div>

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    <td colspan="2" style="text-align: justify">&#160;</td><td>&#160;</td></tr>
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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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<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(a)</span></td><td style="text-align: justify"><ix:footnote id="ix_12_footnote" xml:lang="en-US"><span style="font-size: 10pt">The Company collects the goods
considerations from the recipients after they deliver the goods to the determined locations on behalf of the customers, and will pay
to the customers on a regular basis.</span></ix:footnote></td>
</tr></table></ix:continuation></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 25.1pt; text-align: justify; background-color: white">&#160;</p><div>

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<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><b>12.</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Leases</b></span></td>
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</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c393_cont_2" id="_LesseeOperatingLeasesTextBlock-c393_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Operating leases as
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</div><div>

</div><ix:continuation continuedAt="_LesseeOperatingLeasesTextBlock-c393_cont_3" id="_LesseeOperatingLeasesTextBlock-c393_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December&#160;31,
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expire on various dates through 2031. The Company does not plan to cancel the existing lease agreements for its existing facilities prior
to their respective expiration dates. When determining the lease term, the Company considers options to extend or terminate the lease
when it is reasonably certain that it will exercise or not exercise that option. The Company&#8217;s lease arrangements may contain both
lease and non-lease components. The Company has separately accounted for lease and non-lease components based on their nature. Payments
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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; background-color: White">
    <td style="text-align: justify">&#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>
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</div><div>

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</div><div>

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<td style="width: 0.5in; text-align: left"><span style="font-size: 10pt"><b>(a)</b></span></td><td style="text-align: justify"><span style="font-size: 10pt"><b>Corporate Income Taxes (&#8220;CIT&#8221;)</b></span></td>
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</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; text-align: justify; background-color: white"><i>Cayman Islands</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

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</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; text-align: justify; background-color: white">Under the current tax
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a withholding tax on payments of dividends to shareholders.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><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; text-align: justify; background-color: white"><i>Hong Kong</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

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</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; text-align: justify; background-color: white">Under the current Hong
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from operations in Hong Kong. Additionally, payments of dividends by the subsidiaries incorporated in Hong Kong to the Company are not
subject to any Hong Kong withholding tax. The Company did not make any provision for Hong Kong profit tax as there were no assessable
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</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; text-align: justify; background-color: white"><i>PRC</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</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; text-align: justify; background-color: white">The Company&#8217;s PRC
subsidiaries, VIE and VIE&#8217;s subsidiaries are governed by the income tax laws of the PRC and the income tax provision in respect
to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation,
interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the &#8220;EIT Laws&#8221;), domestic
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</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; text-align: justify; background-color: white">Beijing Shengfeng Supply Chain Management Co., Ltd. and Guangdong Shengfeng
Logistics Co., Ltd. were qualified as High and New Technology Enterprise (&#8220;HNTE&#8221;) and are eligible to enjoy a preferential
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as they maintain the HNTE qualification and duly conducts relevant EIT filing procedures with the relevant tax authority. The Company
expects to renew the HNTE by May 2023. Beijing Tianyushengfeng e-commerce Technology Co. Ltd. has been qualified as HNTE and is eligible
to enjoy a preferential tax rate of <ix:nonFraction contextRef="c396" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateContinuingOperations" scale="-2" unitRef="pure">15</ix:nonFraction>% from 2021 to 2023 to the extent it has taxable income under the Enterprise Income Tax Law. Shengfeng
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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; text-align: justify; background-color: white">Several VIE&#8217;s subsidiaries,
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Ltd., Shengfeng Logistics (Guangxi) Co., Ltd., etc., are qualified as small and micro enterprises, thus the preferential effective tax
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_13" id="_IncomeTaxDisclosureTextBlock-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; text-align: justify">
<td style="width: 0.25in; text-align: left"><span style="font-size: 10pt"><i>ii)</i></span></td><td style="text-align: justify"><span style="font-size: 10pt"><i>The components of the income
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</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_14" id="_IncomeTaxDisclosureTextBlock-c0_cont_13"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:InvestmentCompanyFinancialHighlightsTableTextBlock"><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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ended<br/>
December 31,<br/>
2020</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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</div><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">&#160;</p><div>

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

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_15" id="_IncomeTaxDisclosureTextBlock-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
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    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><i>iii)</i></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>The following table reconciles PRC statutory rates to the Company&#8217;s effective tax rate:</i></span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: justify">Effect of preferential tax rates (1)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_24" id="_IncomeTaxDisclosureTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><i>Uncertain tax positions</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 41.25pt; text-align: justify; background-color: white"><b>&#160;</b></p><div>

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    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>14.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Shareholders&#8217; equity</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_2" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Ordinary shares</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_3" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company was established
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with par value of US$<ix:nonFraction contextRef="c398" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares">1.00</ix:nonFraction> per share. On December 18, 2020, the Company amended the Memorandum of Association to increase the authorized
share capital to <ix:nonFraction contextRef="c399" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares">400,000,000</ix:nonFraction> Class A Ordinary Shares and <ix:nonFraction contextRef="c400" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares">100,000,000</ix:nonFraction> Class B Ordinary Shares and reduced the par value to US$<ix:nonFraction contextRef="c401" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares">0.0001</ix:nonFraction> per
share. As of December 31, 2022 and 2021, <ix:nonFraction contextRef="c64" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c64" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares"><ix:nonFraction contextRef="c50" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c50" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares">38,120,000</ix:nonFraction></ix:nonFraction></ix:nonFraction></ix:nonFraction> Class A Ordinary shares and <ix:nonFraction contextRef="c65" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c65" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares"><ix:nonFraction contextRef="c51" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c51" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares">41,880,000</ix:nonFraction></ix:nonFraction></ix:nonFraction></ix:nonFraction> Class B Ordinary shares were issued and outstanding.
The shares are presented on a retroactive basis to reflect the recapitalization.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_4" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Additional paid-in
capital</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_5" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As of December 31, 2022
and 2021, additional paid-in capital in the consolidated balance sheets represented the combined contributed capital of the Company&#8217;s
subsidiaries. On December 31, 2022, Suzhou Shengfeng, one of VIE subsidiaries declared a dividend of approximately $<ix:nonFraction contextRef="c59" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentRealizedGainLossOnDisposal" scale="6" unitRef="usd">2.5</ix:nonFraction> million based
on the subsidiary&#8217;s performance up to October 31, 2022, of which approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentRealizedGainLossOnDisposal" scale="6" unitRef="usd">0.3</ix:nonFraction> million was paid to the non-controlling shareholders;
For the year ended December 31, 2021, one of the non-controlling shareholders made capital contributions totaling approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:CapitalContribution" scale="6" unitRef="usd">3.4</ix:nonFraction> million
to the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_6" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Statutory reserves</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_7" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company is required
to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based
on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (&#8220;PRC GAAP&#8221;). Appropriations
to the statutory surplus reserve are required to be at least <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="sfwl:AfterTaxNetIncomePercentage" scale="-2" unitRef="pure">10</ix:nonFraction>% of the after-tax net income determined in accordance with PRC GAAP until
the reserve is equal to <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="sfwl:EntityRegisteredCapitalPercentage" scale="-2" unitRef="pure">50</ix:nonFraction>% of the entity&#8217;s registered capital. Appropriations to the discretionary surplus reserve are made at
the discretion of the Board of Directors. The statutory reserve as determined pursuant to PRC statutory laws totaled approximately $<ix:nonFraction contextRef="c402" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:StatutoryAccountingPracticesStatutoryCapitalAndSurplusRequired" scale="6" unitRef="usd">4.0</ix:nonFraction>
million and $<ix:nonFraction contextRef="c403" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:StatutoryAccountingPracticesStatutoryCapitalAndSurplusRequired" scale="6" unitRef="usd">3.4</ix:nonFraction> million as of December 31, 2022 and 2021, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_8" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><span style="text-decoration:underline">Restricted assets</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_9" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company&#8217;s ability
to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiary. Relevant PRC statutory laws
and regulations permit payments of dividends by Shengfeng WFOE, Shengfeng VIE and its subsidiaries (collectively &#8220;Shengfeng PRC
entities&#8221;) only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ
from those reflected in the statutory financial statements of Shengfeng PRC entities.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

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

</div><!-- Field: Page; Sequence: 186; 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 -->43<!-- 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; background-color: white">&#160;</p><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_10" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Shengfeng PRC entities
are required to set aside at least <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="sfwl:AfterTaxProfit" scale="-2" unitRef="pure">10</ix:nonFraction>% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such
reserve funds reach <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="sfwl:RegisteredCapitals" scale="-2" unitRef="pure">50</ix:nonFraction>% of its registered capital. In addition, Shengfeng PRC entities may allocate a portion of its after-tax profits
based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. Shengfeng PRC entities
may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The
statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned
company out of China is subject to examination by the banks designated by State Administration of Foreign Exchange.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">As a result of the foregoing
restrictions, Shengfeng PRC entities are restricted in their ability to transfer their assets to the Company. Foreign exchange and other
regulation in the PRC may further restrict Shengfeng PRC entities from transferring funds to the Company in the form of dividends, loans
and advances. As of December 31, 2022 and 2021, amounts restricted are the paid-in-capital and statutory reserve of Shengfeng PRC entities,
which amounted to approximately $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:PaidInCapital" scale="6" unitRef="usd">79.6</ix:nonFraction> million and $<ix:nonFraction contextRef="c6" decimals="-5" format="ixt:num-dot-decimal" name="sfwl:StatutoryReserve" scale="6" unitRef="usd">79.0</ix:nonFraction> million, respectively.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</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">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b>15.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Commitments and contingencies</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_2" id="_CommitmentsAndContingenciesDisclosureTextBlock-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">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b><i>(a)</i></b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>Lease commitments</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</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; text-align: justify; background-color: white">The Company&#8217;s commitment
for minimum lease payments under the remaining operating leases as of December 31, 2022 is $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLeaseIncomeLeasePayments" scale="6" unitRef="usd">3.5</ix:nonFraction> million.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_4" id="_CommitmentsAndContingenciesDisclosureTextBlock-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">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b><i>(b)</i></b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>Contingencies</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</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; text-align: justify; background-color: white">The Company is subject
to legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with
certainty, but the Company does not anticipate that the final outcome arising out of any such matters will have a material adverse effect
on our consolidated financial position, cash flows or results of operations on an individual basis or in the aggregate. As of December
31, 2022, the Company had various legal proceedings or disputes related to the customers, suppliers, labor contracts and traffic accidents,
which were still pending court decisions. Approximately $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashNoncurrent" scale="6" unitRef="usd">1.0</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashNoncurrent" scale="6" unitRef="cny">7.1</ix:nonFraction> million) was frozen in bank due to the pending lawsuits,
which was included in restricted cash as of December 31, 2022. As of the date of this audit report, the above-mentioned amount is still
frozen in bank and the other legal proceedings or disputes have no material impact to the Company&#8217;s business or financial performances.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

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

</div><!-- Field: Page; Sequence: 187; 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 -->44<!-- 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; background-color: white">&#160;</p><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_6" id="_CommitmentsAndContingenciesDisclosureTextBlock-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">
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt"><b><i>(c)</i></b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>Variable interest entity structure</i></b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_7" id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">It is the opinion of
management that (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the Contractual
Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business
operations of Tianyu and the VIE are in compliance with existing PRC laws and regulations in all material respects.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_CommitmentsAndContingenciesDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">However, there are substantial
uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot
be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of the Company&#8217;s management.
If the current corporate structure of the Company or the Contractual Arrangements is found to be in violation of any existing or future
PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with
changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company&#8217;s current
corporate structure or the Contractual Arrangements is remote based on current facts and circumstances.</p></ix:continuation><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_SubsequentEventsTextBlock-c0_cont_1" escape="true" name="us-gaap:SubsequentEventsTextBlock"><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; text-align: justify"><span style="font-size: 10pt"><b>16.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Subsequent events</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b>&#160;</b>&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation id="_SubsequentEventsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">On April 4, 2023, the Company completed its IPO of <ix:nonFraction contextRef="c404" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceInitialPublicOffering" scale="0" unitRef="usd">2,400,000</ix:nonFraction> Class
A ordinary shares at a public offering price of $<ix:nonFraction contextRef="c405" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares">4.00</ix:nonFraction> per share. The Company received aggregate gross proceeds of $<ix:nonFraction contextRef="c404" decimals="1" format="ixt:num-dot-decimal" name="sfwl:AggregateGrossProceeds" scale="0" unitRef="usd">9.6</ix:nonFraction> million from the
offering, before deducting underwriting discounts and other related expenses. Net proceeds amounted to approximately $<ix:nonFraction contextRef="c404" decimals="1" format="ixt:num-dot-decimal" name="sfwl:NetProceedsAmount" scale="0" unitRef="usd">8.5</ix:nonFraction> million after
deducting underwriting discounts and other related expenses. The Class A ordinary shares began trading on the Nasdaq Capital Market on
March 31, 2023 under the ticker symbol &#8220;SFWL.&#8221; In connection with the IPO, the Company issued to the Representative and its
affiliates warrants, exercisable for a period of one year after the effective date of the registration statement, entitling the holders
of the warrants to purchase an aggregate of up to <ix:nonFraction contextRef="c404" decimals="0" format="ixt:num-dot-decimal" name="sfwl:PurchaseOfAggregateShares" scale="0" unitRef="shares">144,000</ix:nonFraction> Ordinary Shares at a per share price of $<ix:nonFraction contextRef="c405" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares">4.46</ix:nonFraction>.</p></ix:continuation><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="sfwl_DisclosureOfCondensedFinancialInformationOfTheParentCompanyTextBlock-c0_cont_1" escape="true" name="sfwl:DisclosureOfCondensedFinancialInformationOfTheParentCompanyTextBlock"><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; text-align: justify"><span style="font-size: 10pt"><b>17.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Unaudited Condensed financial information of the parent company</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="sfwl_DisclosureOfCondensedFinancialInformationOfTheParentCompanyTextBlock-c0_cont_2" id="sfwl_DisclosureOfCondensedFinancialInformationOfTheParentCompanyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">The Company&#8217;s PRC
subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company. Payment of dividends by entities
organized in the PRC are subject to limitations, procedures and formalities. Regulations in the PRC currently permit payments of dividends
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</div><div>

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</div><div>

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company by subsidiaries in the form of loans, advances or cash dividends without the consent of a third party. The condensed parent company
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</div><div>

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footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: center; background-color: white"><b>CONDENSED
BALANCE SHEETS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: center; background-color: white"><b>(Unaudited)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: justify; background-color: white">&#160;</p><div>

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</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 0pt 9pt; text-align: center"><b>CONDENSED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: center; background-color: white"><b>(Unaudited)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: justify">&#160;</p><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: center"><b>CONDENSED STATEMENTS OF CASH FLOW</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.1pt; text-align: center; background-color: white"><b>(Unaudited)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 9pt; text-align: justify"><b>&#160;</b></p><div>

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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
20-F
☐
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
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
For
the transition period from              to
Commission
file number:
001-41674
Shengfeng
Development Limited
(Exact
name of Registrant as specified in its charter)
N/A
(Translation
of Registrant's name into English)
Cayman
Islands
(Jurisdiction
of incorporation or organization)
Shengfeng
Building
,
No. 478 Fuxin East Road
Jin'an District
,
Fuzhou City
Fujian Province, People's Republic of
China
,
350001
+86-591-83619860
(Address
of principal executive offices)
Guoping
Zheng, Chief Financial Officer
Telephone:
+86
-
591-83619860
Email:
guoping.zheng@sfwl.com.cn
At
the address of the Company set forth above
(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
Class A Ordinary Shares
SFWL
The
Nasdaq
Capital 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.
An aggregate of
40,520,000
Class A ordinary shares, par value $0.0001
per share, and
41,880,000
Class B ordinary shares, par value $0.0001 per share, as of the date of this annual report.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
No
☒
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934.
Yes
☐
No
☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
Yes
☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See definition of "large accelerated filer," "accelerated filer," and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
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.
☒
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
INTRODUCTION
ii
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
ITEM 4.
INFORMATION ON THE COMPANY
57
ITEM 4A.
UNRESOLVED STAFF COMMENTS
98
ITEM 5.
OPERATING AND FINANCIAL
    REVIEW AND PROSPECTS
98
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT
    AND EMPLOYEES
111
ITEM 7.
MAJOR SHAREHOLDERS AND
    RELATED PARTY TRANSACTIONS
119
ITEM 8.
FINANCIAL INFORMATION
121
ITEM 9.
THE OFFER AND LISTING
121
ITEM 10.
ADDITIONAL INFORMATION
121
ITEM 11.
QUANTITATIVE AND QUALITATIVE
    DISCLOSURES ABOUT MARKET RISK
130
ITEM 12.
DESCRIPTION OF SECURITIES
    OTHER THAN EQUITY SECURITIES
132
PART II
133
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES
    AND DELINQUENCIES
133
ITEM 14.
MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
133
ITEM 15.
CONTROLS AND PROCEDURES
133
ITEM 16.
RESERVED
134
ITEM 16A.
AUDIT COMMITTEE FINANCIAL
    EXPERT
134
ITEM 16B.
CODE OF ETHICS
134
ITEM 16C.
PRINCIPAL ACCOUNTANT
    FEES AND SERVICES
134
ITEM 16D.
EXEMPTIONS FROM THE
    LISTING STANDARDS FOR AUDIT COMMITTEES
135
ITEM 16E.
PURCHASES OF EQUITY
    SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
135
ITEM 16F.
CHANGE IN REGISTRANT'S
    CERTIFYING ACCOUNTANT
135
ITEM 16G.
CORPORATE GOVERNANCE
135
ITEM 16H.
MINE SAFETY DISCLOSURE
135
ITEM 16I.
DISCLOSURE REGARDING
    FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
135
PART III
136
ITEM 17.
FINANCIAL STATEMENTS
136
ITEM 18.
FINANCIAL STATEMENTS
136
ITEM 19.
EXHIBITS
136
i
INTRODUCTION
In
this annual report on Form 20-F, unless the context otherwise requires, references to:
●
"Affiliated
    Entities" are to our subsidiaries and Shengfeng Logistics (defined below) and the VIE's subsidiaries (defined below);
●
"China" or the "PRC" are to the People's
Republic of China, and "mainland China", unless otherwise specified herein, are to the People's Republic of China excluding,
for the purpose of this annual report only, Taiwan, the Hong Kong Special Administrative Region, and the Macau Administrative Region;
●
"Class
    A Ordinary Shares" are to Class A ordinary shares of Shengfeng Cayman (defined below), par value $0.0001 per share;
●
"Class
    B Ordinary Shares" are to Class B ordinary shares of Shengfeng Cayman, par value $0.0001 per share;
●
"Our
    subsidiaries" are to Shengfeng HK (defined below) and Tianyu (defined below), each a subsidiary of Shengfeng Cayman;
●
"RMB"
    are to the legal currency of China;
●
"Shengfeng
    HK" are to our wholly owned subsidiary, Shengfeng Holding Limited, a Hong Kong corporation;
●
"Shengfeng
    Logistics" or "the VIE" are to Shengfeng Logistics Group Co., Ltd., a limited liability company organized under
    the laws of the PRC, which we control via a series of contractual arrangements among Tianyu (defined below), Shengfeng Logistics,
    and shareholders of Shengfeng Logistics;
●
"Shengfeng
    WFOE," "Tianyu," or "our PRC subsidiary" are to Fujian Tianyu Shengfeng Logistics Co., Ltd., a limited
    liability company organized under the laws of the PRC, which is wholly owned by Shengfeng HK;
●
"U.S.
    dollars," "$," and "dollars" are to the legal currency of the United States;
●
"VIE's subsidiaries" are to the 32 subsidiaries of
Shengfeng Logistics as listed in "Item 3. Key Information—Our Corporate Structure;"
●
"we,"
    "us," "our," "Shengfeng Cayman," "our Company," or the "Company" are
    to Shengfeng Development Limited, an exempted company with limited liability incorporated under the laws of Cayman Islands; and
●
"WFOE"
    are to wholly foreign-owned enterprise.
The functional currency of Shengfeng Logistics, the VIE in the PRC,
and the VIE's subsidiaries and branch offices, is Renminbi ("RMB"), the currency of China. Our consolidated financial
statements are presented in U.S. dollars. In this annual report, we refer to assets, obligations, commitments, and liabilities in our
consolidated financial statements in U.S. dollars. These dollar references are based on the exchange rate of RMB to U.S. dollars, determined
as of a specific date or for a specific period. Changes in the exchange rate will affect the amount of our obligations and the value of
our assets in terms of U.S. dollars which may result in an increase or decrease in the amount of our obligations (expressed in dollars)
and the value of our assets, including accounts receivable (expressed in dollars).
ii
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
Our
Corporate History
We
began our operations in 2001 through Shengfeng Logistics, a limited liability company established pursuant to PRC laws. Shengfeng Logistics
formed or controlled 30 majority owned/wholly owned subsidiaries pursuant to PRC laws.
In
connection with this offering, we have undertaken a reorganization of our corporate structure (the "Reorganization") in the
following steps:
●
on July 16,
    2020, we incorporated Shengfeng Cayman under the laws of the Cayman Islands;
●
on August 18, 2020, we
    incorporated Shengfeng HK in Hong Kong as a wholly owned subsidiary of Shengfeng Cayman;
●
on December 16, 2020, we
    incorporated Tianyu pursuant to PRC laws as a WFOE and a wholly owned subsidiary of Shengfeng HK;
●
on December 18, 2020, our Company and our shareholders undertook a
series of corporate actions, including an amendment and a subdivision of our share capital, among others. See "
—
History
of Share Issuances" below; and
●
On January 7, 2021, Tianyu
    entered into a series of contractual arrangements with Shengfeng Logistics and its shareholders, through which Tianyu has gained
    full control over the management and receives the economic benefits of Shengfeng Logistics. For more details, see "—Our
    VIE Agreements."
Our
shares and per share data as of December 31, 2022 and 2021 have been presented on a retroactive basis to reflect the Reorganization.
1
History of Share Issuances
The following is a summary of our share issuances
since incorporation.
On July 16, 2020, Quality Corporate Services Ltd.,
the subscriber to our memorandum of association, had initially taken up 1 ordinary share, par value $1.00 per share, which it subsequently
transferred to Shengfeng International Limited on the same date. Also on July 16, 2020, we issued 49,999 ordinary shares, par value $1.00
per share, to Shengfeng International Limited, of which 6,000 ordinary shares were transferred to Everbright International Development
Limited on September 29, 2020.
On December 18, 2020 we undertook the following
corporate actions:
(i)
a repurchase of 43,999 ordinary shares held by Shengfeng International Limited and 6,000 ordinary shares held by Everbright International Development Limited;
(ii)
an amendment of our share capital from $50,000 divided into 50,000 ordinary shares of $1.00 par value per share to $50,000 divided into 40,000 Class A Ordinary Shares of $1.00 par value per share and 10,000 Class B Ordinary Shares of $1.00 par value per share;
(iii)
a re-designation of one issued ordinary share held by Shengfeng International Limited into one Class B Ordinary Share; and
(iv)
a subdivision of our share capital from $50,000 divided into 40,000 Class A Ordinary Shares of $1.00 par value per share and 10,000 Class B Ordinary Shares of $1.00 par value per share to US$50,000 divided into 400,000,000 Class A Ordinary Shares of $0.0001 par value per share and 100,000,000 Class B Ordinary Shares of $0.0001 par value per share.
On December 18, 2020, we issued an aggregate of
38,120,000 Class A Ordinary Shares to 12 investors for an aggregate consideration of $3,812.
On December 18, 2020, we issued 41,870,000 Class
B Ordinary Shares to Shengfeng International Limited for a consideration of $4,187. After such issuance and as of the date of this annual
report, Shengfeng International Limited holds an aggregate of 41,880,000 of our Class B Ordinary Shares.
On April 4, 2023, the Company completed its initial public offering
("IPO") of 2,400,000 Class A Ordinary Shares at a public offering price of $4.00 per share. The net proceeds raised from the
IPO were approximately $8.5 million after deducting underwriting discounts and the offering expenses payable by the Company.
Our
Corporate Structure
Shengfeng Development Limited is a holding company incorporated in
the Cayman Islands and it is not a Chinese operating company. As a holding company with no material operations of its own, its operations
have been conducted in China by its subsidiaries and through certain contractual arrangements ("the VIE Agreements") with
a VIE, Shengfeng Logistics and the VIE's subsidiaries. For accounting purposes, we control and receive the economic benefits of
the VIE and the VIE's subsidiaries' business operations through the VIE Agreements, which enables us to consolidate the financial
results of the VIE and the VIE's subsidiaries in our consolidated financial statement under U.S. GAAP. Neither we nor our subsidiaries
own any equity interests in the VIE or the VIE's subsidiaries.
2
The
following diagram illustrates our corporate structure, including our subsidiaries and the VIE and the VIE's subsidiaries, as
of the date of this annual report.
Notes:
All percentages reflect the voting ownership interests instead of the equity interests held by each of our shareholders given that each
holder of Class B Ordinary Shares will be entitled to 10 votes per one Class B Ordinary Share and each holder of Class A Ordinary Shares
will be entitled to one vote per one Class A Ordinary Share.
(1)
Represents 41,880,000 Class
B Ordinary Shares indirectly held by Yongxu Liu, the 100% owner of Shengfeng International Limited as of the date of this annual report.
(2)
Represents an aggregate of 38,120,000 Class A Ordinary Shares held by 12 shareholders, each one of which holds less than 5% of our voting ownership interests, as of the date of this annual report.
(3)
As of the date of this annual report, Shengfeng Logistics is held by Fujian Yunlian Shengfeng Industry Co., Ltd., which is 90% owned by Yongxu Liu, who is our chief executive officer, chairman of the board and president, as to 54.58%, Yongxu Liu directly as to 30.99%, Zhoushan Zhongxin Equity Investment Partnership (Limited Partnership) as to 1.5%, Zhoushan Guancheng Equity Investment Partnership (Limited Partnership) as to 2%, Daqiu Tang as to 0.85%, Yelie Song as to 0.97%, Zhiping Yang as to 1.58%, Chaoxin Yang as to 0.96%, Guangsheng Lin as to 0.85%, Zhuangyuan Lin as to 2.59%, Zhongdeng Pan as to 2.13% and Yufan Chen as to 1%, who collectively hold 100% of the shares of Shengfeng Logistics. We refer to the above shareholders of Shengfeng Logistics as the "Shengfeng Logistics Shareholders."
3
For details of our principal shareholders' ownership, please
refer to the beneficial ownership table in the section captioned "Item 6. Directors, Senior Management and Employees—E. Share
Ownership."
Significant
subsidiaries of Shengfeng Logistics, as that term is defined under Section 1-02 of Regulation S-X under the Securities Act, consist of
the following entities:
No.
Name
    of subsidiaries
Place
    of
incorporation
Date
    of
incorporation
or acquisition
Percentage
of direct or
indirect
Principal
activities
1
Shengfeng Holding Limited
("Shengfeng HK")
Hong Kong
August 18, 2020
100%
Investment holding of Tianyu
2
Fujian Tianyu Shengfeng Logistics Co., Ltd. ("Tianyu")
Fujian, the PRC
December 16, 2020
100%
Investment holding of Shengfeng VIE
3
Shengfeng Logistics Group Co., Ltd. ("Shengfeng
    VIE" or
"
Shengfeng Logistics
"
)
Fujian, the PRC
December 7, 2001
100%
Transportation and warehouse storage management service
4
Fuqing Shengfeng Logistics Co., Ltd.
Fujian, the PRC
April 15, 2011
100%
Transportation and warehouse storage management service
5
Xiamen Shengfeng Logistics Co., Ltd.
Fujian, the PRC
December 22, 2011
100%
Transportation and warehouse storage management service
6
Guangdong Shengfeng Logistics Co., Ltd.
Guangdong, the PRC
December 30, 2011
100%
Transportation and warehouse storage management service
7
Hainan Shengfeng Supply Chain Management Co., Ltd.
Hainan, the PRC
August 18, 2020
100%
Transportation and warehouse storage management service
8
Beijing Tianyushengfeng e-commerce Technology Co., Ltd.
Beijing, the PRC
January 9, 2004
100%
Transportation and warehouse storage management service
9
Beijing Shengfeng Supply Chain Management Co., Ltd.
Beijing, the PRC
April 13, 2016
100%
Transportation and warehouse storage management service
10
Shengfeng Logistics (Guizhou) Co., Ltd.
Guizhou, the PRC
August 15, 2017
100%
Transportation and warehouse storage management service
11
Shengfeng Logistics (Tianjin) Co., Ltd.
Tianjin, the PRC
March 8, 2016
100%
Transportation and warehouse storage management service
12
Shengfeng Logistics (Shandong) Co., Ltd.
Shandong, the PRC
March 15, 2016
100%
Transportation and warehouse storage management service
13
Shengfeng Logistics Hebei Co., Ltd.
Hebei, the PRC
February 17, 2016
100%
Transportation and warehouse storage management service
14
Shengfeng Logistics (Henan) Co., Ltd.
Henan, the PRC
March 28, 2016
100%
Transportation and warehouse storage management service
15
Shengfeng Logistics (Liaoning) Co., Ltd.
Liaoning, the PRC
March 2, 2016
100%
Transportation and warehouse storage management service
16
Fuzhou Shengfeng New Material Technology Co., Ltd.
(a)
Fujian, the PRC
August 13, 2019
0%
Packaging material manufacturing
4
17
Shengfeng Logistics (Yunnan) Co.,
    Ltd.
Yunnan, the PRC
January 25, 2016
100%
Transportation and warehouse storage
    management service
18
Shengfeng Logistics (Guangxi) Co., Ltd.
Guangxi, the PRC
February 1, 2016
100%
Transportation and warehouse storage management service
19
Hubei Shengfeng Logistics Co., Ltd.
Hubei, the PRC
December 15, 2010
100%
Transportation and warehouse storage management service
20
Shengfeng Logistics Group (Shanghai) Supply Chain Management
    Co., Ltd.
Shanghai, the PRC
August 26, 2015
100%
Transportation and warehouse storage management service
21
Shanghai Shengxu Logistics Co., Ltd.
Shanghai, the PRC
June 4, 2003
100%
Transportation and warehouse storage management service
22
Hangzhou Shengfeng Logistics Co., Ltd.
Zhejiang, the PRC
June 10, 2010
100%
Transportation and warehouse storage management service
23
Nanjing Shengfeng Logistics Co., Ltd.
Jiangsu, the PRC
August 30, 2011
100%
Transportation and warehouse storage management service
24
Suzhou Shengfeng Logistics Co., Ltd.
Jiangsu, the PRC
January 14, 2005
90%
Transportation and warehouse storage management service
25
Suzhou Shengfeng Supply Chain Management Co., Ltd.
(b)
Jiangsu, the PRC
August 9, 2019
100%
Transportation and warehouse storage management service
26
Shengfeng Supply Chain Management Co., Ltd.
Fujian, the PRC
June 19, 2014
100%
Transportation and warehouse storage management service
27
Fuzhou Shengfeng Transportation Co., Ltd.
Fujian,  the PRC
April 18, 2019
100%
Transportation and warehouse storage management service
28
Diaobingshan Hengde Logistics Co., Ltd.
(c)
Liaoning, the PRC
April 23, 2018
0%
Transportation and warehouse storage management service
29
Sichuan Shengfeng Logistics Co., Ltd.
Sichuan, the PRC
June 27, 2019
100%
Transportation and warehouse storage management service
30
Fujian Shengfeng Logistics Co., Ltd.
Fujian, the PRC
April 2, 2020
100%
Transportation and warehouse storage management service
31
Fujian Dafengche Information Technology Co. Ltd.
Fujian, the PRC
August 26, 2020
100%
Software engineering
32
Ningde Shengfeng Logistics Co. Ltd.
(d)
Fujian, the PRC
November 12, 2018
51%
Transportation and warehouse storage management service
33
Fujian Fengche Logistics Co., Ltd.
Fujian, the PRC
October 28, 2020
100%
Transportation service
34
Fujian Hangfeng Logistics Technology Co., Ltd.
(e)
Fujian, the PRC
October 13, 2020
0%
Online service
35
Shengfeng Logistics (Zhejiang) Co., Ltd
Zhejiang, the PRC
February 1, 2021
100%
Transportation and warehouse storage management service
36
Chengdu Shengfeng Supply Chain Management Co., Ltd
Chengdu, the PRC
October 12, 2021
100%
Supply chain service
5
37
Shengfeng Logistics Group (Ningde) Supply Chain Management
    Co., Ltd.
(f)
Fujian, the PRC
September 23, 2022
100%
Supply chain service
38
Yichun Shengfeng Logistics
    Co., Ltd.
Jiangxi, the PRC
December 1, 2022
100%
Transportation and warehouse storage management service
39
Fujian Shengfeng Smart Technology Co., Ltd.
(g)
Fujian, the PRC
April 20,2023
100%
Property service
(a)
On
        July 14, 2021, Shengfeng Logistics entered into a share transfer agreement with Dongguan Suxing New Material Co., Ltd ("Dongguan
        Suxing"), a related party, to transfer its 51% equity interest in Fuzhou Shengfeng New Material Technology Co., Ltd. ("New
        Material Technology") to Dongguan Suxing for a consideration of $468,973 (RMB3,060,000). The aforementioned transaction
        was completed during the year ended December 31, 2021. The Company has continued to operate the transportation business through
        the VIE's other subsidiaries. Since New Material Technology's operating revenue was less than 1% of the Company's
        consolidated revenue, the transfer did not constitute a strategic shift that would have a major effect on the Company's
        operations and financial results. The results of operations for New Material Technology were not reported as discontinued operations
        in the consolidated financial statements.
(b)
On
        July 8, 2021, Suzhou Shengfeng Supply Chain Management Co, Ltd. became a wholly owned subsidiary of Shengfeng Logistics.
(c)
On
        April 20, 2021, Shengfeng Logistics entered into a share transfer agreement with Mr. Sun Mingyang, an unrelated third party,
        among others, to transfer its 51% equity interest in Diaobingshan Hengde Logistics Co., Ltd. to Mr. Sun Mingyang for a consideration
        of approximately $0.3 million. The aforementioned transaction was completed during the year ended December 31, 2021. The Company
        has continued to operate the transportation business through the VIE's other subsidiaries. Since Diaobingshan Hengde Logistics
        Co., Ltd.'s operating revenue was less than 1% of the Company's consolidated revenue, the transfer did not constitute
        a strategic shift that would have a major effect on the Company's operations and financial results. The results of operations
        for Diaobingshan Hengde Logistics Co., Ltd. were not reported as discontinued operations in the consolidated financial statements.
(d)
On
        January 5, 2022, Shengfeng Logistics entered into a share transfer agreement with Fuzhou Puhui Technology Co., Ltd. ("Fuzhou
        Puhui"), an unrelated third party, to transfer its 49% equity interest in Ningde Shengfeng Logistics Co., Ltd. ("Ningde
        Shengfeng") to Fuzhou Puhui. According to the share transfer agreement, instead of paying any cash consideration to Shengfeng
        Logistics, Fuzhou Puhui was required to make a capital contribution to fulfill the required registered capital (approximately
        $15.5 million or RMB100 million) based on its 49% ownership interest (approximately $7.6 million or RMB49 million). The aforementioned
        transaction has been completed. After the transaction, the Company owned a 51% equity interest in Ningde Shengfeng.
(e)
On March 16, 2022, Fujian
    Hangfeng Logistics Technology Co., Ltd. was deregistered, as it has not commenced business operations and the Company has cancelled
    the future plans for such entity.
(f)
On September 23, 2022, Shengfeng Logistics Group (Ningde) Supply Chain
Management Co., Ltd. was set up in Fujian, China. This entity is fully owned by Shengfeng Logistics Group Co., Ltd. and provides
supply chain service in the future.
(g)
On April 20, 2023, Fujian Shengfeng Smart Technology Co., Ltd was set
up in Fujian, China. This entity is fully owned by Fujian Tianyu Shengfeng Logistics Co., Ltd. and will provide property service in the
future.
6
Our VIE Agreements
Neither we nor our subsidiaries own any share
in Shengfeng Logistics or the VIE's subsidiaries. Instead, for accounting purposes, we control and receive the economic benefits
of Shengfeng Logistics' business operation through the VIE Agreements entered into by and among WFOE, Shengfeng Logistics and its
shareholders on January 7, 2021, which enables us to consolidate the financial results of the VIE and the VIE's subsidiaries in
our consolidated financial statement under U.S. GAAP. The VIE Agreements are designed to provide Tianyu with the power, rights, and obligations
to Shengfeng Logistics, including control rights and the rights to the assets, property, and revenue of Shengfeng Logistics, as set forth
under the VIE Agreements. The VIE Agreements have not been tested in a court of law in China as of the date of this annual report and
may not be effective in providing control over the VIE. We are, therefore, subject to risks due to the uncertainty of the interpretation
and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure, including, but not limited to, regulatory
review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangements
with the VIE.
We have evaluated the guidance in FASB ASC 810
and determined that we are regarded as the primary beneficiary of the VIE, for accounting purposes, as a result of our direct ownership
in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat the VIE and the VIE's subsidiaries as our consolidated
entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE's subsidiaries in our consolidated financial
statements in accordance with U.S. GAAP.
Although we took every precaution available to
effectively enforce the contractual and corporate relationship, the VIE structure has its inherent risks that may affect your investment,
including less effectiveness and certainties than direct ownership and potential substantial costs to enforce the terms of the VIE Agreements.
For example, Shengfeng Logistics and the Shengfeng Logistics 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 direct ownership of Shengfeng Logistics, we would be able to exercise our rights as a shareholder to effect changes in the board
of directors of Shengfeng Logistics, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management
and operational level. However, under the current VIE Agreements, we rely on the performance by Shengfeng Logistics and the Shengfeng
Logistics Shareholders of their respective obligations under the contracts to exercise control over Shengfeng Logistics. The Shengfeng
Logistics Shareholders may not act in the best interests of our Company or may not perform their obligations under these contracts. Such
risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements with Shengfeng
Logistics. Furthermore, failure of the VIE shareholders to perform certain obligations could compel the Company to rely on legal remedies
available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective.
Additionally, if any disputes relating to these contracts remain 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 and the Company may incur substantial costs to enforce the terms of the VIE Agreements. We, as a Cayman Islands
holding company, may have difficulty in enforcing any rights we may have under the VIE Agreements with the VIE, its founders and owners,
in PRC because all of our VIE Agreements are governed by the PRC laws and provide for the resolution of disputes through arbitration in
the PRC, where legal environment in the PRC is not as developed as in the United States. Also, these VIE Agreements may not be enforceable
in China if PRC government authorities or courts take a view that such VIE Agreements contravene PRC laws and regulations or are otherwise
not enforceable for public policy reasons. In the event we are unable to enforce these VIE Agreements, we may not be able to exert effective
control over Shengfeng Logistics, and our ability to conduct our business may be materially and adversely affected. In addition, there
is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us
or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. See "Item
3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure" and "—D. Risk Factors—Risks
Relating to Doing Business in the PRC" for more information. In particular, see "—D. Risk Factors—Risks Relating
to Our Corporate Structure—Our VIE Agreements with Shengfeng Logistics and the Shengfeng Logistics Shareholders may not be effective
in providing control over Shengfeng Logistics," "—D. Risk Factors—Risks Relating to Our Corporate Structure—The
Shengfeng Logistics Shareholders have potential conflicts of interest with our Company which may adversely affect our business and financial
condition," "—D. Risk Factors—Risks Relating to Our Corporate Structure—Our VIE Agreements are governed
by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual arrangements" and
"—D. Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese
authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE's operations,
and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently being offered
may substantially decline in value and become worthless."
7
Each of the VIE Agreements is described in detail below:
Exclusive Technical Consultation and Service
Agreement
Pursuant to the Technical Consultation and Service
Agreement between Shengfeng Logistics and Tianyu, Tianyu provides Shengfeng Logistics with consultation and services in the areas of funding,
human, technology and intellectual properties, including, but not limited to, training and technical support, marketing consultation services,
general advice and assistance relating to management and operation of Shengfeng Logistics' business, and other consultation and
services which are necessary for Shengfeng Logistics' business, on an exclusive basis, utilizing its resources. For services rendered
to Shengfeng Logistics by Tianyu under the Technical Consultation and Service Agreement, Tianyu is entitled to collect a service fee,
or the "Service Fee." The Service Fees are composed of the basic annual fee, which is equal to 50% of the after-tax income
of Shengfeng Logistics, and a floating fee, which shall not exceed the after-tax income after deducting paid basic annual fees. The floating
fees shall be determined by both parties based on several factors including the number and the qualifications of the employees used by
Tianyu, the time Tianyu spent on providing the services, the costs being paid for providing the services and the content, the value of
the services provided and the operation revenue of Shengfeng Logistics.
The Technical Consultation and Service Agreement
became effective on January 7, 2021 and will remain effective for 20 years. Such agreement can be extended if Tianyu provides its notice
of extension to Shengfeng Logistics unilaterally prior to the expiration date of this agreement. Shengfeng Logistics shall use its best
efforts to renew its business license and extend its operation term until and unless otherwise instructed by Tianyu.
The Technical Consultation and Service Agreement
does not prohibit related party transactions. Upon the establishment of the audit committee at the consummation of this offering, the
Company's audit committee will be required to review and approve in advance any related party transactions, including transactions
involving Tianyu or Shengfeng Logistics.
Equity Pledge Agreement
Under the Equity Pledge Agreement by and among
Tianyu, Shengfeng Logistics and the Shengfeng Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, the
Shengfeng Logistics Shareholders pledged their shares in Shengfeng Logistics to Tianyu to guarantee the performance of Shengfeng Logistics
and/or Shengfeng Logistics Shareholders' obligations under the Technical Consultation and Service Agreement. Under the terms of
the Equity Pledge Agreement, in the event that Shengfeng Logistics or the Shengfeng Logistics Shareholders breach their respective contractual
obligations under the Technical Consultation and Service Agreement, Tianyu, as pledgee, will be entitled to certain rights, including,
but not limited to, the right to collect dividends generated by the pledged shares. The Shengfeng Logistics Shareholders also agreed that
upon occurrence of any event of default, as set forth in the Equity Pledge Agreement, Tianyu is entitled to dispose of the pledged shares
in accordance with applicable PRC laws. The Shengfeng Logistics Shareholders further agreed not to assign the pledged shares prior to
the full payment of the service fees.
The Equity Pledge Agreement is effective until
the full payment of the service fees under the Technical Consultation and Service Agreement and upon termination of Shengfeng Logistics'
obligations under the Technical Consultation and Service Agreement, or upon the transfer of shares of the Shengfeng Logistics Shareholders.
The purposes of the Equity Pledge Agreement are
to (1) guarantee the performance of Shengfeng Logistics' obligations under the Technical Consultation and Service Agreement, (2)
make sure the Shengfeng Logistics Shareholders do not transfer or assign the pledged shares, or create or allow any encumbrance that would
prejudice Tianyu's interests without Tianyu's prior written consent, and (3) provide Tianyu control over Shengfeng Logistics
under certain circumstances. In the event Shengfeng Logistics breaches its contractual obligations under the Technical Consultation and
Service Agreement, Tianyu will be entitled to dispose of the pledged shares in accordance with relevant PRC laws.
As of the date of this annual report, the share
pledges under the Equity Pledge Agreement have been registered with the competent PRC regulatory authority.
8
Exclusive Call Option Agreement
Under the Call Option Agreement, the Shengfeng
Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, irrevocably granted Tianyu (or its designee) an exclusive
option to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, part or all of their shares in Shengfeng
Logistics in consideration of the payment of RMB1. The purchase price shall be the lowest price allowed by the laws of China.
Under the Call Option Agreement, Tianyu may at
any time under any circumstances, purchase or have its designee purchase, at its discretion, to the extent permitted under PRC law, all
or part of the Shengfeng Logistics Shareholders' shares in Shengfeng Logistics. The Call Option Agreement, together with the Equity
Pledge Agreement, the Technical Consultation and Service Agreement, the Voting Rights Proxy Agreement, and the Shareholders' Powers
of Attorney, enable Tianyu to exercise effective control over Shengfeng Logistics.
The Call Option Agreement remains effective until
all the equity of Shengfeng Logistics is legally transferred under the name of Tianyu and/or other entity or individual designated by
it.
Shareholders' Powers of Attorney
Under each of the Powers of Attorney, the Shengfeng
Logistics Shareholders authorized Tianyu to act on their behalf as their exclusive agent and attorney with respect to all rights as shareholders,
including, but not limited to: (a) attending shareholders' meetings; (b) exercising all the shareholder's rights, including
voting, that shareholders are entitled to under the laws of China and the Articles of Association, including, but not limited to, the
sale or transfer or pledge or disposition of shares in part or in whole; and (c) designating and appointing on behalf of shareholders
the legal representative, the executive director, supervisor, the chief executive officer, and other senior management members of Shengfeng
Logistics.
The Powers of Attorney is irrevocable and continuously
valid from the date of execution of the Powers of Attorney, so long as the Shengfeng Logistics Shareholders are shareholders of Shengfeng
Logistics.
Voting Rights Proxy Agreement
Pursuant to the Voting Rights Proxy Agreements,
the Shengfeng Logistics Shareholders unconditionally and irrevocably entrust Tianyu or Tianyu's designee to exercise all their rights
as shareholders of Shengfeng Logistics under the articles of association of Shengfeng Logistics, including without limitation to: (a)
propose to hold a shareholders' meeting in accordance with the articles of association of Shengfeng Logistics and attend shareholders'
meeting of Shengfeng Logistics as the agent and attorney of such shareholders; (b) exercise all shareholders' voting rights with
respect to all matters to be discussed and voted in the shareholders' meeting of Shengfeng Logistics, including, but not limited
to, the right to designate and appoint the director, the chief executive officer and other senior management members of Shengfeng Logistics;
(c) exercise other voting rights the shareholders are entitled to under the laws of China promulgated from time to time; and (d) exercise
other voting rights the shareholders are entitled to under the articles of associations of Shengfeng Logistics from time to time.
The Voting Rights Proxy Agreement became effective
on January 7, 2021 and will remain effective for 20 years. Such agreement can be extended if Tianyu provides its notice of extension unilaterally
prior to the expiration date of this agreement. All other parties shall agree with such extension without reserve.
Spousal Consent Letters
The spouses of certain of the Shengfeng Logistics
Shareholders agreed, via a spousal consent letter, to the execution of certain of the VIE Agreements, including: (a) the Equity Pledge
Agreement entered into with Tianyu and Shengfeng Logistics; (b) the Call Option Agreement entered into with Tianyu and Shengfeng Logistics;
and (c) the Voting Rights Proxy Agreement entered into with Tianyu and Shengfeng Logistics, and the disposal of the shares of Shengfeng
Logistics held by the Shengfeng Logistics Shareholders and registered in their names.
The spouses of certain of the Shengfeng Logistics
Shareholders have further undertaken to not to make any assertions in connection with the shares of Shengfeng Logistics which are held
by the Shengfeng Logistics Shareholders. The spouses of certain of the Shengfeng Logistics Shareholders have confirmed in spousal consent
letters that the Shengfeng Logistics Shareholders can perform, amend, or terminate certain VIE Agreements without their authorization
or consent and have agreed to execute all necessary documents and take all necessary actions to ensure appropriate performance of such
VIE Agreements.
Risks
Associated with our Corporate Structure and the VIE Agreements
Because
we do not directly hold equity interests in the VIEs, we are subject to risks and uncertainties of the interpretations and applications
of PRC laws and regulations, including but not limited to, regulatory review of overseas listing of PRC companies through special purpose
vehicles and the validity and enforcement of the VIE Agreements. We are also subject to the risks and uncertainties about any future
actions of the PRC government in this regard that could disallow the VIE structure, which would likely result in a material change in
our operations, and the value of our Class A Ordinary Shares may depreciate significantly or become worthless. The VIE Agreements have
not been tested in a court of law in China as of the date of this annual report. See "—D. Risk Factors—Risks Relating
to Our Corporate Structure," "—D. Risk Factors—Risks Relating to Doing Business in the PRC," and "—D.
Risk Factors—Risks Relating to Our Class A Ordinary Shares and the Trading Market."
9
The VIE Agreements may not be as effective as direct ownership in providing
operational control. For instance, the VIE and the VIE's subsidiaries 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.
The VIE and the VIE's subsidiaries may not act in the best interests of our Company or may not perform their obligations under these
contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements.
In the event that the VIE or the VIE's subsidiaries fail to perform their respective obligations under the VIE Agreements, we may
have to incur substantial costs and expend additional resources to enforce such arrangements. In addition, even if legal actions are taken
to enforce such arrangements, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts
against us or such persons predicated upon the civil liability provisions of the securities laws of the U.S. or any state. See "—D.
Risk Factors—Risks Relating to Our Corporate Structure—Our VIE Agreements with Shengfeng Logistics and the Shengfeng Logistics
Shareholders may not be effective in providing control over Shengfeng Logistics," "—D. Risk Factors—Risks Relating
to Our Corporate Structure—The Shengfeng Logistics Shareholders have potential conflicts of interest with our Company which may
adversely affect our business and financial condition," "—D. Risk Factors—Risks Relating to Our Corporate Structure—Our
VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual
arrangements" and "—D. Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to obtain
permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the
VIE's operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities
currently being offered may substantially decline in value and become worthless."
Risks
Associated with being based in the PRC
We are subject to certain legal and operational risks associated with
having the majority of our operations in China, which could cause the value of our securities to significantly decline or become worthless.
PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and as a result these risks may
result in material changes in the operations of the VIE and the VIE's subsidiaries, significant depreciation or a complete loss
of the value of our Class A Ordinary Shares, or a complete hindrance of our ability to offer, or continue to offer, our securities to
investors. Recently, the PRC government adopted a series of regulatory actions and issued statements to regulate business operations in
China with little advance notice, including cracking down on illegal activities in the securities market, adopting new measures to extend
the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. As of the date of this annual report, we,
our PRC subsidiary, and VIE and the VIE's subsidiaries have not been involved in any investigations on cybersecurity review initiated
by any PRC regulatory authority, nor has any of them received any inquiry, notice, or sanction. As confirmed by our PRC counsel, AllBright
Law Offices, or "AllBright," we are not subject to cybersecurity review with the Cyberspace Administration of China (the "CAC")
under the Cybersecurity Review Measures that became effective on February 15, 2022, given that: (i) we presently possesses personal information
of less than one (1) million individual users in our business operations, as of the date of this annual report; and (ii) data processed
in our business is less likely to have a bearing on national security, thus it may not be classified as core or important data by the
authorities; we are also not subject to network data security review by the CAC if the Draft Regulations on the Network Data Security
Administration (Draft for Comments) (the "Security Administration Draft") is enacted as proposed, since we currently do not
have over one million users' personal information and do not collect data that affects or may affect national security and we do
not anticipate that we will be collecting over one million users' personal information or data that affects or may affect national
security in the foreseeable future, which we understand might otherwise subject us to the Security Administration Draft. See "—D.
Risk Factors—Risks Relating to Doing Business in the PRC—Our business generates and processes a large quantity of data, and
improper handling of or unauthorized access to such data may adversely affect our business. In light of recent events indicating greater
oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking to list on a foreign
exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply
with applicable laws and obligations could have a material and adverse effect on our business, our listing on Nasdaq, financial condition,
results of operations, and the offering.."
Since
2021, the Chinese government has strengthened its anti-monopoly supervision, mainly in three aspects: (i) establishing the National Anti-Monopoly
Bureau; (ii) revising and promulgating anti-monopoly laws and regulations, including: the Anti-Monopoly Law of the PRC (amended on June
24, 2022 and effective on August 1, 2022), the anti-monopoly guidelines for various industries, and the Detailed Rules for the Implementation
of the Fair Competition Review System; and (iii) expanding the anti-monopoly law enforcement targeting Internet companies and large enterprises.
As of the date of this annual report, the Chinese government's recent statements and regulatory actions related to anti-monopoly
concerns have not impacted our or the PRC operating entities' ability to conduct business or our ability to accept foreign investments
or issue our securities to foreign investors because neither we and our subsidiaries, nor the VIE and the VIE's subsidiaries engage
in monopolistic behaviors that are subject to these statements or regulatory actions.
10
On February 17, 2023, the China Securities Regulatory Commission (the
"CSRC") promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the
"Trial Measures") and five supporting guidelines, which came into effect on March 31, 2023. See "—D. Risk Factors—Risks
Relating to Doing Business in the PRC—We may be required to obtain permission from Chinese authorities (i) to issue our Class A
Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE's operations, and if either or both are required and
we are not able to obtain such permission in a timely manner, the securities currently being offered may substantially decline in value
and become worthless.." Other than the foregoing, as of the date of this annual report, according to AllBright, no relevant PRC
laws or regulations in effect require that we obtain permission from any PRC authorities to issue securities to foreign investors, and
we have not received any inquiry, notice, warning, sanction, or any regulatory objection to our offerings from the CSRC, the CAC, or any
other PRC authorities that have jurisdiction over our operations. Since these statements and regulatory actions are newly published, however,
official guidance and related implementation rules have not been issued. It is highly uncertain what the potential impact such modified
or new laws and regulations will have on the daily business operations of the VIE and the VIE's subsidiaries, our ability to accept
foreign investments, and our listing on a U.S. exchange. The Standing Committee of the National People's Congress (the "SCNPC")
or PRC regulatory authorities may in the future promulgate additional laws, regulations, or implementing rules that require us, our subsidiaries,
or the VIE and the VIE's subsidiaries to obtain regulatory approval from Chinese authorities before listing in the U.S. If we do
not receive or maintain such approval, or inadvertently conclude that such approval is not required, or applicable laws, regulations,
or interpretations change such that we are required to obtain approval in the future, we may be subject to an investigation by competent
regulators, fines or penalties, or an order prohibiting us from conducting an offering, and these risks could result in a material adverse
change in our operations and the value of our Class A Ordinary Shares, significantly limit or completely hinder our ability to offer or
continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.
In addition, our Class A Ordinary Shares may be prohibited from trading
on a national exchange or over-the-counter under the Holding Foreign Companies Accountable Act (the "HFCA Act") if the Public
Company Accounting Oversight Board (United States) (the "PCAOB") is unable to inspect our auditors for three consecutive years
beginning in 2021. As of the date of the annual report, the Company's auditor prior to November 11, 2022, Friedman LLP ("Friedman"),
headquartered in New York, New York, has been inspected by the PCAOB on a regular basis, with the last inspection in October 2020. Our
current auditor, Marcum Asia CPAs LLP ("Marcum Asia"), has been inspected by the PCAOB on a regular basis, with the last inspection
in 2020. Neither Friedman nor Marcum Asia is subject to the determinations announced by the PCAOB on December 16, 2021. If trading in
our Class A Ordinary Shares is prohibited under the HFCA Act in the future because the PCAOB determines that it cannot inspect or fully
investigate our auditor at such future time, Nasdaq may determine to delist our Class A Ordinary Shares and trading in our Class A Ordinary
Shares could be prohibited. On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on
December 29, 2022, legislation entitled "Consolidated Appropriations Act, 2023" (the "Consolidated Appropriations Act")
was signed into law by President Biden, which contained, among other things, an identical provision to the Accelerating Holding Foreign
Companies Accountable Act and amended the HFCA Act by requiring the U.S. Securities and Exchange Commission (the "SEC") to
prohibit an issuer's securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for
two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. On August 26, 2022, the
CSRC, the Ministry of Finance of the PRC (the "MOF"), and the PCAOB signed a Statement of Protocol (the "Protocol")
governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access
for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. 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 has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board
determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered
in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct
or otherwise fail to facilitate the PCAOB's access in the future, the PCAOB Board will consider the need to issue a new determination.
See "—D. Risk Factors—Risks Relating to Doing Business in the PRC—Recent joint statement by the SEC and the Public
Company Accounting Oversight Board (United States), or the "PCAOB," rule changes by Nasdaq, and an act 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."
11
Permissions
Required from the PRC Authorities for The VIE's Operations and the Company's Issuance of Securities to Foreign Investors
We
are currently not required to obtain permission from any of the PRC authorities to operate and issue our Class A Ordinary Shares to
foreign investors. In addition, neither we, our subsidiaries, the VIE nor the VIE's subsidiaries are required to obtain
permission or approval from the PRC authorities including the CSRC and CAC for the VIE's operation, nor have we, our
subsidiaries, the VIE nor the VIE's subsidiaries received any denial for the VIE's operations. However, 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, and cybersecurity and data privacy protection requirements and
similar matters. On December 24, 2021, the CSRC promulgated the draft of State Council Administration Rules in respect of Overseas
Securities Offering and Listing of Domestic Enterprise and the draft Recording Administrative Rules of Overseas Securities Offering
and Listing of Domestic Enterprise, or the "New Overseas Listing Rules," for public comments. The New Overseas Listing
Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information
under certain circumstances, such as, a) an issuer making an application for initial public offering and listing in an overseas
market; b) an issuer making an overseas securities offering after having been listed on an overseas market; c) an issuer
offering securities on an overseas market to purchase assets after having been listed overseas; and d) a domestic company
seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of
shares or other means. On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering
and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023.
The Trial Measures and its supporting guidelines, reiterate the basic principles of the New Overseas Listing Rules and impose
substantially the same requirements for the overseas securities offering and listing by domestic enterprises. Pursuant to the Trial
Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete filing
procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission of
initial public offerings or listing application. If a domestic company fails to complete required filing procedures or conceals any
material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative
penalties, such as an order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly
in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.
According
to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies
from the CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas 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 not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges
(for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their indirect
overseas offering and listing prior 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 to September 30, 2023. Those that complete their indirect 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 indirect overseas offerings
and listings. Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance
and listing, they shall complete the filing procedures with the CSRC.
On
February 24, 2023, the CSRC, together with Ministry of Finance of the PRC, National Administration of State Secrets Protection and National
Archives Administration of China, revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities
Offering and Listing, which were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration
of China in 2009, or the Provisions. The revised Provisions were issued under the title the "Provisions on Strengthening Confidentiality
and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies", and came into effect on March 31,
2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect
overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including, but not limited
to, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide
to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents
and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities
according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to,
either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including
securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be
detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
12
As of the date of this annual report, the revised Provisions have come
into effect, and any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to comply with the above confidentiality
and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities
being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected
of committing a crime. See "Item 4. Information on the Company—B. Business Overview—Regulations—Regulations on
Mergers & Acquisitions and Overseas Listings." The Opinions, the Trial Measures, the revised Provisions and any related implementing
rules to be enacted may subject us to compliance requirement in the future. Given the current regulatory environment in the PRC, we are
still subject to the uncertainty of different interpretation and enforcement of the rules and regulations in the PRC adverse to us, which
may take place quickly with little advance notice. Notwithstanding the foregoing, as of the date of this annual report, we are not aware
of any PRC laws or regulations in effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors,
and we have not received any inquiry, notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or
any other Chinese authorities that have jurisdiction over our operations. If we inadvertently conclude that we are not required to obtain
any permission or approval from any of the PRC authorities for the VIE's operations and/or our issuance of securities to foreign,
or applicable laws, regulations, or interpretations change and we are required to obtain such permission or approval in the future, we
may be subject to investigations by competent regulators, fines, or penalties, ordered to suspend our relevant operations and rectify
any non-compliance, prohibited from engaging in relevant business or conducting any offering, or incur additional costs to procure such
approval or permission, and there is no guarantee that we can successfully obtain such approval or permission. These risks could result
in a material adverse change in our operations, significantly limit or completely hinder our ability to offer or continue to offer securities
to investors, or cause such securities to significantly decline in value or become worthless. See "—D. Risk Factors—Risks
Relating to Our Corporate Structure" and "—D. Risk Factors—Risks Relating to Doing Business in the PRC"
for more information. In particular, see "—D. Risk Factors—Risks Relating to Doing Business in the PRC—PRC laws
and regulations governing our current business operations are sometimes vague and uncertain. Uncertainties in the interpretation and enforcement
of PRC laws and regulations could limit the legal protection available to you and us. Any changes in such laws and regulations may impair
our ability to operate profitably," "—D. Risk Factors—Risks Relating to Doing Business in the PRC—The Chinese
government exerts substantial influence over the manner in which we must conduct our business activities. Any actions by the Chinese government,
including any decision to intervene or influence our operations or to exert control over any offering of securities conducted overseas
and/or foreign investment in China-based issuers, may cause us to make material changes to our operation, may limit or completely hinder
our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline
or be worthless" and "—D. Risk Factors—Risks Relating to Doing Business in the PRC—We may be required to
obtain permission from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii)
for the VIE's operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the
securities currently being offered may substantially decline in value and become worthless."
Dividend
Distributions, Cash Transfer, and Tax Consequences
Shengfeng
Cayman transfers cash to its wholly-owned Hong Kong subsidiary, Shengfeng HK, by making capital contributions or providing loans, and
the Hong Kong subsidiary transfers cash to the subsidiary in China by making capital contributions or providing loans to it. Because
Shengfeng Cayman consolidates the financial statements of the VIE under the U.S. GAAP in reliance upon contractual arrangements and is
regarded as the primary beneficiary of the VIE for accounting purposes, Shengfeng Cayman's subsidiaries are not able to make direct
capital contributions to the VIE and their subsidiaries. However, Shengfeng Cayman's subsidiaries may transfer cash to the VIEs
by making loans or payments to the VIEs for inter-group transactions. As of the date of this annual report, no inter-company cash transfers
or transfers of other assets have occurred among Shengfeng Cayman, Shengfeng HK, WFOE, the VIE and the VIE's subsidiaries for the
fiscal years ended December 31, 2022 and 2021.
13
We intend to keep any future earnings to finance the expansion of our
business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Our board of directors has complete
discretion on whether to distribute dividends, subject to applicable laws. See "—D. Risk Factors—Risks Relating to this
Offering and the Trading Market—We do not intend to pay dividends for the foreseeable future." As of the date of this annual
report, none of our subsidiaries, nor the consolidated VIE and VIE's subsidiaries have made any dividends or distributions to our
Company. Additionally, no dividends or distributions have been made to U.S. investors as of the date of this annual report.
Under
Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amounts, provided
that in no circumstance may a dividend be paid if such payment would result in the company being unable to pay its debts due in the ordinary
course of business.
If
we determine to pay dividends on any of our Class A Ordinary Shares or Class B Ordinary Shares in the future, in the absence of available
profits or share premium, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary, Shengfeng HK.
Current
PRC regulations permit our PRC subsidiary to pay dividends to Shengfeng HK only out of its accumulated profits, if any, determined in
accordance with Chinese accounting standards and regulations. In addition, each of our Affiliated Entities in China is required to set
aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered
capital. Each of such entities in China is also required to further set aside a portion of its after-tax profits to fund the employee
welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory
reserves can be used, among other things, to increase the registered capital and eliminate future losses in excess of retained earnings
of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.
The PRC government also imposes controls on the conversion of RMB into
foreign currencies and the remittance of currencies out of the PRC. For instance, the Circular on Promoting the Reform of Foreign Exchange
Management and Improving Authenticity and Compliance Review, or "SAFE Circular 3," issued on January 26, 2017, provides that
banks shall, when dealing with dividend remittance transactions from a domestic enterprise to its offshore shareholders of more than $50,000,
review the relevant board resolutions, original tax filing form, and audited financial statements of such domestic enterprise based on
the principal of genuine transaction. Furthermore, if our Affiliated Entities in the PRC incur debt on their own in the future, the instruments
governing the debt may restrict their ability to pay dividends or make other payments. If we or our PRC subsidiary is unable to receive
all of the revenue from the operations of the VIE and the VIE's subsidiaries, we may be unable to pay dividends on our Class A Ordinary
Shares or Class B Ordinary Shares, should we desire to do so in the future. See "—D. Risk Factors—Risk Relating to Doing
Business in the PRC—Governmental control of currency conversion may affect the value of your investment and our payment of dividends."
Cash dividends, if any, on our Class A Ordinary Shares or Class B Ordinary
Shares would be paid in U.S. dollars. Shengfeng HK may be considered a non-resident enterprise for tax purposes, so that any dividends
Tianyu pays to Shengfeng HK may be regarded as China-sourced income and, as a result, may be subject to PRC withholding tax at a rate
of up to 10%. See "Item 10. Additional Information—E. Taxation—People's Republic of China Enterprise Taxation
(for the purpose of this paragraph, PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau)
.
"
In
order for us to pay dividends to our shareholders, we will rely on payments made from Shengfeng Logistics to Tianyu, pursuant to contractual
arrangements between such parties, and the distribution of such payments to Shengfeng HK as dividends from Tianyu. Certain payments from
Shengfeng Logistics to Tianyu are subject to PRC taxes, including Value-Added Tax. If Shengfeng Logistics or the VIE's subsidiaries
incur debt on their own behalf in the future, the instruments governing the debt may restrict any such party's ability to pay dividends
or make other distributions to us.
14
Pursuant to the Arrangement between Mainland China and the Hong Kong
Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement,
the 10% withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC entity. The 5% withholding
tax rate, however, does not automatically apply and certain requirements must be satisfied, including, without limitation, the requirement
that (a) the Hong Kong entity must be the beneficial owner of the relevant dividends; and (b) the Hong Kong entity must directly hold
no less than 25% share ownership in the PRC entity during the 12 consecutive months preceding its receipt of the dividends. In current
practice, a Hong Kong entity must obtain a tax resident certificate from the Hong Kong tax authority to apply for the 5% lower PRC withholding
tax rate. As the Hong Kong tax authority will issue such a tax resident certificate on a case-by-case basis, we cannot assure you that
we will be able to obtain the tax resident certificate from the relevant Hong Kong tax authority and enjoy the preferential withholding
tax rate of 5% under the Double Taxation Arrangement with respect to any dividends paid by our PRC subsidiary to its immediate holding
company, Shengfeng HK. As of the date of this annual report, we have not applied for the tax resident certificate from the relevant Hong
Kong tax authority. Shengfeng HK intends to apply for the tax resident certificate if and when Tianyu plans to declare and pay dividends
to Shengfeng HK. See
"
—D. Risk Factors—Risks Relating to Doing Business in the PRC—There are significant
uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary
to our offshore subsidiaries may not qualify to enjoy certain treaty benefits
."
Subject to certain contractual, legal
and regulatory restrictions, cash and capital contributions may be transferred among our Cayman Islands holding company and our subsidiaries.
U.S. investors will not be subject to Cayman Islands, mainland China, or Hong Kong taxation on dividend distributions, and no withholding
will be required on the payment of dividends or distributions to them, while they may be subject to U.S. federal income tax for receiving
dividends, to the extent that the distribution is paid out of our current or accumulated earnings and profits, as determined under U.S.
federal income tax principles. See "Item 10. Additional Information—E. Taxation."
We conduct substantially all of our business in China through the VIE,
Shengfeng Logistics, and the VIE's subsidiaries. Substantially all of Shengfeng Development Limited's revenues, costs and
net income in China are directly or indirectly generated through the VIE and the VIE's subsidiaries. We maintain our bank accounts
and balances primarily in licensed banks in Mainland China. In addition, cash transfers from our Cayman Islands holding company are subject
to applicable PRC laws and regulations on loans and direct investment. For details, see "—D. Risk Factors—Risk Relating
to Doing Business in the PRC — PRC regulation of parent/subsidiary loans and direct investment by offshore holding companies to
PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our
PRC subsidiary and to make loans to Shengfeng Logistics, which could materially and adversely affect our liquidity and our ability to
fund and expand our business."
Cash transfers from our Cayman Islands holding company are subject
to applicable PRC laws and regulations on loans and direct investment. For example, any loans from Shengfeng Cayman to our wholly owned
subsidiary in the PRC, Tianyu, to finance its activities cannot exceed statutory limits and must be registered with the local counterpart
of SAFE, or filed with SAFE in its information system. Pursuant to relevant PRC regulations, we may provide loans to Tianyu up to the
larger amount of (i) the balance between the registered total investment amount and registered capital of Tianyu, or (ii) twice the amount
of the net assets of Tianyu calculated in accordance with the Circular on Full-Coverage Macro-Prudent Management of Cross-Border Financing,
or the "PBOC Circular 9." Moreover, any medium or long-term loan to be provided by us to Tianyu or other domestic PRC entities
must also be filed and registered with National Development and Reform Commission, or the "NDRC." We may also decide to finance
Tianyu by means of capital contributions. These capital contributions are subject to registration with the State Administration for Market
Regulation or its local branch, reporting of foreign investment information with MOFCOM, or registration with other governmental authorities
in China. Due to the restrictions imposed on loans in foreign currencies extended to PRC domestic companies, we are not likely to make
such loans to Shengfeng Logistics, which is a PRC domestic company. Further, we are not likely to finance the activities of Shengfeng
Logistics and the VIE's subsidiaries by means of capital contributions, due to regulatory restrictions relating to foreign investment
in PRC domestic enterprises, which may be engaged in certain businesses, such as the Foreign Investment Law, which provides that
foreign investors shall not invest in any field with investment prohibited by the negative list for foreign investment access. Additionally,
the PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of
currency out of China. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our
foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders. For a more detailed description
of the restrictions and limitations on our ability to transfer cash or distribute earnings to our Cayman Islands holding company and the
investors, see "—D. Risk Factors—Risks Relating to Doing Business in the PRC—PRC regulation of parent/subsidiary
loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering
to make loans or additional capital contributions to our PRC subsidiary and to make loans to Shengfeng Logistics, which could materially
and adversely affect our liquidity and our ability to fund and expand our business
,
" "—D. Risk Factors—
Risks Relating to Doing Business in the PRC—Governmental control of currency conversion may affect the value of your investment
and our payment of dividends
,
" and "Item 14. Material Modifications to the Rights of Security Holders and Use of Proceed
s
."
In addition, current PRC regulations permit our PRC subsidiary to pay dividends to its shareholders only out of its accumulated profits,
if any, determined in accordance with PRC accounting standards and regulations. For details, see "—D. Risk Factors—Risks
Relating to Doing Business in the PRC—Our PRC subsidiary is subject to restrictions on paying dividends or making other payments
to us, which may have a material adverse effect on our ability to conduct our business."
15
If needed, cash can be transferred between our holding company and
subsidiaries through intercompany fund advances, and there are currently no restrictions on transferring funds between our Cayman Islands
holding company and subsidiaries in Hong Kong and mainland China, other than certain restrictions and limitations imposed by the PRC government.
Currently, there are no restrictions or limitations imposed by the Hong Kong government on the transfer of capital within, into and out
of Hong Kong (including funds from Hong Kong to the PRC), except for transfer of funds involving money laundering and criminal activities.
Additionally, under existing PRC foreign exchange regulations, payment of current account items, such as profit distributions and trade
and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the SAFE, by complying
with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in foreign currencies to us without prior
approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures
under PRC foreign exchange regulations, such as the overseas investment registrations by our shareholders or the ultimate shareholders
of our corporate shareholders who are PRC residents. Approval from, or registration with, appropriate government authorities is, however,
required where the RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment
of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies
for current account transactions. Current PRC regulations permit our PRC subsidiary to pay dividends to shareholders only out of its accumulated
profits, if any, determined in accordance with Chinese accounting standards and regulations. See "—D. Risk Factors—Governmental
control of currency conversion may affect the value of your investment and our payment of dividends" and "—D. Risk Factors
— Risks Relating to Doing Business in the PRC — Our PRC subsidiary is subject to restrictions on paying dividends or making
other payments to us, which may have a material adverse effect on our ability to conduct our business." As of the date of this annual
report, no cash transfers, dividends, or distributions have occurred among our Company, our subsidiaries, and the VIE for the fiscal years
ended December 31, 2022 and 2021. As of the date of this annual report, none of our subsidiaries or the VIE have made any dividends or
distributions to our Company and our Company has not made any dividends or distributions to our shareholders.
Selected Condensed Consolidating Financial
Schedule of Shengfeng Cayman and Its Subsidiaries and the VIEs
On December 18, 2020, the Company completed a reorganization of entities
under common control of its then existing shareholders, who collectively owned all of the equity of the Company prior to the reorganization.
The Company and Shengfeng HK were each established as the holding companies of Shengfeng WFOE. Through Shengfeng WFOE, the Company entered
into the VIE agreements with the VIE. Pursuant to the VIE agreements, the Company was established as the primary beneficiary of the VIE
and its subsidiaries to transfer the economic benefits from the VIE to the Company and to direct the activities of the VIE.
We
conduct substantially all of our business in China through the VIE, and the VIE's subsidiaries. Substantially all of the Company's
revenues, costs and net income in China are directly or indirectly generated through the VIE and the VIE's subsidiaries.
The
following tables present selected condensed consolidating financial data of Shengfeng Cayman and its subsidiaries, the VIE, and the VIE's
subsidiaries for the fiscal years ended December 31, 2022 and 2021, and balance sheet data as of December 31, 2022 and 2021, which have
been derived from our unaudited condensed consolidated interim financial statements for the period and our audited consolidated financial
statements for those years.
16
As
of and for the year ended December 31, 2022
Shengfeng
Development
Limited
(Shengfeng
Cayman)
Shengfeng HK
(100% owned by
Shengfeng
Cayman)
Fujian Tianyu
Shengfeng
Logistics
Co., Ltd.
(WFOE)
(100% owned by
Shengfeng HK)
Shengfeng
Logistics
Group Co., Ltd.
and its
subsidiaries
(VIE)
Eliminations
Consolidated
Total
$ in thousands
Condensed Consolidating Schedule – Balance Sheet
Assets:
Current assets
$
47
$
-
$
-
$
135,650
$
-
$
135,697
Receivable from VIE
$
-
$
-
$
91,695
$
-
$
(91,695
)
$
-
Investments in subsidiaries
$
91,695
$
91,695
$
-
$
-
$
(183,390
)
$
-
Non-current assets
$
91,776
$
91,695
$
91,695
$
109,481
$
(275,085
)
$
109,562
Total assets
$
91,823
$
91,695
$
91,695
$
245,131
$
(275,085
)
$
245,259
Liabilities:
Current liabilities
$
600
$
-
$
-
$
130,196
$
-
$
130,796
Payable to WFOE
$
-
$
-
$
-
$
91,695
$
(91,695
)
$
-
Non-current liabilities
$
-
$
-
$
-
$
111,072
$
(91,695
)
$
19,377
Total liabilities
$
600
$
-
$
-
$
241,268
$
(91,695
)
$
150,173
Total shareholders' equity
$
91,223
$
91,695
$
91,695
$
3,863
$
(183,390
)
$
95,086
Total liabilities and shareholders' equity
$
91,823
$
91,695
$
91,695
$
245,131
$
(275,085
)
$
245,259
Condensed Consolidating Schedule – Statement of Operations
Revenues
$
-
$
-
$
-
$
370,325
$
-
$
370,325
Cost of revenues
$
-
$
-
$
-
$
(328,793
)
$
-
$
(328,793
)
Gross profit
$
-
$
-
$
-
$
41,532
$
-
$
41,532
Operating expenses
$
(472
)
$
-
$
-
$
(31,214
)
$
-
$
(31,686
)
Technical service income from VIE and its subsidiaries (1)
$
-
$
-
$
8,298
$
-
$
(8,298
)
$
-
Technical Service expense in WFOE (1)
$
-
$
-
$
-
$
(8,298
)
$
8,298
$
-
Income for equity method investments
$
8,298
$
8,298
$
-
$
-
$
(16,596
)
$
-
Net income
$
7,826
$
8,298
$
8,298
$
-
$
(16,596
)
$
7,826
Condensed Consolidating Schedule – Statement of Cash Flows
Net cash provided by (used in) operating activities
$
(472
)
$
-
$
-
$
7,402
$
-
$
6,930
Net cash used in investing activities
$
-
$
-
$
-
$
(6,715
)
$
-
$
(6,715
)
Net cash provided by financing activities
$
519
$
-
$
-
$
5,530
$
-
$
6,049
Effects of exchange rate changes on cash and restricted cash
$
-
$
-
$
-
$
(1,814
)
$
-
$
(1,814
)
Net increase in cash and restricted cash
$
47
$
-
$
-
$
4,403
$
-
$
4,450
Cash and restricted cash, beginning of year
$
-
$
-
$
-
$
18,918
-
$
18,918
Cash and restricted cash, end of year
$
47
$
-
$
-
$
23,321
$
-
$
23,368
Inter-company cash transfers (2)
$
-
$
-
$
-
$
-
$
-
$
-
17
As
of and for the year ended December 31, 2021
Shengfeng
Development
Limited
(Shengfeng
Cayman)
Shengfeng HK
(100% owned by
Shengfeng
Cayman)
Fujian Tianyu
Shengfeng
Logistics
Co., Ltd.
(WFOE)
(100% owned by
Shengfeng
HK)
Shengfeng
Logistics
Group Co., Ltd. and its
subsidiaries
(VIE)
Eliminations
Consolidated
Total
$ in thousands
Condensed Consolidating Schedule – Balance Sheet
Assets:
Current assets
$
-
$
-
$
-
$
121,698
$
-
$
121,698
Receivable from VIE
$
-
$
-
$
91,593
$
-
$
(91,593
)
$
-
Investments in subsidiaries
$
91,593
$
91,593
$
-
$
-
$
(183,186
)
$
-
Non-current assets
$
91,593
$
91,593
$
91,593
$
122,511
$
(274,779
)
$
122,511
Total assets
$
91,593
$
91,593
$
91,593
$
244,209
$
(274,779
)
$
244,209
Liabilities:
Current liabilities
$
-
$
-
$
-
$
125,352
$
-
$
125,352
Payable to WFOE
$
-
$
-
$
-
$
91,953
$
(91,953
)
$
-
Non-current liabilities
$
-
$
-
$
-
$
114,552
$
(91,953
)
$
22,959
Total liabilities
$
-
$
-
$
-
$
239,904
$
(91,953
)
$
148,311
Total shareholders' equity
$
91,593
$
91,593
$
91,593
$
4,305
$
(183,186
)
$
95,898
Total liabilities and shareholders' equity
$
91,953
$
91,593
$
91,593
$
244,209
$
(274,779
)
$
244,209
Condensed Consolidating Schedule – Statement of Operations
Revenues
$
-
$
-
$
-
$
346,699
$
-
$
346,699
Cost of revenues
$
-
$
-
$
-
$
(305,345
)
$
-
$
(305,345
)
Gross profit
$
-
$
-
$
-
$
41,345
$
-
$
41,345
Operating expenses
$
-
$
-
$
-
$
(32,758
)
$
-
$
(32,758
)
Technical service income from VIE and its subsidiaries (1)
$
-
$
-
$
6,644
$
-
$
(6,644
)
$
-
Technical Service expense in WFOE (1)
$
-
$
-
$
-
$
(6,644
)
$
6,644
$
-
Income for equity method investments
$
6,644
$
6,644
$
-
$
-
$
(13,288
)
$
-
Net income
$
6,644
$
6,644
$
6,644
$
-
$
(13,288
)
$
6,644
Condensed Consolidating Schedule – Statement of Cash Flows
Net cash provided by operating activities
$
-
$
-
$
-
$
16,592
$
-
$
16,592
Net cash used in investing activities
$
-
$
-
$
-
$
(23,869
)
$
-
$
(23,869
)
Net cash used in financing activities
$
-
$
-
$
-
$
(2,127
)
$
-
$
(2,127
)
Effects of exchange rate changes on cash and restricted cash
$
-
$
-
$
-
$
538
$
-
$
538
Net decrease in cash and restricted cash
$
-
$
-
$
-
$
(8,866
)
$
-
$
(8,866
)
Cash and restricted cash, beginning of year
$
-
$
-
$
-
$
27,784
$
-
$
27,784
Cash and restricted cash, end of year
$
-
$
-
$
-
$
18,918
$
-
$
18,918
Inter-company cash transfers (2)
$
-
$
-
$
-
$
-
$
-
$
-
18
As
of and for the year ended December 31, 2020
Shengfeng
Development
Limited
(Shengfeng
Cayman)
Shengfeng
HK (100%
owned by
Shengfeng
Cayman)
Fujian Tianyu
Shengfeng
Logistics Co.,
Ltd. (WFOE)
(100% owned
by Shengfeng
HK)
Shengfeng
Logistics
Group Co.,
Ltd. and its
subsidiaries
(VIE)
Eliminations
Consolidated
Total
$ in thousands
Condensed Consolidating Schedule – Balance Sheet
Assets:
Current assets
$
-
$
-
$
-
$
128,143
$
-
$
128,143
Receivable from VIE
$
-
$
-
$
82,623
$
-
$
(82,623
)
$
-
Investments in subsidiaries
$
82,623
$
82,623
$
-
$
-
$
(165,246
)
$
-
Non-current assets
$
82,623
$
82,623
$
82,623
$
104,039
$
(247,869
)
$
104,039
Total assets
$
82,623
$
82,623
$
82,623
$
232,182
$
(247,869
)
$
232,182
Liabilities:
Current liabilities
$
-
$
-
$
-
$
129,016
$
-
$
129,016
Payable to WFOE
$
-
$
-
$
-
$
82,623
$
(82,623
)
$
-
Non-current liabilities
$
-
$
-
$
-
$
101,410
$
(82,623
)
$
18,787
Total liabilities
$
-
$
-
$
-
$
230,426
$
(82,623
)
$
147,803
Total shareholders' equity
$
82,623
$
82,623
$
82,623
$
1,756
$
(165,246
)
$
84,379
Total liabilities and shareholders' equity
$
82,623
$
82,623
$
82,623
$
232,182
$
(247,869
)
$
232,182
Condensed Consolidating Schedule – Statement of Operations
Revenues
$
-
$
-
$
-
$
287,464
$
-
$
287,464
Cost of revenues
$
-
$
-
$
-
$
(251,489
)
$
-
$
(251,489
)
Gross profit
$
-
$
-
$
-
$
35,975
$
-
$
35,975
Operating expenses
$
-
$
-
$
-
$
(29,771
)
$
-
$
(29,771
)
Technical service income from VIE and its subsidiaries (1)
$
-
$
-
$
6,043
$
-
$
(6,043
)
$
-
Technical Service expense in VIE (1)
$
-
$
-
$
-
$
(6,043
)
$
6,043
$
-
Income for equity method investments
$
6,043
$
6,043
$
-
$
-
$
(12,086
)
$
-
Net income
$
6,043
$
6,043
$
6,043
$
-
$
(12,086
)
$
6,043
Condensed Consolidating Schedule – Statement of Cash Flows
Net cash provided by operating activities
$
-
$
-
$
-
$
2,332
$
-
$
2,332
Net cash used in investing activities
$
-
$
-
$
-
$
(7,821
)
$
-
$
(7,821
)
Net cash provided by financing activities
$
-
$
-
$
-
$
13,144
$
-
$
13,144
Effects of exchange rate changes on cash and restricted cash
$
-
$
-
$
-
$
1,714
$
-
$
1,714
Net increase in cash and restricted cash
$
-
$
-
$
-
$
9,369
$
-
$
9,369
Cash and restricted cash, beginning of year
$
-
$
-
$
-
$
18,415
$
-
$
18,415
Cash and restricted cash, end of year
$
-
$
-
$
-
$
27,784
$
-
$
27,784
Inter-company cash transfers (2)
$
-
$
-
$
-
$
-
$
-
$
-
(1)
Represents technical service fee,
    including the basic annual fee and the floating fee, which equals to 100% of the VIE's income net of tax, pursuant to the Exclusive
    Technical Consultation and Service Agreements.
(2)
There were no inter-company cash transfers among Shengfeng
    Cayman, Shengfeng HK, WFOE, the VIE and the VIE's subsidiaries for the years ended December 31, 2022, 2021 and 2020.
19
A.
[Reserved]
B.
Capitalization and Indebtedness
Not
applicable.
C.
Reasons for the Offer and Use of Proceeds
Not
applicable.
D.
Risk Factors
Risks
Relating to Our Corporate Structure
Our
corporate structure, in particular our contractual arrangements (the "VIE Agreements") with Shengfeng Logistics and the Shengfeng
Logistics Shareholders, together holding 100% of the shares in Shengfeng Logistics, are subject to significant risks, as set forth in
the following risk factors.
If
the PRC government deems that the contractual arrangements in relation to the VIE do not comply with applicable PRC law or PRC regulatory
restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations
change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
We currently operate our business through Shengfeng Logistics, a VIE,
pursuant to the VIE Agreements, and the VIE's subsidiaries. As a result of these contractual arrangements, under generally accepted
accounting principles in the United States, or "U.S. GAAP," the assets and liabilities of Shengfeng Logistics are treated
as our assets and liabilities and the results of operations of Shengfeng Logistics are treated in all aspects as if they were the results
of our operations. For a description of these contractual arrangements, see "Item 3. Key Information—Our VIE Agreements."
In
the opinion of AllBright, our PRC counsel, based on its understandings of the relevant PRC laws and regulations, (i) the ownership structures
of Shengfeng Logistics in China and Tianyu, our wholly owned subsidiary in China, both currently and immediately after giving effect
to this offering, are not in violation of applicable PRC laws and regulations currently in effect; and (ii) each of the contracts among
Tianyu, Shengfeng Logistics, and the Shengfeng Logistics Shareholders is legal, valid, binding, and enforceable in accordance with its
terms and applicable PRC laws. However, our PRC counsel has also advised us that there are substantial uncertainties regarding the interpretation
and application of current or future PRC laws and regulations. In addition, our VIE Agreements have not been tested in a court of law
in China as of the date of this annual report. Accordingly, the PRC regulatory authorities may ultimately take a view contrary to the
opinion of our PRC counsel in the future. It is uncertain whether any new PRC laws or regulations relating to VIE structures will be
adopted or, if adopted, what they would provide. Furthermore, it is uncertain whether any future actions by the government of China will
significantly affect the enforceability of the VIE Agreements.
20
If
(i) the applicable PRC authorities invalidate the VIE Agreements for violation of PRC laws, rules and regulations, (ii) the VIE or its
shareholders terminate the contractual arrangements (iii) the VIE or its shareholders fail to perform their respective obligations under
such VIE Agreements, or (iv) if these regulations change or are interpreted differently in the future, our business operations in China
would be materially and adversely affected, and the value of our Class A Ordinary Shares would substantially decrease or even become
worthless. Further, if we fail to renew such VIE Agreements 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 the VIE or the VIE's subsidiaries or all or part of their respective 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 VIE or the VIE's subsidiaries undergoes a voluntary or involuntary
liquidation proceeding, its respective 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
revenue.
All
of the VIE Agreements 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 such VIE Agreements.
If
our corporate structure and the VIE Agreements are determined to be illegal or invalid by a PRC court, arbitral tribunal, or regulatory
authorities, we may lose control of the VIE and have to modify such structure to comply with regulatory requirements. However, there
can be no assurance that we can achieve a structural modification without material disruption to our business. Further, if our corporate
structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, or we or Shengfeng
Logistics fails to obtain or maintain any required permits or approvals, the relevant regulatory authorities would have broad discretion
in dealing with such violations, including:
●
revoking the
    business or operating licenses or both of Tianyu or Shengfeng Logistics;
●
discontinuing or restricting
    the operations of Tianyu or Shengfeng Logistics;
●
imposing conditions
    or requirements with which we, Tianyu, or Shengfeng Logistics may not be able to comply;
●
requiring us, Tianyu, or
    Shengfeng Logistics to change our corporate structure and contractual arrangements;
●
restricting or prohibiting
    our use of the proceeds from our initial public offering to finance our business and operations in China; and
●
imposing fines.
The
imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business. In addition,
it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of Shengfeng
Logistics in our consolidated financial statements, if the PRC government authorities were to find our legal structure and VIE Agreements
to be in violation of PRC laws and regulations. If the imposition of any of these government actions causes us to lose our right to direct
the activities of Shengfeng Logistics or our right to receive substantially all the economic benefits and residual returns from Shengfeng
Logistics and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able
to consolidate the financial results of Shengfeng Logistics in our consolidated financial statements. Either of these results, or any
other significant penalties that might be imposed on us in this event, would have a material adverse effect on our financial condition
and results of operations.
Furthermore,
if the PRC government determines that the contractual arrangements constituting part of our VIE structure do not comply with PRC regulations,
or if these regulations change or are interpreted differently in the future, our Class A Ordinary Shares may decline in value or become
worthless if we are unable to assert our contractual control rights over the assets of the VIE and the VIE's subsidiaries that
conduct substantially all of our operations in China.
21
Our
VIE Agreements with Shengfeng Logistics and the Shengfeng Logistics Shareholders may not be effective in providing control over Shengfeng
Logistics.
Shengfeng Development Limited is a holding company incorporated in
the Cayman Islands and it is not a Chinese operating company. As a holding company with no material operations of its own, its operations
have been conducted in China by its subsidiaries and through contractual arrangements, or VIE Agreements, with a VIE, Shengfeng Logistics,
and the VIE's subsidiaries. For accounting purposes, we control and receive the economic benefits of the VIE and the VIE's
subsidiaries' business operations through the VIE Agreements, which enable us to consolidate the financial results of the VIE and
the VIE's subsidiaries in our consolidated financial statement under U.S. GAAP. Neither we nor our subsidiaries own any equity interests
in the VIE or the VIE's subsidiaries. As an investor in this offering, you may be subject to unique risks due to our VIE structure.
The VIE Agreements are designed to provide our wholly owned subsidiary, Tianyu, with the power, rights, and obligations to Shengfeng Logistics,
including control rights and the rights to the assets, property, and revenue of the VIE, as set forth under the VIE Agreements. Our VIE
Agreements have not been tested in a court of law in China as of the date of this annual report. We have evaluated the guidance in FASB
ASC 810 and determined that we are regarded as the primary beneficiary of the VIE, for accounting purposes, as a result of our direct
ownership in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat the VIE and the VIE's subsidiaries as our consolidated
entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE's subsidiaries in our consolidated financial
statements in accordance with U.S. GAAP.
Our Class A Ordinary Shares offered in this offering are shares of
our offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE's subsidiaries in China, therefore, you
will not directly hold equity interests in the VIE or the VIE's subsidiaries, and you may never directly hold equity interests in
the VIE or the VIE's subsidiaries through your investment in this offering. For a description of the VIE Agreements, see "Item
3. Key Information—Our VIE Agreements."
We
primarily have relied, and expect to continue to rely on the VIE Agreements to control and operate the business of Shengfeng Logistics.
However, the VIE Agreements may not be as effective in providing us with the necessary control over Shengfeng Logistics and its operations.
For example, Shengfeng Logistics and the Shengfeng Logistics 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 direct ownership of Shengfeng Logistics, we would be able to exercise our rights as a shareholder to effect changes in the
board of directors of Shengfeng Logistics, which in turn could implement changes, subject to any applicable fiduciary obligations, at
the management and operational level. However, under the current VIE Agreements, we rely on the performance by Shengfeng Logistics and
the Shengfeng Logistics Shareholders of their respective obligations under the contracts to exercise control over Shengfeng Logistics.
As of the date of this annual report, Shengfeng Logistics is owned by Fujian Yunlian Shengfeng Industry Co., Ltd. as to 54.58%, Yongxu
Liu, our chief executive officer, chairman of the board and president, as to 30.99%, and the other Shengfeng Logistics Shareholders who
collectively own 14.43% of the VIE. Fujian Yunlian Shengfeng Industry Co., Ltd. is 90% owned by Yongxu Liu. As a result, Mr. Liu directly
and indirectly owns 80.12% of Shengfeng Logistics. For more details, please see "Item 3. Key Information—Our Corporate Structure."
The Shengfeng Logistics Shareholders may not act in the best interests of our Company or may not perform their obligations under these
contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the VIE Agreements
with Shengfeng Logistics. Furthermore, failure of the VIE shareholders to perform certain obligations could compel the Company to rely
on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which
may not be effective. If any disputes relating to these contracts remain 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 and the Company may incur substantial costs to enforce the terms of such contracts. Therefore, our VIE Agreements
with Shengfeng Logistics and the Shengfeng Logistics Shareholders may not be as effective in ensuring our control over the relevant portion
of our business operations as direct ownership would be. Additionally, our VIE Agreements have not been tested in a court of law in China,
as of the date of this annual report, and may not be effective in providing control over the VIE. We are, therefore, subject to risks
due to the uncertainty of the interpretation and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure,
including, but not limited to, regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity
and enforcement of the contractual arrangements with the VIE. The VIE Agreements may not be enforceable in China if the PRC government
authorities or courts take a view that such VIE Agreements contravene PRC laws and regulations or are otherwise not enforceable for public
policy reasons. In the event that we are unable to enforce the VIE Agreements, we may not be able to exert effective control over Shengfeng
Logistics, and our ability to conduct our business may be materially and adversely affected.
22
Our
VIE Agreements are governed by the laws of the PRC and we may have difficulty in enforcing any rights we may have under these contractual
arrangements.
As
our VIE Agreements are governed by PRC laws and provide for the resolution of disputes through arbitration in the PRC, they would be
interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Disputes arising from
the VIE Agreements will be resolved through arbitration in the PRC, although these disputes do not include claims arising under the United
States federal securities law and thus do not prevent you from pursuing claims under the United States federal securities law. The legal
environment in the PRC is not as developed as in the United States. As a result, uncertainties in the PRC legal system could further
limit our ability to enforce these contractual arrangements, through arbitration, litigation, and other legal proceedings remain in the
PRC, which could limit our ability to enforce these contractual arrangements and exert effective control over Shengfeng Logistics. Furthermore,
these contracts may not be enforceable in the PRC if the PRC government authorities or courts take a view that such contracts contravene
PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event we are unable to enforce these contractual
arrangements, we may not be able to exert effective control over Shengfeng Logistics, and our ability to conduct our business may be
materially and adversely affected. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would
recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities
laws of the United States or any state.
We
may not be able to consolidate the financial results of Shengfeng Logistics or such consolidation could materially and adversely affect
our operating results and financial condition.
Our
business is conducted through Shengfeng Logistics, which currently is considered for accounting purposes as a VIE, and we are considered
the primary beneficiary for accounting purposes, enabling us to consolidate the financial results of Shengfeng Logistics in our consolidated
financial statements. In the event that in the future Shengfeng Logistics would no longer meet the definition of a VIE, or we are deemed
not to be the primary beneficiary for accounting purposes, we would not be able to consolidate line by line its financial results in
our consolidated financial statements for PRC purposes. Furthermore, if in the future an affiliate company becomes a VIE and we become
the primary beneficiary for accounting purposes, we would be required to consolidate that entity's financial results in our consolidated
financial statements for PRC purposes. If such entity's financial results were negative, this could have a corresponding negative
impact on our operating results for PRC purposes. However, any material variations in the accounting principles, practices, and methods
used in preparing financial statements for PRC purposes from the principles, practices, and methods generally accepted in the United
States and in the SEC accounting regulations must be discussed, quantified, and reconciled in financial statements for the United States
and SEC purposes.
The
VIE Agreements may result in adverse tax consequences.
PRC
laws and regulations emphasize the requirement of an arm's length basis for transfer pricing arrangements between related parties.
The laws and regulations also require enterprises with related party transactions to prepare transfer pricing documentation to demonstrate
the basis for determining pricing, the computation methodology, and detailed explanations. Related party arrangements and transactions
may be subject to challenge or tax inspection by the PRC tax authorizes.
Under
a tax inspection, if our transfer pricing arrangements between Tianyu and Shengfeng Logistics are judged as tax avoidance, or related
documentation does not meet the requirements, Tianyu and Shengfeng Logistics may be subject to material adverse tax consequences, such
as transfer pricing adjustment. A transfer pricing adjustment could result in a reduction, for PRC tax purpose, of adjustments recorded
by Tianyu, which could adversely affect us by (i) increasing Shengfeng Logistics' tax liabilities without reducing Tianyu's
tax liabilities, which could further result in interest being levied to us for unpaid taxes; or (ii) imposing late payment fees and other
penalties on Shengfeng Logistics for the adjusted but unpaid taxes according to the applicable regulations. In addition, if Tianyu requests
the Shengfeng Logistics Shareholders to transfer their equity interests in Shengfeng Logistics at nominal or no value pursuant to the
VIE Agreements, such transfer may be viewed as a gift and subject Tianyu to PRC income tax. As a result, our financial position could
be materially and adversely affected if Shengfeng Logistics' tax liabilities increase or if it is required to pay late payment
fees and other penalties.
The
Shengfeng Logistics Shareholders have potential conflicts of interest with our Company which may adversely affect our business and financial
condition.
The
Shengfeng Logistics Shareholders may have potential conflicts of interest with us. These shareholders may not act in the best interest
of our Company or may breach, or cause Shengfeng Logistics to breach the existing contractual arrangements we have with them and Shengfeng
Logistics, which would have a material and adverse effect on our ability to effectively control Shengfeng Logistics and receive economic
benefits from it. For example, the shareholders may be able to cause our agreements with Shengfeng Logistics to be performed in a manner
adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot
assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such
conflicts will be resolved in our favor.
23
Currently,
we do not have any arrangements to address potential conflicts of interest between these shareholders and our Company, except that we
could exercise our purchase option under the exclusive call option agreements with these shareholders to request them to transfer all
of their equity interests in Shengfeng Logistics to a PRC entity or individual designated by us, to the extent permitted by PRC law.
If we cannot resolve any conflicts of interest or disputes between us and those shareholders, we would have to rely on legal proceedings,
which may materially disrupt our business. There is also substantial uncertainty as to the outcome of any such legal proceeding.
We
rely on the approvals, certificates, and business licenses held by Shengfeng Logistics and any deterioration of the relationship between
Tianyu and Shengfeng Logistics could materially and adversely affect our overall business operations.
Pursuant
to the VIE Agreements, our business in the PRC will be undertaken on the basis of the approvals, certificates, business licenses, and
other requisite licenses held by Shengfeng Logistics. There is no assurance that Shengfeng Logistics will be able to renew its licenses
or certificates when their terms expire with substantially similar terms as the ones they currently hold.
Further,
our relationship with Shengfeng Logistics is governed by the VIE Agreements, which are intended to provide us, through our indirect ownership
of Tianyu, with effective control over the business operations of Shengfeng Logistics. However, the VIE Agreements may not be effective
in providing control over the applications for and maintenance of the licenses required for our business operations. Shengfeng Logistics
could violate the VIE Agreements, go bankrupt, suffer from difficulties in its business, or otherwise become unable to perform its obligations
under the VIE Agreements and, as a result, our operations, reputation, business, and stock price could be severely harmed.
The
exercise of our option to purchase part or all of the shares in Shengfeng Logistics under the exclusive call option agreement might be
subject to certain limitations and substantial costs.
Our
exclusive call option agreement with Shengfeng Logistics and the Shengfeng Logistics Shareholders gives Tianyu the option to purchase
up to 100% of the shares in Shengfeng Logistics. Such transfer of shares may be subject to approvals from, filings with, or reporting
to competent PRC authorities, such as the Ministry of Commerce of the PRC, or "MOFCOM," the State Administration for Market
Regulation, and/or their local competent branches. In addition, the shares transfer price may be subject to review and tax adjustment
by the relevant tax authorities. The shares transfer price to be received by Shengfeng Logistics under the VIE Agreements may also be
subject to enterprise income tax, and these amounts could be substantial.
Risks
Relating to Doing Business in the PRC
There
are uncertainties under the Foreign Investment Law relating to the status of businesses in China controlled by foreign invested projects
primarily through contractual arrangements, such as our business.
MOFCOM
and the NDRC promulgated the
Special Measures for Foreign Investment Access (2021 version)
, or the "2021 Negative List,"
on December 27, 2021, which became effective on January 1, 2022.
On March 15, 2019, the National People's Congress approved the
Foreign Investment Law of the PRC, which came into effect on January 1, 2020, repealing simultaneously the Law of the PRC on Sino-foreign
Equity Joint Ventures, the Law of the PRC on Wholly Foreign-owned Enterprises, and the Law of the PRC on Sino-foreign Cooperative Joint
Ventures, together with their implementation rules and ancillary regulations. Pursuant to the Foreign Investment Law, foreign investment
refers to any investment activity directly or indirectly carried out by foreign natural persons, enterprises, or other organizations,
including investment in new construction project, establishment of foreign funded enterprise or increase of investment, merger and acquisition,
and investment in any other way stipulated under laws, administrative regulations, or provisions of the State Council of the PRC, or the
"State Council." The Foreign Investment Law does not explicitly stipulate the contractual arrangements as a form of foreign
investment. On December 26, 2019, the State Council promulgated the Implementation Regulations on the Foreign Investment Law, which came
into effect on January 1, 2020. However, the Implementation Regulations on the Foreign Investment Law still remain silent on whether contractual
arrangements should be deemed to be a form of foreign investment. Though these regulations do not explicitly classify contractual arrangements
as a form of foreign investment, there is still uncertainty regarding whether the VIE would be identified as a foreign-invested enterprise
in the future. As a result, there is no assurance that foreign investment via contractual arrangements would not be interpreted as a type
of indirect foreign investment activities under the definition in the future.
24
If
we are deemed to have a non-PRC entity as a controlling shareholder, the provisions regarding control through contractual arrangements
could apply to our VIE Agreements, and as a result Shengfeng Logistics might become subject to restrictions on foreign investment, which
may materially impact the viability of our current and future operations. Specifically, we may be required to modify our corporate structure,
change our current scope of operations, obtain approvals, or face penalties or other additional requirements, compared to entities which
do have PRC controlling shareholders. Uncertainties exist with respect to the interpretation and implementation of the Foreign Investment
Law and how it may impact the viability of our current corporate structure, corporate governance, and business operations.
It
is uncertain whether we would be considered as ultimately controlled by Chinese parties. Immediately prior to completion of this offering,
Mr. Yongxu Liu, our chief executive officer and Chairman and a PRC citizen beneficially and indirectly owns 41,880,000 Class B Ordinary
Shares, representing approximately 91.66% of the voting rights in our Company. It is uncertain, however, if these factors would be sufficient
to give them control over us under the Foreign Investment Law. If future revisions or implementation rules of the Foreign Investment
Law mandate further actions, such as the MOFCOM market entry clearance or certain restructuring of our corporate structure and operations,
there may be substantial uncertainties as to whether we can complete these actions in a timely manner, if at all, and our business and
financial condition may be materially and adversely affected.
China's
economic, political and social conditions, laws and regulations, as well as possible interventions and influences of any government policies
and actions are uncertain and their changes may be quick with little advance notice. Therefore, such uncertainties and changes could
have a material adverse effect on our business, operations and the value of our Class A Ordinary Shares.
Our assets and operations are currently located in China. Accordingly,
our business, financial condition, results of operations, and prospects may be influenced to a significant degree by political, economic,
and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many respects,
including the level of government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources.
Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, including the
reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial
portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant
role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over
China's economic growth by allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary
policy, and providing preferential treatment to particular industries or companies. In addition, although the PRC includes also Hong Kong
Special Administrative Region and Macau Special Administrative Region, they are subject to different legal systems from mainland China.
For example, according to Basic Law of Hong Kong Special Administrative Region of the PRC (the "Basic Law"), the Hong Kong
Special Administrative Region is an inalienable part of the People's Republic of China. The National People's Congress (the
"NPC") of the PRC authorizes the Hong Kong Special Administrative Region to exercise a high degree of autonomy and to enjoy
executive, legislative and independent judicial power, including that of final adjudication, in accordance with the provisions of the
Basic Law. The laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and
customary law shall be maintained, except for any that contravene the Basic Law and subject to any amendment by the legislature of the
Hong Kong Special Administrative Region. PRC national laws shall not be applied in the Hong Kong Special Administrative Region except
for those listed in the Basic Law. The Standing Committee of the National People's Congress may add to or delete from the list of
laws in Annex III of Basic Law after consulting its Committee for the Basic Law of the Hong Kong Special Administrative Region and the
government of the Hong Kong Special Administrative Region. Laws listed in Annex III to this Law shall be confined to those relating to
national defense and foreign affairs as well as other matters outside the limits of the autonomy of the Hong Kong Special Administrative
Region as specified by the Basic Law. In the event that the Standing Committee of the National People's Congress decides to declare
a state of war or, by reason of turmoil within the Hong Kong Special Administrative Region which endangers national unity or security
and is beyond the control of the government of the Region, decides that the Hong Kong Special Administrative Region is in a state of emergency,
the Central People's Government may issue an order applying the relevant national laws in the Hong Kong Special Administrative Region.
As of the date of this annual report, the PRC national laws applicable to the Hong Kong Special Administrative Region include the following:
Resolution on the Capital, Calendar, National Anthem and National Flag of the People's Republic of China, Resolution on the National
Day of the People's Republic of China, Declaration of the Government of the People's Republic of China on the Territorial
Sea, Nationality Law of the People's Republic of China, Regulations of the People's Republic of China Concerning Diplomatic
Privileges and Immunities, Law of the People's Republic of China on the National Flag, Regulations of the People's Republic
of China concerning Consular Privileges and Immunities, Law of the People's Republic of China on the National Emblem, Law of the
People's Republic of China on the Territorial Sea and the Contiguous Zone, Law of the People's Republic of China on the Garrisoning
of the Hong Kong Special Administrative Region, Law of the People's Republic of China on the Exclusive Economic Zone and the Continental
Shelf, Law of the People's Republic of China on the National Anthem, and Law of the People's Republic of China on Safeguarding
National Security in the Hong Kong Special Administrative Region. However, due to the uncertainty of the PRC legal system and changes
in laws, regulations or policies, including how those laws, regulations or policies would be interpreted or implemented, and the national
laws applicable in Hong Kong, the Basic Law might be revised in the future, and as a consequence, we may face certain legal and operational
risks associated with operating in the PRC, which may also apply to our operations in Hong Kong, including those of Shengfeng HK. However,
as of the date of this annual report, we, believe that since the list of laws in Annex III of Basic Law is currently limited to national
defense and foreign affairs, PRC national laws listed in the Basic Law does not apply to our operations in Hong Kong. Moreover, our HK
subsidiary, Shengfeng HK, does not have any business operations in Hong Kong. Nevertheless, Shengfeng HK, as an entity incorporated under
law of Hong Kong, shall be subject to Hong Kong law in general.
25
While
the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various
sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the Chinese government, or in the laws
and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely
affect our business and operating results, reduce demand for our products, and weaken our competitive position. The Chinese government
has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit
the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may
be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese
government has implemented certain measures, including interest rate adjustments, to control the pace of economic growth. These measures
may cause decreased economic activities in China, which may adversely affect our business and operating results.
China's
economic, political and social conditions, laws and regulations, as well as possible interventions and influences of any government policies
and actions are uncertain and could have a material adverse effect on our business, operations and the value of our Class A Ordinary
Shares. Furthermore, the PRC government authorities may strengthen oversight and control over offerings that are conducted overseas and/or
foreign investment in China-based issuers like us. Such actions taken by the PRC government authorities may intervene or influence our
operations at any time, which are beyond our control. Any such action may adversely affect our operations and significantly limit or
completely hinder our ability to offer or continue to offer our Class A Ordinary Shares to investors and reduce the value of such securities.
Furthermore,
our Company, the VIE and the VIE's subsidiaries, and our investors may face uncertainty about future actions by the government
of China that could significantly affect the VIE and the VIE's subsidiaries' financial performance and operations, including
the enforceability of the contractual arrangements. As of the date of this annual report, neither our Company nor the VIE has received
or was denied permission from Chinese authorities to list on U.S. exchanges. However, there is no guarantee that our Company or VIE will
receive or not be denied permission from Chinese authorities to list on U.S. exchanges in the future.
PRC
laws and regulations governing our current business operations are sometimes vague and uncertain. Uncertainties in the interpretation
and enforcement of PRC laws and regulations could limit the legal protection available to you and us. Any changes in such laws and regulations
may impair our ability to operate profitably.
There
are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to,
the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances.
The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement
may involve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations, including amendments
to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently
adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect
existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing
or new PRC laws or regulations may have on our business.
The
PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents.
In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in
general. The legislation over the past three decades has significantly increased the protection afforded to various forms of foreign
or private-sector investment in China. Our PRC Affiliated Entities are subject to various PRC laws and regulations generally applicable
to companies in China. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, however,
the interpretations of many laws, regulations, and rules are not always uniform and enforcement of these laws, regulations, and rules
involve uncertainties.
26
From
time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Since PRC administrative and
court authorities have significant discretion in interpreting and implementing statutory and contractual terms, however, it may be more
difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy in the PRC legal
system than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules
(some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of
our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainties over the scope
and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes
in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.
For
example, 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, and cybersecurity and data privacy protection requirements and similar matters. On December 24, 2021, the CSRC promulgated
the New Overseas Listing Rules for public comments. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings
with relevant governmental authorities and report related information under certain circumstances, such as, a) an issuer making an application
for initial public offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been
listed on an overseas market; c) an issuer offering securities on an overseas market to purchase assets after having been listed overseas;
and d) a domestic company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share
swap, transfer of shares or other means. On February 17, 2023, the CSRC promulgated the Trial Measures, and five supporting guidelines,
which came into effect on March 31, 2023. The Trial Measures and its supporting guidelines, reiterate the basic principles of the New
Overseas Listing Rules and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises.
Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall
complete filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission
of initial public offerings or listing application. If a domestic company fails to complete the required filing procedures or conceals
any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties,
such as orders to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other
directly liable persons may also be subject to administrative penalties, such as warnings and fines.
According
to the Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies
from the CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas 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 not required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges
(for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their indirect
overseas offering and listing prior 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 to September 30, 2023. Those that complete their indirect 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 indirect overseas offerings
and listings. Within such six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance
and listing, they shall complete the filing procedures with the CSRC.
27
On February 24, 2023, the CSRC, together with
Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised
the Provisions, which were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration
of China in 2009. The revised Provisions were issued under the title the "Provisions on Strengthening Confidentiality and Archives
Administration of Overseas Securities Offering and Listing by Domestic Companies", and came into effect on March 31, 2023 together
with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas
offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including, but not limited to, (a)
a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant
individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials
that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according
to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly
or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities
companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental
to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As
of the date of this annual report, the revised Provisions came into effect and we are not aware of any PRC laws or regulations in effect
requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry,
notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities that have
jurisdiction over our operations. However, any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to comply with
the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may
result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated
for criminal liability if suspected of committing a crime. See "Item 4. Information on the Company—B. Business Overview—Regulations—Regulations
on Mergers & Acquisitions and Overseas Listings
.
" The Opinions, the Trial Measures, the revised Provisions and any related
implementing rules to be enacted may subject us to compliance requirement in the future. Therefore, we cannot assure you that we will
remain fully compliant with all new regulatory requirements of the Opinions, the Trial Measures or any future implementation rules on
a timely basis, or at all.
Uncertainties
regarding the enforcement of laws and the fact that rules and regulations in China can change quickly with little advance notice, along
with the risk that the Chinese government may intervene or influence our operations at any time, or
may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers could result in a material
change in our operations, financial performance and/or the value of our Class A Ordinary Shares or impair our ability to raise money.
You
may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against
us or our management named in the annual report based on foreign laws. It may also be difficult for you or overseas regulators to conduct
investigations or collect evidence within China.
We
are a company incorporated under the laws of the Cayman Islands, and we conduct our operations in China and our assets are located in
China. In addition, all our senior executive officers reside within China for a significant portion of the time and are PRC nationals.
As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. In addition, there
is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against
us or such persons predicated upon the civil liability provisions of the securities laws of the U.S. or any state.
28
The recognition and enforcement of foreign judgments
are provided for under the
PRC Civil Procedures Law
. PRC courts may recognize and enforce foreign judgments in accordance with
the requirements of the
PRC Civil Procedures Law
based either on treaties between China and the country where the judgment is made
or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the
U.S. that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the
PRC Civil Procedures
Law
, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment
violates the basic principles of PRC laws or national sovereignty, security, or public interest. As a result, it is uncertain whether
and on what basis a PRC court would enforce a judgment rendered by a court in the U.S.
It
may also be difficult for you or overseas regulators to conduct investigations or collect evidence within China. For example, in China,
there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside
China or otherwise with respect to foreign entities. Although the authorities in China may establish a regulatory cooperation mechanism
with its counterparts of another country or region to monitor and oversee cross-border securities activities, such regulatory cooperation
with the securities regulatory authorities in the United States may not be efficient in the absence of a practical cooperation mechanism.
Furthermore, according to Article 177 of the PRC Securities Law, or "Article 177," which became effective in March 2020,
no overseas securities regulator is allowed to directly conduct investigations or evidence collection activities within the territory
of the PRC. Article 177 further provides that Chinese entities and individuals are not allowed to provide documents or materials related
to securities business activities to foreign agencies without prior consent from the securities regulatory authority of the State Council
and the competent departments of the State Council. While detailed interpretation of or implementing rules under Article 177 have yet
to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities
within China may further increase difficulties faced by you in protecting your interests.
Recent
joint statement by the SEC and the Public Company Accounting Oversight Board (United States), or the "PCAOB," rule changes
by Nasdaq, and an act 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.
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 a minimum offering size requirement for companies primarily operating
in a "Restrictive Market," (ii) adopt a new requirement relating to the qualification of management or the board of directors
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 auditor. On October 4, 2021, the SEC approved Nasdaq's revised proposal for the rule changes.
On
May 20, 2020, the U.S. Senate passed the HFCA Act, requiring a foreign company to certify it is not owned or manipulated by a foreign
government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection.
If the PCAOB is unable to inspect the company's auditor for three consecutive years, the issuer's securities are prohibited
to trade on a national exchange or in the over-the-counter trading market in the United States. On December 2, 2020, the U.S. House
of Representatives approved the HFCA Act. On December 18, 2020, the HFCA Act was signed into law.
29
On
June 4, 2020, the U.S. President issued a memorandum ordering the President's working group on financial markets, or the "PWG,"
to submit a report to the President within 60 days of the date of the memorandum that should include recommendations for actions that
can be taken by the executive branch and by the SEC or PCAOB to enforce U.S. regulatory requirements on Chinese companies listed on U.S.
stock exchanges and their audit firms.
On
August 6, 2020, the PWG released a report recommending that the SEC take steps to implement the five recommendations outlined in the
report. In particular, to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfill its statutory
mandate, or "NCJs", the PWG recommends enhanced listing standards on U.S. stock exchanges. This would require, as a condition
to initial and continued exchange listing, PCAOB access to work papers of the principal audit firm for the audit of the listed company.
Companies unable to satisfy this standard as a result of governmental restrictions on access to audit work papers and practices in NCJs
may satisfy this standard by providing a co-audit from an audit firm with comparable resources and experience where the PCAOB determines
it has sufficient access to audit work papers and practices to conduct an appropriate inspection of the co-audit firm. The report permits
the new listing standards to provide for a transition period until January 1, 2022 for listed companies, but would apply immediately
to new listings once the necessary rulemakings and/or standard-setting are effective.
On
August 10, 2020, the SEC announced that SEC Chairman had directed the SEC staff to prepare proposals in response to the PWG Report, and
that the SEC was soliciting public comments and information with respect to these proposals. If we are listed on Nasdaq and fail to meet
the new listing standards before the deadline specified thereunder due to factors beyond our control, we could face possible de-listing
from the Nasdaq Capital Market, deregistration from the SEC, and/or other risks, which may materially and adversely affect, or effectively
terminate, the trading of our Ordinary Shares in the United States.
The
HFCA Act 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, the issuer's securities are banned from trade on a national exchange or in the over-the-counter
trading market in the United States or through other methods.
On
March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure
requirements of the HFCA Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual
report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign
jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority
in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required
to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction,
and will also require disclosure in the registrant's annual report regarding the audit arrangements of, and governmental influence
on, such a registrant.
30
On
June 22, 2021, the U.S. Senate passed the Accelerating HFCA Act, which, if passed by the U.S. House of Representatives
and signed into law, would decrease the number of non-inspection years for foreign companies to comply with PCAOB audits from three to
two, thus reducing the time period before their securities may be prohibited from trading or delisted.
On
September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining,
as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms
located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On
November 5, 2021, the SEC approved the PCAOB's Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable
Act. Rule 6100 provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether it is unable to
inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by
one or more authorities in that jurisdiction.
On
December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCA Act,
which became effective on January 10, 2022. The rules apply to registrants that 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 PCAOB is unable to inspect
or investigate completely because of a position taken by an authority in foreign jurisdictions.
On
December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered
public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by mainland China and Hong Kong authorities
in those jurisdictions. The PCAOB has made such designations as mandated under the HFCA Act. Pursuant to each annual determination by
the PCAOB, the SEC will, on an annual basis, identify issuers that have used non-inspected audit firms and thus are at risk of such suspensions
in the future. As of the date of this annual report, our auditor is not subject to the determinations announced by the PCAOB on December
16, 2021. On August 26, 2022, the PCAOB signed the Statement of Protocol (SOP) Agreements with the China Securities Regulatory Commission
(CSRC) and China's Ministry of Finance. The SOP, together with two protocol agreements governing inspections and investigations
(together, the "SOP Agreements"), establish a specific, accountable framework to make possible complete inspections and investigations
by the PCAOB of audit firms based in mainland China and Hong Kong, as required under U.S. law. On December 15, 2022, the PCAOB Board
determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered
in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct
or otherwise fail to facilitate the PCAOB's access in the future, the PCAOB Board will consider the need to issue a new determination.
On
December 23, 2022, the Accelerating HFCA Act was signed into law, which amended the HFCA Act by requiring the SEC to prohibit an issuer's
securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead
of three. On December 29, 2022, the Consolidated Appropriations Act was signed into law by President Biden. The Consolidated Appropriations
Act contained, among other things, an identical provision to Accelerating HFCA Act, which reduces the number of consecutive non-inspection
years required for triggering the prohibitions under the HFCA Act from three years to two.
The
SEC may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection in the future.
31
Our auditor prior to November 11, 2022, Friedman LLP, or Friedman,
and current auditor, Marcum Asia CPAs LLP ("Marcum Asia"), the independent registered public accounting firms that issue the
audit reports included elsewhere in this annual report, as auditors of companies that are traded publicly in the United States and firms
registered with the PCAOB, have been subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to
assess its compliance with the applicable professional standards. Both Friedman and Marcum Asia have been inspected by the PCAOB on a
regular basis, with the last inspection in 2020. Neither Friedman nor Marcum Asia is subject to the determinations announced by the PCAOB
on December 16, 2021. The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting
firms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections
in early 2023 and beyond. Each year, the PCAOB will determine whether it can inspect and investigate completely accounting firms headquartered
in mainland China and Hong Kong. Furthermore, the Accelerating HFCA Act, which requires that the PCAOB be permitted to inspect the issuer's
public accounting firm within two years, may result in the delisting of our Company in the future if the PCAOB is unable to inspect our
accounting firm at such future time. Our securities may be prohibited from trading if our auditor cannot be fully inspected. While the
Company's auditor is based in the U.S. and is registered with PCAOB and subject to PCAOB inspection, in the event it is later determined
that the PCAOB is unable to inspect or investigate completely the Company's auditor because of a position taken by an authority
in a foreign jurisdiction, then such inability could cause trading in the Company's securities to be prohibited under the Accelerating
HFCA Act, and ultimately result in a determination by a securities exchange to delist the Company's securities. If trading in our
Class A Ordinary Shares is prohibited under the Accelerating HFCA Act in the future because the PCAOB determines that it cannot inspect
or fully investigate our auditor at such future time, Nasdaq may determine to delist our Class A Ordinary Shares. A termination in the
trading of our securities or any restriction on the trading in our securities would be expected to have a negative impact on the Company
as well as on the value of our securities.
It
remains unclear what the SEC's implementation process related to the above rules will entail or what further actions the SEC, the
PCAOB or Nasdaq will take to address these issues and what impact those actions will have on the companies that have significant operations
in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market).
In addition, the above amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S.
regulatory access to audit information could create some uncertainty for investors, the market price of our Class A Ordinary Shares could
be adversely affected, and we could be delisted if we and our auditor are unable to meet the PCAOB inspection requirement or being required
to engage a new audit firm, which would require significant expense and management time.
Furthermore,
new laws and regulations or changes in laws and regulations in both the United States and China could affect our ability to list our
securities on the Nasdaq Capital Market, which could materially impair the market for and the market price of our securities.
32
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 usually 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 the application through our office
automation system and the application 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 the VIE. 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.
Increases
in labor costs in the PRC may adversely affect our business and our profitability.
China's
economy has experienced increases in labor costs in recent years. China's overall economy and the average wage in China are expected
to continue to grow. The average wage level for our employees has also increased in recent years. We expect that our labor costs, including
wages and employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to our clients by increasing
prices for our services, our profitability and results of operations may be materially and adversely affected.
In
addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying
various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment
insurance, and maternity insurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract
Law, or the "Labor Contract Law," that became effective in January 2008 and its amendments that became effective in July
2013 and its implementing rules that became effective in September 2008, employers are subject to stricter requirements in terms of signing
labor contracts, minimum wages, paying remuneration, determining the term of employees' probation, and unilaterally terminating
labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices,
the Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner,
which could adversely affect our business and results of operations.
We
are currently not in full compliance with all PRC labor-related laws and regulations in certain respects. As of the date of this annual
report, we have not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations. We
believe that the estimated unpaid contribution amounts the Company was required to reserve in respect of the social insurance and housing
fund contribution is not material. The Company has taken measures to comply with related laws and regulations. Such measures include,
but are not limited to, outsourcing our labor-related matters and making payments for unpaid social insurance and housing fund contributions,
which may increase the costs of our business and operations. We are endeavoring to have sufficient funds to address our social insurance
and housing fund contribution requirements by the end of next year. However, our estimate of unpaid contributions may not be accurate
or sufficient and may not be accumulated by such time. Additionally, as of the date of this annual report,
our
number of dispatched workers has exceeded the 10% limitation required by the
Interim Provisions on Labor Dispatching
. The
Company has taken measures to comply with related laws and regulations. Such measures include, but are not limited to, decreasing the
number of dispatched workers and increasing the number of employees and outsourced workers, which is expected to increase the costs of
our business and operations. We are endeavoring to lower the rate of dispatched workers among our total employees and dispatched workers
in order to comply with related laws and regulations by the end of next year. We believe that the estimated amount of costs in respect
of taking such measures is not material. However, our estimate of costs may not be accurate or sufficient and may not be accumulated
by such time. Other than the social insurance and housing fund contributions and the estimate of costs to reduce the number of dispatched
workers, we are currently not able to quantify the contribution amounts that we will need to make for us to be in full compliance with
all PRC labor-related laws and regulations. To the best of our knowledge, as of the date of this annual report, based on all the information
available to us, we do not believe that the estimated amount of contributions that we will need to make in order to be in full compliance
with all PRC labor-related laws and regulations is material for our business operations. We will continue investigating and monitoring
our compliance status in connection with PRC labor-related laws and regulations in order to promptly address any shortfall going forward.
33
The
interpretation and implementation of labor-related laws and regulations are still constantly evolving which may be further amended from
time to time. Due to the constant evolution of the labor-related laws, we cannot assure you that our current employment practices will
not violate any future labor-related laws and regulations in China, which may subject us to labor disputes or government investigations.
If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our
employees, and our business, financial condition and results of operations could be materially and adversely affected.
Our
PRC Affiliated Entities have not made adequate social insurance and housing fund contributions for all employees as required by PRC regulations,
which may subject us to penalties.
According to the
PRC Social Insurance Law
and
the
Administrative Regulations on the Housing Funds
, companies operating in China are required to participate in pension insurance,
work-related injury insurance, medical insurance, unemployment insurance, maternity insurance (collectively known as "social insurance"),
and housing funds plans, and the employers must pay all or a portion of the social insurance premiums and housing funds for their employees.
For more details, please see "Item 4. Information on the Company—B. Business Overview—Regulations—Regulations
Related to Employment and Social Welfare—Social Insurance and Housing Fund." The requirement of social insurance and housing
fund has not been implemented consistently by the local governments in China given the different levels of economic development in different
locations.
Our
PRC Affiliated Entities have not made adequate social insurance and housing fund contributions for all employees. We may be required
to make up the social insurance contributions as well as to pay late fees at the rate of 0.05% per day of the outstanding amount from
the due date. If we fail to make up for the shortfalls within the prescribed time limit, the relevant administrative authorities will
impose a fine of one (1) to three (3) times the outstanding amount upon us. With respect to housing fund plans, we may be required to
pay and deposit housing funds in full and on time within the prescribed time limit. If we fail to do so, relevant authorities could file
applications to competent courts for compulsory enforcement of payment and deposit. Accordingly, if the relevant PRC authorities determine
that we shall make supplemental social insurance and housing fund contributions or that we are subject to fines and legal sanctions in
relation to our failure to make social insurance and housing fund contributions in full for our employees, our business, financial condition,
and results of operations may be adversely affected. However, as of the date of this annual report, the relevant local authorities confirmed
in writing that no records of violation were found on our PRC Entities for social insurance and/or housing fund contribution obligations.
Further, these PRC Entities have never received any demand or order from the competent authorities.
Our
number of dispatched workers has exceeded the 10% limitation required by PRC regulations, which may subject us to penalties.
The Labor
Contract Law provides that enterprises accepting labor dispatch services shall strictly control the number of dispatched workers and the
proportion of dispatched workers shall not exceed the percentage prescribed by competent labor administrative departments. The Interim
Provisions on Labor Dispatching, issued by the Ministry of Human Resources and Social Security of the People's Republic of China
on January 24, 2014, which came into effect on March 1, 2014, require the number of dispatched workers not to exceed 10% of the total
number of 1) the employees that are employed directly by an enterprise and 2) the dispatched workers.
For more details, please
see "Item 4. Information on the Company—B. Business Overview—Regulations—The Labor Law and the Labor Contract
Law" and
"
Item 4. Information on the Company—B. Business Overview—Regulations—The Interim Provisions
on Labor Dispatching
."
34
The
term "labor dispatch" refers to an atypical employment relationship pursuant to which the dispatch work agencies enter
into employment agreements with the workers, and then send such dispatched workers to the enterprises which have entered into labor dispatch
service agreements with the dispatch work agencies to provide services. In such circumstances, dispatched workers are under the supervision
and management of the enterprises they work in.
As
of the date of this annual report, the number of our dispatched workers has exceeded 10% of the total number of the employees directly
employed by the Company and the dispatched workers. According to the Labor Contract Law, any labor dispatching unit or employer who violates
the provisions of such law in respect of labor dispatching will be ordered by the labor administrative authorities to take corrective
action within a stipulated period. If such correction is not made within the stipulated period, a fine ranging from RMB5,000 (approximate
USD720) to RMB10,000 (approximate USD1,400) per person will be imposed to such labor dispatching unit or employer, and the labor dispatching
business permit of such labor dispatching unit will be revoked.
The
Company has taken measures to comply with related laws and regulations. Such measures include, but are not limited to, decreasing the
number of dispatched workers and increasing the number of employees and outsourced workers, which is expected to increase the costs of
our business and operations. We are endeavoring to lower the rate of dispatched workers among our total employees and dispatched workers
in order to comply with related laws and regulations by the end of next year. We may be required by the competent authorities to decrease
our number of dispatched workers
within a stipulated period earlier than the end of next year.
If we fail to correct such shortfall within the prescribed time limit, the relevant administrative authorities may impose a fine
ranging from RMB5,000 (approximate USD720) to RMB10,000 (approximate USD1,400) per person
upon us. Accordingly, if the relevant PRC authorities determine that we are subject to fines in relation to our failure to decrease the
number of our dispatched workers within the prescribed time limit, our business, financial condition, and results of operations may be
adversely affected. However, as of the date of this annual report, neither the Company, nor our PRC Affiliated Entities have received
any demand or order from the competent authorities.
PRC
regulations relating to offshore investment activities by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary
to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary's ability to increase
its registered capital or distribute profits to us, or may otherwise adversely affect us.
On
July 4, 2014, SAFE issued the
Circular on Issues Concerning Foreign Exchange Control over the Overseas Investment and Financing and
Round-trip Investment by Domestic Residents via Special Purpose Vehicles
, or "SAFE Circular 37." According to SAFE Circular
37, prior registration with the local SAFE branch is required for PRC residents, (including PRC individuals and PRC corporate entities
as well as foreign individuals that are deemed to be PRC residents for foreign exchange administration purpose), in connection with their
direct or indirect contribution of domestic assets or interests to offshore special purpose vehicles, or "SPVs." SAFE Circular
37 further requires amendments to the SAFE registrations in the event of any changes with respect to the basic information of the offshore
SPV, such as change of a PRC individual shareholder, name and operation term, or any significant changes with respect to the offshore
SPV, such as an increase or decrease of capital contribution, share transfer or exchange, or mergers or divisions. SAFE Circular 37 is
applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. In
February 2015, SAFE promulgated a
Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment
,
or "SAFE Notice 13," effective in June 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound
foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with
qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision
of SAFE.
35
In addition to SAFE Circular 37 and SAFE Notice
13, our ability to conduct foreign exchange activities in China may be subject to the interpretation and enforcement of the
Implementation
Rules of the Administrative Measures for Individual Foreign Exchange
promulgated by SAFE in January 2007 (as amended and supplemented,
the "Individual Foreign Exchange Rules"). Under the Individual Foreign Exchange Rules, any PRC individual seeking to make
a direct investment overseas or engage in the issuance or trading of negotiable securities or derivatives overseas must make the appropriate
registrations in accordance with SAFE provisions, the failure of which may subject such PRC individual to warnings, fines, or other liabilities.
As of the date of this annual report, Mr. Yongxu
Liu has completed the initial registrations with the qualified banks, as required by the regulations. We may not be informed of the identities
of all the PRC residents holding direct or indirect interest in our Company, however, and we have no control over any of our future beneficial
owners. Thus, we cannot provide any assurance that our current or future PRC resident beneficial owners will comply with our request to
make or obtain any applicable registrations or continuously comply with all registration procedures set forth in these SAFE regulations.
Such failure or inability of our PRC residents beneficial owners to comply with these SAFE regulations may subject us or our PRC resident
beneficial owners to fines and legal sanctions, restrict our cross-border investment activities, or limit our PRC subsidiary's ability
to distribute dividends to or obtain foreign-exchange-dominated loans from us, or prevent us from being able to make distributions or
pay dividends, as a result of which our business operations and our ability to distribute profits to you could be materially and adversely
affected.
PRC regulation of parent/subsidiary loans
and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to
make loans or additional capital contributions to our PRC subsidiary and to make loans to Shengfeng Logistics, which could materially
and adversely affect our liquidity and our ability to fund and expand our business.
We are an offshore holding company conducting
our operations in China through our PRC subsidiary Tianyu, Shengfeng Logistics, and the subsidiaries of Shengfeng Logistics. We may make
loans to these entities, or we may make additional capital contributions to Tianyu, or we may establish new PRC subsidiaries and make
capital contributions to these new PRC subsidiaries.
Most of these ways are subject to PRC regulations
and approvals or registration. For example, any loans to Tianyu, which is treated as a foreign-invested enterprise under PRC law, are
subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to Tianyu to finance its activities cannot
exceed statutory limits and must be registered with the local counterpart of SAFE, or filed with SAFE in its information system. Pursuant
to relevant PRC regulations, we may provide loans to Tianyu up to the larger amount of (i) the balance between the registered total investment
amount and registered capital of Tianyu, or (ii) twice the amount of the net assets of Tianyu calculated in accordance with the
Circular
on Full-Coverage Macro-Prudent Management of Cross-Border Financing
, or the "PBOC Circular 9." Moreover, any medium or
long-term loan to be provided by us to Tianyu or other domestic PRC entities must also be filed and registered with the NDRC. We may also
decide to finance Tianyu by means of capital contributions. These capital contributions are subject to registration with the State Administration
for Market Regulation or its local branch, reporting of foreign investment information with MOFCOM, or registration with other governmental
authorities in China. Due to the restrictions imposed on loans in foreign currencies extended to PRC domestic companies, we are not likely
to make such loans to Shengfeng Logistics, which is a PRC domestic company. Further, we are not likely to finance the activities of Shengfeng
Logistics and the VIE's subsidiaries by means of capital contributions due to regulatory restrictions relating to foreign investment
in PRC domestic enterprises, which may be engaged in certain business, such as the Foreign Investment Law, which provides that foreign
investors shall not invest in any field with investment prohibited by the negative list for foreign investment access.
On March 30, 2015, SAFE issued the
Circular
of the State Administration of Foreign Exchange on Reforming the Administrative Approach Regarding the Settlement of the Foreign Exchange
Capital of Foreign-invested Enterprise
s, or "SAFE Circular 19," which took effect and replaced previous regulations effective
on June 1, 2015. Pursuant to SAFE Circular 19, up to 100% of foreign currency capital of a foreign-invested enterprise may be converted
into RMB capital according to the actual operation, and within the business scope, of the enterprise at its will. Although SAFE Circular
19 allows for the use of RMB converted from the foreign currency-denominated capital for equity investments in the PRC, the restrictions
continue to apply as to foreign-invested enterprises' use of the converted RMB for purposes beyond their business scope, for entrusted
loans or for inter-company RMB loans. On June 9, 2016, 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 on June 9, 2016, which reiterates some rules set forth in 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-affiliated 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 this offering, to Tianyu, which may adversely affect
our liquidity and our ability to fund and expand our business in China. On October 23, 2019, the SAFE issued the
Notice of the State
Administration of Foreign Exchange on Further Facilitating Cross-border Trade and Investment
, or "SAFE Circular 28," which,
among other things, expanded the use of foreign exchange capital to domestic equity investment area. Non-investment foreign-funded enterprises
are allowed to lawfully make domestic equity investments by using their capital on the premise without violation to prevailing special
administrative measures for access of foreign investments (negative list) and the authenticity and compliance with the regulations of
domestic investment projects. However, since SAFE Circular 28 is newly promulgated, it is unclear how SAFE and competent banks will carry
it out in practice.
36
In light of the various requirements imposed by
PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, including SAFE Circular 19, SAFE Circular
16, and other relevant rules and regulations, we cannot assure you that we will be able to complete the necessary registrations or obtain
the necessary government approvals on a timely basis, if at all, with respect to future loans to Tianyu, Shengfeng Logistics, and subsidiaries
of Shengfeng Logistics, or future capital contributions by us to Tianyu. As a result, uncertainties exist as to our ability to provide
prompt financial support to Tianyu, Shengfeng Logistics, or subsidiaries of Shengfeng Logistics when needed. If we fail to complete such
registrations or obtain such approvals, our ability to use the proceeds we received or expect to receive from our offshore offerings and
to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our business,
including our liquidity and our ability to fund and expand our business.
Fluctuations in exchange rates could have
a material and adverse effect on our results of operations and the value of your investment.
The value of RMB against the U.S. dollar and other
currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China's
foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of RMB to the U.S.
dollar, and RMB appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this
appreciation halted and the exchange rate between RMB and the U.S. dollar remained within a narrow band. Since June 2010, RMB has fluctuated
against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government
policy may impact the exchange rate between RMB and the U.S. dollar in the future.
Our business is conducted in the PRC, and our
books and records are maintained in RMB, which is the currency of the PRC. The financial statements that we file with the SEC and provide
to our shareholders are presented in U.S. dollars. Changes in the exchange rates between RMB and U.S. dollar affect the value of our assets
and the results of our operations, when presented in U.S. dollars. The value of RMB against the U.S. dollar and other currencies may fluctuate
and is affected by, among other things, changes in the PRC's political and economic conditions and perceived changes in the economy
of the PRC and the United States. Any significant revaluation of RMB may materially and adversely affect our cash flows, revenue, and
financial condition. Further, since our Class A Ordinary Shares are offered in U.S. dollars, we will need to convert the net proceeds
we receive into RMB in order to use the funds for our business. Changes in the conversion rate among the U.S. dollar and RMB will affect
the amount of proceeds we will have available for our business.
Very limited hedging options are available in
China to reduce our exposure to exchange rate fluctuations. As of the date of this annual report, we have not entered into any hedging
transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into more hedging transactions
in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure
or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to
convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.
Under the PRC Enterprise Income Tax Law,
we may be classified as a PRC "resident enterprise" for PRC enterprise income tax purposes. Such classification would likely
result in unfavorable tax consequences to us and our non-PRC 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," that became effective in January 2008, an enterprise established outside the PRC with "de facto management
bodies" within the PRC is considered a "resident enterprise" for PRC enterprise income tax purposes and is generally
subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a "de
facto management body" is defined as a body that has material and overall management and control over the manufacturing and business
operations, personnel and human resources, finances, and properties of an enterprise. In addition, a circular, known as "SAT Circular
82," issued in April 2009 by the State Administration of Taxation, or the "SAT," specifies that certain offshore incorporated
enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are
located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management;
financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders'
meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin,
known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82 and clarify
the reporting and filing obligations of such "Chinese-controlled offshore incorporated resident enterprises." SAT Bulletin
45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters.
Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups,
not those controlled by PRC individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin
45 may reflect the SAT's general position on how the "de facto management body" test should be applied in determining
the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups,
or by PRC or foreign individuals.
37
If the PRC tax authorities determine that the
actual management organ of Shengfeng Cayman is within the territory of China, Shengfeng Cayman may be deemed to be a PRC resident enterprise
for PRC enterprise income tax purposes and a number of unfavorable PRC tax consequences could follow. First, we will be subject to the
uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be
subject to PRC enterprise income tax reporting obligations. Finally, dividends payable by us to our investors and gains on the sale of
our shares may become subject to PRC withholding 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. It
is unclear whether non-PRC shareholders of our Company would be able to claim the benefits of any tax treaties between their country of
tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment
in our shares. Although up to the date of this annual report, Shengfeng Cayman has not been notified or informed by the PRC tax authorities
that it has been deemed to be a resident enterprise for the purpose of the EIT Law, we cannot assure you that it will not be deemed to
be a resident enterprise in the future.
We face uncertainty with respect to indirect
transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
In February 2015, SAT issued a
Public Notice
Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises
, or "SAT Circular
7." SAT Circular 7 provides comprehensive guidelines relating to indirect transfers of PRC taxable assets (including equity interests
and real properties of a PRC resident enterprise) by a non-resident enterprise. In addition, in October 2017, SAT issued an
Announcement
on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises
, or "SAT Circular 37," effective
in December 2017, which, among others, amended certain provisions in SAT Circular 7 and further clarify the tax payable declaration obligation
by non-resident enterprise. Indirect transfer of equity interest and/or real properties in a PRC resident enterprise by their non-PRC
holding companies are subject to SAT Circular 7 and SAT Circular 37.
SAT Circular 7 provides clear criteria for an
assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale
of equity through a public securities market. As stipulated in SAT Circular 7, indirect transfers of PRC taxable assets are considered
as reasonable commercial purposes if the shareholding structure of both transaction parties falls within the following situations: i)
the transferor directly or indirectly owns 80% or above equity interest of the transferee, or vice versa; ii) the transferor and the transferee
are both 80% or above directly or indirectly owned by the same party; iii) the percentages in bullet points i) and ii) shall be 100% if
over 50% the share value of a foreign enterprise is directly or indirectly derived from PRC real properties. Furthermore, SAT Circular
7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable
assets. Where a non-resident enterprise transfers PRC taxable assets indirectly by disposing of the equity interests of an overseas holding
company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly
owns the taxable assets, may report such indirect transfer to the relevant tax authority and the PRC tax authority may disregard the existence
of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding,
or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee
or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for
the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under
PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.
According to SAT Circular 37, where the non-resident
enterprise fails to declare the tax payable pursuant to Article 39 of the EIT Law, the tax authority may order it to pay the tax due within
required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax
authority. If the non-resident enterprise, however, voluntarily declares and pays the tax payable before the tax authority orders it to
do so within required time limits, it shall be deemed that such enterprise has paid the tax in time.
We face uncertainties as to the reporting and
assessment of reasonable commercial purposes and future transactions where PRC taxable assets are involved, such as offshore restructuring,
sale of the shares in our offshore subsidiaries, and investments. In the event of being assessed as having no reasonable commercial purposes
in an indirect transfer transaction, we may be subject to filing obligations or taxed if we are a transferor in such transactions, and
may be subject to withholding obligations (to be specific, a 10% withholding tax for the transfer of equity interests) if we are a transferee
in such transactions, under SAT Circular 7 and SAT Circular 37. For transfer of shares by investors who are non-PRC resident enterprises,
our PRC subsidiary may be requested to assist in the filing under the SAT circulars. As a result, we may be required to expend valuable
resources to comply with the SAT circulars or to request the relevant transferors from whom we purchase taxable assets to comply with
these circulars, or to establish that we should not be taxed under these circulars, which may have a material adverse effect on our financial
condition and results of operations.
Our PRC subsidiary is subject to restrictions
on paying dividends or making other payments to us, which may have a material adverse effect on our ability to conduct our business.
We are a holding company incorporated in the Cayman
Islands. We may need dividends and other distributions on equity from our PRC subsidiary to satisfy our liquidity requirements, including
the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiary
incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other
distributions to us. In addition, the PRC tax authorities may require our PRC subsidiary to adjust its taxable income under the contractual
agreements Tianyu currently has in place with Shengfeng Logistics in a manner that would materially and adversely affect its ability to
pay dividends and other distribution to us. See
"
Item 3. Key Information—D. Risk Factors
—
Risks Relating
to Our Corporate Structure—The VIE Agreements may result in adverse tax consequences."
38
Current PRC regulations permit our PRC subsidiary
to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
In addition, our PRC subsidiary is required to set aside at least 10% of its respective accumulated profits each year, if any, to fund
certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiary may also
allocate a portion of its respective after-tax profits based on PRC accounting standards to employee welfare and bonus funds at its discretion.
These reserves are not distributable as cash dividends. These limitation on the ability of 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.
Governmental control of currency conversion
may affect the value of your investment and our payment of dividends.
The PRC government imposes controls on the convertibility
of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenue
in RMB. Under our current corporate structure, Shengfeng Cayman may rely on dividend payments from our PRC subsidiary, Tianyu, to fund
any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such
as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval
from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in foreign currencies
to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with
certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by our shareholders or the ultimate
shareholders of our corporate shareholders who are PRC residents. Approval from or registration with appropriate government authorities
is, however, required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the
repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign
currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies
to satisfy our foreign currency demand, we may not be able to pay dividends in foreign currencies to our shareholders.
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
the PRC, will be subject to a withholding tax rate of 10%. 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 "Double Tax Avoidance Arrangement,"
a withholding tax rate of 10% may be lowered to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise for at least 12
consecutive months prior to distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other
conditions and requirements under the Double Tax Avoidance Arrangement and other applicable PRC laws.
However, based on the
Circular on Certain Issues
with Respect to the Enforcement of Dividend Provisions in Tax Treaties
, or the "SAT Circular 81," which became effective
on February 20, 2009, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income
tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment.
According to
Circular on Several Issues regarding the "Beneficial Owner" in Tax Treaties
, which became effective as
of April 1, 2018, when determining an applicant's status as the "beneficial owner" regarding tax treatments in connection
with dividends, interests, or royalties in the tax treaties, several factors will be taken into account. Such factors include whether
the business operated by the applicant constitutes actual business activities, and whether the counterparty country or region to the tax
treaties does not levy any tax, grant tax exemption on relevant incomes, or levy tax at an extremely low rate. This circular further requires
any applicant who intends to be proved of being the "beneficial owner" to file relevant documents with the relevant tax authorities.
Our PRC subsidiary is wholly owned by our Hong Kong subsidiary. However, we cannot assure you that our determination regarding our qualification
to enjoy the preferential tax treatment will not be challenged by the relevant PRC tax authority or we will be able to complete the necessary
filings with the relevant PRC tax authority and enjoy the preferential withholding tax rate of 5% under the Double Tax Avoidance Arrangement
with respect to dividends to be paid by our PRC subsidiary to our Hong Kong subsidiary, in which case, we would be subject to the higher
withdrawing tax rate of 10% on dividends received.
If we become directly subject to the scrutiny,
criticism, and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate
and resolve the matter which could harm our business operations, stock price, and reputation.
U.S. public companies that have substantially
all of their operations in China have been the subject of intense scrutiny, criticism, and negative publicity by investors, financial
commentators, and regulatory agencies, such as the SEC. Much of the scrutiny, criticism, and negative publicity has centered on financial
and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance
policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism, and negative
publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has become virtually
worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and
external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism, and negative publicity
will have on us, our business, and the price of our Class A Ordinary Shares. If we become the subject of any unfavorable allegations,
whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations
and/or defend our Company. This situation will be costly and time consuming and distract our management from developing our business.
If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a
significant decline in the value of our Class A Ordinary Shares.
39
The disclosures in our reports and other
filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.
We are regulated by the SEC, and our reports and
other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities
Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of
any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by the CSRC,
a PRC regulator that is responsible for oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings,
and our other public pronouncements with the understanding that no local regulator has done any review of us, our SEC reports, other filings,
or any of our other public pronouncements.
The approval of the China Securities Regulatory
Commission, or the "CSRC," may be required in connection with this offering under a regulation adopted in August 2006, and,
if required, we cannot assure you that we will be able to obtain such approval, in which case we may face sanctions by the CSRC or other
PRC regulatory agencies for failure to seek the CSRC approval for this offering.
The Regulations on Mergers and Acquisitions of
Domestic Companies by Foreign Investors, or the "M&A Rules," adopted by six PRC regulatory agencies in 2006 and amended
in 2009, requires an overseas SPV formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies
or individuals to obtain the approval of the CSRC, prior to the listing and trading of such SPV's securities on an overseas stock
exchange. In September 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted
to it by an SPV seeking the CSRC approval of its overseas listings. The application of the M&A Rules remains unclear.
Our PRC legal counsel has advised us, based on
their understanding of the current PRC law, rules, and regulations that the CSRC's approval is not required for the listing and
trading of our shares on Nasdaq in the context of this offering, given that:
●
we established our PRC subsidiary by means of direct investment rather than by merger with or acquisition of PRC domestic companies as defined in the M&A Rules;
●
the CSRC already promulgated the Trial Measures and its supporting guidelines, which came into effect on March 31, 2023. The Trial Measures and its supporting guidelines shall apply to overseas securities offerings and/or listings conducted by companies incorporated overseas which normally have been treated as overseas special purpose vehicles with operations primarily in the PRC and valued on the basis of interests in PRC domestic companies; and
●
no explicit provision in the M&A Rules or the Trial Measures classifies the VIE Agreements as a type of acquisition transaction subject to the M&A Rules.
Our PRC legal counsel, however, has further advised
us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering
and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in
any form relating to the M&A Rules. We cannot assure you that relevant PRC governmental agencies, including the CSRC, would reach
the same conclusion as we do. If it is determined that the CSRC approval is required for this offering, we may face sanctions by the CSRC
or other PRC regulatory agencies for failure to seek the CSRC approval for this offering. These sanctions may include fines and penalties
on our operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the
proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiary,
or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation,
and prospects, as well as the trading price of our Class A Ordinary Shares. The CSRC or other PRC regulatory agencies may also take actions
requiring us, or making it advisable for us, to halt this offering before the settlement and delivery of the Class A Ordinary Shares that
we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and
delivery of the Class A Ordinary Shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur.
40
We may be required to obtain permission
from Chinese authorities (i) to issue our Class A Ordinary Shares to foreign investors in this offering and/or (ii) for the VIE's
operations, and if either or both are required and we are not able to obtain such permission in a timely manner, the securities currently
being offered may substantially decline in value and become worthless.
On July 6, 2021, 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." 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.
Furthermore, they proposed to take measures, including promoting the construction of relevant regulatory systems to control the risks
and handle the incidents from China-based overseas-listed companies. On December 24, 2021, the CSRC promulgated the New Overseas Listing
Rules for public comments. The New Overseas Listing Rules require Chinese domestic enterprises to complete filings with relevant governmental
authorities and report related information under certain circumstances, such as, a) an issuer making an application for initial public
offering and listing in an overseas market; b) an issuer making an overseas securities offering after having been listed on an overseas
market; c) an issuer offering securities on an overseas market to purchase assets after having been listed overseas; and d) a domestic
company seeking an overseas direct or indirect listing of its assets through single or multiple acquisition(s), share swap, transfer of
shares or other means. On February 17, 2023, the CSRC promulgated the Trial Measures, and five supporting guidelines, which came into
effect on March 31, 2023. The Trial Measures and its supporting guidelines, reiterate the basic principles of the New Overseas Listing
Rules and impose substantially the same requirements for the overseas securities offering and listing by domestic enterprises. Pursuant
to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, shall complete
filing procedures with the CSRC pursuant to the requirements of the Trial Measures within three working days following its submission
of initial public offerings or listing application. If a domestic company fails to complete the required filing procedures or conceals
any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties,
such as orders to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other
directly liable persons may also be subject to administrative penalties, such as warnings and fines.
On February 24, 2023, the CSRC, together with
Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised
the Provisions, which were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration
of China in 2009. The revised Provisions were issued under the title the "Provisions on Strengthening Confidentiality and Archives
Administration of Overseas Securities Offering and Listing by Domestic Companies", and came into effect on March 31, 2023 together
with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas
offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including, but not limited, to (a)
a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant
individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials
that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according
to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly
or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities
companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental
to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As
of the date of this annual report, the revised Provisions have come into effect and we are not aware of any PRC laws or regulations in
effect requiring that we obtain permission from any PRC authorities to issue securities to foreign investors, nor have we received any
inquiry, notice, warning, sanction or any regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities
that have jurisdiction over our operations. However, any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to
comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations
may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated
for criminal liability if suspected of committing a crime. See "Item 4. Information on the Company—B. Business Overview—Regulations—Regulations
on Mergers & Acquisitions and Overseas Listings
.
" The Opinions, the Trial Measures, the revised Provisions and any related
implementing rules to be enacted may subject us to compliance requirement in the future. We are currently not required to obtain any permission
or approval from Chinese authorities to list on U.S. exchanges nor to execute the VIE Agreements. However, if we inadvertently conclude
that such permission or approval is not required, or applicable laws, regulations, or interpretations change and the VIE or the holding
company are required to obtain such permission or approval in the future and are denied such permission or approval from the Chinese authorities
to list on U.S. exchanges, we will not be able to continue listing on U.S. exchanges or continue to offer securities to investors, which
could cause significant depreciation of the price of our Class A Ordinary Shares and materially affect the interest of the investors.
According to the Notice on the Administrative
Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the CSRC, or the CSRC Notice, the
domestic companies that have already been listed overseas 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 not required to complete the
filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings. Further, according to the
CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges (for example, the effectiveness
of a registration statement for offering and listing in the U.S. has been obtained) for their indirect overseas offering and listing prior
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 to September 30, 2023. Those that complete their indirect 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 indirect overseas offerings and listings. Within such
six-month transition period, however, if such domestic companies fail to complete their indirect overseas issuance and listing, they shall
complete the filing procedures with the CSRC.
41
On February 24, 2023, the CSRC, together with
Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised
the Provisions, which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration
of China in 2009. The revised Provisions is issued under the title the "Provisions on Strengthening Confidentiality and Archives
Administration of Overseas Securities Offering and Listing by Domestic Companies", and came into effect on March 31, 2023 together
with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas
offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, including, but not limited to, (a)
a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant
individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials
that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according
to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly
or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities
companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental
to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. See
"Item 4. Information on the Company—B. Business Overview—Regulations—Regulations on Mergers & Acquisitions
and Overseas Listings
.
" Any new rules or regulations promulgated in the future in that regard may impose additional requirements
or restrictions on us. If we fail to comply with these regulatory requirements, relevant regulatory authorities may impose fines and penalties
on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict
the repatriation of the proceeds from this offering into China, or even take other actions that could materially and adversely affect
our business, financial condition, results of operations, prospects and the trading price of our shares.
The Chinese government has exercised and continued
to exercise substantial control over virtually every sector of the Chinese economy through regulations and state ownership. Our ability
to operate in the PRC may be significantly harmed by changes in its laws and regulations, including those relating to taxation, environment,
land use rights, property, cybersecurity and other matters. The central or local governments of these jurisdictions may impose new and
stricter regulations or interpretations of existing regulations with little or no advance notice that would require additional expenditures
and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future,
including regional or local variations in the implementation of economic policies, could have a significant effect on the economic conditions
in China or particular regions thereof, and could result in our divesting ourselves of any interest we then hold in our operations in
China.
Furthermore, it is uncertain when and whether
we will be required to obtain permission or approval from the PRC government to list on U.S. exchanges or to execute the VIE Agreements
in the future, when such permission will be obtained, if at all, or whether it will be denied or rescinded. Although we are currently
not required to obtain permission or approval from any of the PRC central or local governments for the VIE's operations and/or the
Company's issuance of securities to foreign investors, nor have we received any denial to list on the U.S. exchange or to execute
the VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating
to our business or industry. As indicated by the recent statements from the PRC government, the PRC government may take actions to exert
more oversight and control over the offerings that are conducted overseas and/or foreign investment in PRC-based issuers, which could
significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our
securities to significantly decline or become worthless.
The M&A Rules and certain other PRC
regulations establish complex procedures for certain acquisitions of Chinese companies by foreign investors, which could make it more
difficult for us to pursue growth through acquisitions in China.
The M&A Rules and recently adopted PRC regulations
and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition
activities by foreign investors more time consuming and complex. For example, the M&A Rules require that MOFCOM be notified in advance
of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry
is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction
will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Mergers or acquisitions
that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance
to MOFCOM when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or the "Prior
Notification Rules," issued by the State Council in August 2008 is triggered.
In addition, the security review rules issued
by MOFCOM that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise "national
defense and security" concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic
enterprises that raise "national security" concerns are subject to strict review by MOFCOM, and the rules prohibit any activities
attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. 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 MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is clear that our business
would not be deemed to be in an industry that raises "national defense and security" or "national security" concerns.
MOFCOM or other government agencies, however, may publish explanations in the future determining that our business is in an industry subject
to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual control
arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand
our market share through future acquisitions would as such be materially and adversely affected.
42
The Chinese government exerts substantial
influence over the manner in which we must conduct our business activities. Any actions by the Chinese government, including any
decision to intervene or influence our operations or to exert control over any offering of securities conducted overseas and/or foreign
investment in China-based issuers, may cause us to make material changes to our operation, may limit or completely hinder our ability
to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.
The Chinese government has exercised and may continue
to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability
to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations,
land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations
or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance
with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support
recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest
ourselves of any interest we then hold in Chinese properties.
As such, the Company's business segments
may be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject
to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions.
The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure
to comply.
Furthermore, it is uncertain when and whether
the Company will be required to obtain permission from the PRC government to list on U.S. exchanges or enter into VIE Agreements in the
future, and even when such permission is obtained, whether it will be denied or rescinded. Although the Company is currently not required
to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list
on the U.S. exchange and or enter into VIE Agreements, our operations could be adversely affected, directly or indirectly, by existing
or future laws and regulations relating to our business or industry.
Risks Relating to Our Business and Our Industry
Any service disruption experienced by our
regional sorting centers, cloud-based order fulfillment centers ("Cloud OFCs"), or service outlets may adversely affect our
business operations.
Our daily operations heavily rely on the orderly
performance of our regional sorting centers, Cloud OFCs, service outlets, freight sorting facilities, and storages. Any service disruption
due to: automated facilities failures, under-capacity during peak freight volume periods, force majeure events, third-party sabotage and
disputes, employee delinquencies, worker strikes, governmental inspections, orders, or mandates, or shutdowns (temporary or permanent)
will adversely impact our business operations by causing delays, suspensions, interruptions, or halts. In the event of a service disruption,
freights will be redirected to other nearby regional sorting centers, Cloud OFCs, or service outlets, but the rerouting process will likely
increase the risks in delay and delivery errors. At the same time, rerouting freights will increase pressures such as capacity and operation
in freight sorting, storage, or pickup and delivery to local sorting centers, Cloud OFCs, or service outlets and spread further across
the rest of our network. Any of the foregoing events may result in significant operational interruptions and slowdowns, client complaints,
and reputational damage.
We face risks associated with the freight
handled through our network.
We, through the VIE and the VIE's subsidiaries,
handle a large volume of freights across our network daily, and we face challenges with respect to the protection and examination of freights.
Freights within our network may be stolen, damaged, or lost for various reasons, and we or third-party transportation providers or both
may be perceived or found liable for such incidents. In addition, we may fail to screen freight and detect unsafe, prohibited, or restricted
items. Unsafe items, such as flammables, explosives, toxic, radioactive, or corrosive items and materials, may damage other freights within
our network, injure recipients, and harm the personnel and assets of us and/or third-party transportation providers. Furthermore, if we
fail to prevent prohibited or restricted items from entering into our network and if we participate in the transportation and delivery
of such items, we may be subject to administrative or even criminal penalties, and if any personal injury or property damage is concurrently
caused, we may be further liable for civil compensation.
43
The transportation of freight also involves inherent
risks. We constantly have a large number of vehicles and personnel in transportation, and are therefore subject to risks associated with
transportation safety, and the insurance maintained by us may not fully cover the damages caused by transportation related injuries or
loss. From time to time, our vehicles and personnel may be involved in transportation accidents, and the freight carried by them may be
lost or damaged. In addition, frictions or disputes may occasionally arise from the direct interactions between our pickup and delivery
personnel with freight senders and recipients. Personal injuries or property damages may arise if such incidents escalate.
Any of the foregoing could disrupt our services,
cause us to incur substantial expenses, and divert the time and attention of our management. We and third-party transportation providers
may face claims and incur significant liabilities if found liable or partially liable for any of injuries, damages, or losses. Claims
against us may exceed the amount of our insurance coverage, or may not be covered by insurance at all. Governmental authorities may also
impose significant fines on us or require us to adopt costly preventive measures. Furthermore, if our services are perceived to be insecure
or unsafe by our clients, our business volume may be significantly reduced, and our business, financial condition, and results of operations
may be materially and adversely affected.
Our technology systems are critical to our
business operations and growth prospects.
The satisfactory performance, reliability, and
availability of our technology system is critical to our ability to provide high-quality client services. We rely on our proprietary Shengfeng
Transportation Management System, or "Shengfeng TMS," to efficiently operate our network, and our warehouse management system,
or "WMS," to optimize our warehouse storage and management services. These integrated systems support the smooth performance
of certain key functions of our business, such as shipment transportation and tracking management, payment calculation, client services,
storage management and order management. In addition, the maintenance and processing of various operating and financial data is essential
to the daily operations of our business and formulation of our development strategies. Therefore, our business operations and growth prospects
depend, in part, on our ability to maintain and make timely and cost-effective enhancements and upgrades to our technology systems and
to introduce innovative additions which can meet changing operational needs. Failure to invest enough in information technology and equipment
could cause economic losses and put us at a disadvantage to our competitors. We can provide no assurance that we will be able to keep
up with technological improvements or that the technology developed by others will not render our services less competitive or attractive.
Any interruptions caused by telecommunications
failures, computer viruses, hacking, or other attempts to harm our systems that result in the unavailability or slowdown of our systems
could quickly impact the workflow in a large portion of, if not the entire, network. We can provide no assurance that our current security
mechanisms will be sufficient to protect our technology systems from any third-party intrusions, viruses or hacker attacks, information
or data theft, or other similar activities. Any such occurrences could disrupt our services, damage our reputation, and harm our results
of operations.
Failure to renew our current leases or locate
desirable alternatives for our facilities could materially and adversely affect our business.
We, through the VIE and the VIE's subsidiaries,
lease properties for a majority of our offices, regional sorting centers, Cloud OFCs and service outlets. We may not be able to successfully
extend or renew such leases upon expiration of the current term on commercially reasonable terms or at all, and may therefore be forced
to relocate the affected operations. This could disrupt our operations and result in significant relocation expenses, which could adversely
affect our business, financial condition, and results of operations. In addition, we compete with other businesses for premises at certain
locations or of desirable sizes. As a result, even though we, through the VIE and the VIE's subsidiaries, could extend or renew
our leases, rental payments may significantly increase as a result of the high demand for the leased properties. In addition, we may not
be able to locate desirable alternative sites for our facilities as our business continues to grow and failure in relocating our affected
operations could adversely affect our business and operations.
Moreover, certain lessors have not provided us
with valid ownership certificates. Under the relevant PRC laws and regulations, if the lessors are unable to obtain certificates of title
because such properties were built illegally or failed to pass the inspection or other reasons, such lease agreements may be recognized
as void and as a result, we may be required to vacate the relevant properties. In addition, if our lessors are not the owners of the properties
and they have not obtained consents from the owners or their lessors or permits from the relevant government authorities, our leases could
be invalidated. As a result, we may be subject to challenges, lawsuits or other actions taken against us with respect to the properties
leased to us that are without valid title certificates from the relevant lessors.
44
Under PRC laws, all lease agreements are required
to be registered with the local housing authorities. Some of our lease agreements have not been registered with the relevant government
authorities. Failure to complete these required registrations may expose our landlords, lessors and the Company to potential monetary
fines.
Our business and results of operations may
be materially and adversely affected if we or third-party transportation providers are unable to provide high-quality services to our
clients.
The success of our business largely depends on
our ability to maintain and further enhance our service quality. About 30% of our freight transportation services are provided, through
the VIE and the VIE's subsidiaries, by our self-owned fleet and the balance is provided by third-party transportation providers.
Together with third-party transportation providers, we, through the VIE and the VIE's subsidiaries, provide B2B freight transportation
services, cloud storage, and value-added services to our clients. If we or third-party transportation providers are unable to provide
services in a timely, reliable, safe, and secure manner, our reputation and client loyalty could be negatively affected. If our client
service personnel fail to satisfy client needs and respond effectively to client complaints, we may lose potential or existing clients
and experience a decrease in client orders, which could have a material adverse effect on our business, financial condition and results
of operations.
We face intense competition which could
adversely affect our results of operations and market share.
We operate in a highly competitive and fragmented
industry. We compete with many local, regional, and national logistics providers including Sinotrans Logistics Ltd., Beijing Changjiu
Logistics Co., Ltd., and Kerry Logistics (EAS) Limited. We compete with them based on a number of factors, including service pricing,
transportation speed, service offerings, and service quality. In particular, we may face downward pricing pressure from our competitors.
If we cannot effectively control our costs to remain competitive, our market share and revenue may decline.
Furthermore, as we diversify service offerings
and further expand our client base, we may face competition from existing or new players in those new sectors. In particular, we may face
competition from existing or new express delivery service providers which may expand their service offerings to freight transportation
and logistics services or adopt a business model disruptive to our business and compete with us for hiring of delivery personnel. Similarly,
existing players in an adjacent or sub-market may choose to leverage their existing infrastructure and expand their services to serve
our clients. If these players succeed in doing so, our business could be encroached by their entrance and adversely affected.
Certain of our current and potential competitors,
as well as international logistics operators with presence in China, may have significantly greater resources, longer operating histories,
larger client bases, and greater brand recognition than us. They may be acquired by, receive investment from, or enter into strategic
relationships with, established and well-financed companies or investors which would help enhance their competitiveness. In view of this,
some of our competitors may adopt more aggressive pricing policies or devote greater resources to marketing and promotional campaigns
than us. We may not be able to compete successfully against current or future competitors, and competitive pressures may have a material
and adverse effect on our business, financial condition, and results of operations.
We may be subject to catastrophic events.
A disruption or failure of our systems or operations
in the event of a major earthquake, weather event, cyber-attack, heightened security measures, actual or threatened terrorist attack,
strike, civil unrest, pandemic, or other catastrophic event could cause delays in providing services or performing other critical functions.
A catastrophic event that results in the destruction or disruption of any of our critical business or information systems could harm our
ability to conduct normal business operations and adversely impact our operating results.
Our financial condition, results of operations,
and cash flows have been adversely affected by COVID-19.
The COVID-19 pandemic resulted in a series of
governmental orders and mandates, including lockdowns, closures, quarantines, and travel bans in order to contain and control the spread
of the virus.
Consequently, the COVID-19 pandemic has materially
and adversely affected our business operations and conditions and operating results for 2020, including material negative impact on our
total revenue and net income. As a result of the government-imposed restrictions, the VIE and the VIE's subsidiaries' facilities
and operations were mostly closed from February 2020 to late March 2020. The VIE and the VIE's subsidiaries gradually resumed operation
during February and March 2020, but it was not until April 2020 that we resumed full operation, which has caused a decrease in our net
revenue and also adversely affected our marketing activities during the closure. We, through the VIE and the VIE's subsidiaries,
took a series of measures in response to the pandemic, including, among others, the establishment of a special team for epidemic prevention
and control, the remote working arrangements for some of our employees, and the requirement for our employees on site to take extra measures
and procedures to lower the risks of COVID-19 exposure. We, through the VIE and the VIE's subsidiaries, also donated some epidemic
prevention materials to areas and entities in need. These measures reduced the capacity and efficiency of our operations and increased
our expenditures.
45
The spread of COVID-19 has caused us
to incur incremental costs. However, by leveraging our advantages in the logistics fields and our networks, we were able to resume a larger
portion of our operations in late March 2020 and have seen an increase in demand for our services since April 2020. Furthermore, to mitigate
any negative impacts that COVID-19 may have on our operations, we, through the VIE and the VIE's subsidiaries, implemented
a variety of measures, including disinfection of offices, free mask distribution, temperature monitoring to ensure the safety of our employees
returning to work, setting up quarantine rooms for employees and separate rest areas for drivers to avoid unnecessary contact, and disinfection
of all the vehicles in and out of our locations. After the initial outbreak of COVID-19, from time to time, some instances of COVID-19
infections have emerged in various regions of China, including the infections caused by the Omicron variants in early 2022. For example,
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. From April to May, 2022, our Shanghai office was shut down and all the businesses in Shanghai were
closed, which negatively affected our operational and financial results. Our shanghai office resumed full operation in June 2022. Since
December 2022, many of the restrictive measures previously adopted by the PRC governments at various levels to control the spread of the
COVID-19 virus have been revoked or replaced with more flexible measures.
The COVID-19 pandemic has broadly affected China's
logistic market and the macroeconomy. Our results of operations and financial performance may be adversely affected, to the extent that
COVID-19 exerts long-term negative impact on the Chinese economy. The pandemic caused temporary disruptions in the supply chains for companies
in China and elsewhere, including us and our customers and suppliers. As a result, we have experienced lower efficiency, increased aging
of our trade receivable, longer collection period and more bad debts. which could adversely affect our business operation. However, by
leveraging our advantages in the logistics fields and our networks, our results of operation for the year ended December 31, 2022 have
not been materially negatively affected by the COVID-19.
For more information on the impact of the COVID-19
pandemic on our operations and financial performance, see "Item 5. Operating and Financial Review and Prospects—A. Operating
Results—Impact of COVID-19 on Our Operations and Financial Performance."
Changes in industry regulations and industrial
policies may affect our future performance
.
Providing logistics services requires business
licensing and is subject to various laws, administrative rules and industry standards. In order to support the development of the logistics
industry, governments at various levels have successively introduced a number of industrial support and encouragement policies.
Pursuant to the Administrative Provisions Concerning
the Running of Cargo Vehicles with Out-of-Gauge Goods promulgated by the PRC Ministry of Transport, which became effective on September
21, 2016, cargo vehicles running on public roads shall not carry cargo weighing more than, and their dimensions shall not exceed, the
limits set forth by such provisions. The operation of our vehicle fleet is subject to these provisions. If our trucks are not in compliance
with such provisions, we may be required to reduce the length of our trucks or purchase new ones to replace them. Otherwise, we may be
subject to penalties if we continue to operate those trucks that exceed the limits set forth in the provisions.
New laws and regulations may be promulgated from
time to time and substantial uncertainties exist regarding the interpretation and implementation of current and future PRC laws and regulations
applicable to our businesses. If the PRC government promulgates new laws and regulations that require additional approvals or licenses
or imposes additional restrictions on our daily operations, it has the authority, among other things, to levy fines, confiscate income,
revoke business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business.
Any of these actions by the PRC government may have a material and adverse effect on our results of operations.
Relevant state policies on environmental
protection may affect our future performance.
Logistics service companies and provides rely
on various types and models of transportation vehicles to perform its daily operations, but due to heavy regulations in environmental
protection, energy conservation, and emission reductions, an increase in expenses is expected to incurred; which may directly or indirectly
affect our future performances.
If our clients are able to reduce their
logistics and supply chain costs or increase utilization of their internal solutions, our business and operating results may be materially
and adversely affected.
One of the main reasons that clients use contract
logistics companies is because traditional logistics is comprised of high cost, high degree of difficulties in association with developing
in-house logistics and supply chain expertise, and operational deficiencies. If, however, our clients are able to develop their own logistics
and supply chain solutions, increase utilization of their in-house supply chain, reduce their logistics spending, or otherwise choose
to terminate our services, our business and operating results may be materially and adversely affected.
We may not be able to maintain and enhance
our ecosystem, which could negatively affect our business and prospects.
Our ability to maintain our ecosystem that creates
strong network effects among our participants is critical to our success. See "Item 4. Information on the Company—B. Business
Overview—Our Ecosystem." While our ecosystem provides synergies and economies of scale across services and among our ecosystem
participants, the extent to which we are able to maintain and strengthen the attractiveness of our ecosystem depends on our ability to
offer a mutually beneficial platform for all participants, maintain the quality of our services and solutions, develop attractive services
and solutions that meet the evolving needs of our ecosystem participants, reinforce the scope and scale of our ecosystem, and retain our
participants. We must also provide sufficient geographic coverage to cement the effectiveness of our transportation network, continue
to utilize data to improve service quality and operational efficiency of all ecosystem participants, and maintain and improve our technology
infrastructure as part of our single interoperable system to ensure seamless operations.
46
In addition, our ecosystem participants may compete
with one another, which may complicate the management of our ecosystem. Further, changes made to enhance our ecosystem or balance the
interests of participants may be viewed positively by one participant but may have negative effects upon another. If we fail to balance
the interests of all participants in our ecosystem, we may fail to further attract and retain additional ecosystem participants, which
could adversely impact our business and financial condition.
We face risks from fuel price fluctuation.
Transportation cost is one of the major costs
of companies in the contract logistics industry, and fuel cost is a component of transportation cost. Fluctuation of fuel prices will
have a certain impact on the profitability of contract logistics service providers. Fuel costs accounted for approximately 4.13% of our
total operational expenses for the fiscal year ended December 31, 2022. Considering the number of vehicles, we own, it is estimated that
if fuel price fluctuates by +/- 5%, cost of revenue may increase or decrease by $0.68 million for the current year, which will either
increase or decrease our net profit by a maximum of $0.51 million. Fuel costs accounted for approximately 3.8% of our total operational
expenses for the year ended December 31, 2021. Considering the number of vehicles, we own, it is estimated that if fuel price fluctuates
by +/- 5%, cost of revenue may increase or decrease by $0.58 million for the current year, which will either increase or decrease our
net profit by a maximum of $0.43 million. Fuel costs accounted for approximately 3.92% of our total operational expenses for the fiscal
year ended December 31, 2020. Considering the number of vehicles, we own, it is estimated that if fuel price fluctuates by +/- 5%, cost
of revenue may increase or decrease by $0.49 million for the current year, which will either increase or decrease our net profit by a
maximum of 0.37 million. If fuel prices rise significantly in the future, we will experience pressure of increased costs.
Our past growth rates may not be indicative
of our future growth, and if we are not able to manage our growth effectively, our business and prospects may be materially and adversely
affected.
Our business has grown substantially in recent years, but our past
growth rates may not be indicative of our future growth. Our expansion has placed, and will continue to place, substantial demands on
our managerial, operational, technological, and other resources. To manage and support our continued growth, we must continue to improve
our operational, administrative, financial, and technological systems, procedures, and controls, and expand, train, and manage our growing
employee and agent base. Even if we are able to expand our network as planned, we may not be able to continue to integrate and optimize
a larger network. We cannot assure you that our current and planned personnel, systems, procedures, and controls will be adequate to support
our future operations. Any failure to effectively and efficiently manage our expansion could materially and adversely affect our ability
to capitalize on new business opportunities, which in turn could have a material adverse effect on our results of operations.
Client demand is difficult to forecast accurately,
and as a result we may be unable to make planning and spending decisions to match such demand.
We make planning and spending decisions, including
capacity expansion, procurement commitments, personnel needs, and other resource requirements based on our estimates of client demand.
The freight volume we generate from clients can vary significantly and unexpectedly, reducing our ability to accurately estimate future
client demand. In particular, we may potentially experience capacity and resource shortages in fulfilling client orders during peak season
of e-commerce consumption or following special promotional campaigns on any e-commerce platforms. Failure to meet client demand in a timely
fashion or at all adversely affect our financial condition and results of operations.
Our future success depends on the continuing
efforts of our senior management team and other key personnel, and our business may be harmed if we lose their services.
Our future success depends heavily upon the continuing
services of the members of our senior management team and other key personnel, in particular Mr. Yongxu Liu, our chairman of the board,
or "Chairman," and chief executive officer. In addition, because of the importance of training to our business, our team of
dedicated training professionals plays a key role in our operations. If one or more of our senior executives or other key personnel, including
key training personnel, are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at
all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected.
Competition for senior management and key personnel is intense, the pool of qualified candidates is very limited, and we may not be able
to retain the services of our senior executives or key personnel, or attract and retain high-quality senior executives or key personnel
in the future. As is customary in the PRC, we do not have insurance coverage for the loss of our senior management team or other key personnel.
In addition, if any member of our senior management
team or any of our other key personnel joins a competitor or forms a competing company, we may lose clients, sensitive trade information,
and key professionals and staff members. Each of our executive officers and key employees has entered into an employment agreement with
us which contains confidentiality and non-competition provisions. These agreements generally have an initial term of three years, and
are automatically extended for successive one-year terms unless terminated earlier pursuant to the terms of the agreement. If any disputes
arise between any of our senior executives or key personnel and us, we cannot assure you of the extent to which any of these agreements
may be enforced.
47
We use third-party services in connection
with our business, and any disruption to these services could result in a disruption to our business, negative publicity, and a slowdown
in the growth of our customer base, materially and adversely affecting our business, financial condition, and results of operations.
Our
business depends on the services provided by, and relationships with, various third parties, including third-party transportation providers,
among others. For the fiscal years ended December 31, 2022, 2021 and 2020, about 71%, 70% and 70% of our freight transportation services
were provided by third-party transportation providers, respectively, which included owner-operators of a single truck, private fleets,
and large trucking companies. Several third-party transportation providers contributed a significant part of the total cost of revenue
of the Company. In particular, for the fiscal year ended December 31, 2022, Fujian Jinwang Yuntong Logistics Technology Co., Ltd. contributed
approximately 23.5% of total cost of revenue of the Company. For the year ended December 31, 2021, Anhui Luge Transportation Co., Ltd.,
or "Anhui Luge," contributed approximately 27.8% of total cost of revenue of the Company. For the year ended December 31,
2020, Hubei Luge Logistics Co., Ltd. ("Hubei Luge") and Anhui Luge contributed approximately 19.8% and 12.4% of total cost
of revenue of the Company, respectively.
The failure of these
and other third parties to perform in compliance with our agreements may negatively impact our business.
Damages to brand image and corporate reputation
could materially and adversely impact our business.
We believe our brand image and corporate reputation
play an increasingly important role in enhancing our competitiveness and maintaining our business growth. Many factors, some of which
are beyond our control, may negatively impact our brand image and corporate reputation if not properly managed. These factors include
our ability to provide superior services to our clients, successfully conduct marketing and promotional activities, manage complaints
and events of negative publicity, and maintain positive perception of our Company, our peers, and the contract logistics industry in general.
Any actual or perceived deterioration of our service quality, which is based on an array of factors including client satisfaction, rate
of complaint, and rate of accident, could subject us to damages such as loss of important clients. Any negative publicity against us or
our peers could cause damages to our corporate reputation and changes to the government policies and regulatory environment. If we are
unable to promote our brand image and protect our corporate reputation, we may not be able to maintain and grow our client base, and our
business and growth prospects may be adversely affected.
We may not be able to prevent others from
unauthorized use of our intellectual property, which could harm our business and competitive position.
We regard our trademarks, domain names, trade
secrets, proprietary technologies, and other intellectual property as critical to our business. We rely on a combination of intellectual
property laws and contractual arrangements to protect our proprietary rights. It is often difficult to register, maintain, and enforce
intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not
be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality agreements and license agreements
may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not
be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Policing any unauthorized
use of our intellectual property is difficult and costly and the steps we have taken may be inadequate to prevent the misappropriation
of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could
result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail
in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by,
our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business,
financial condition, and results of operations.
Our business generates and processes a large
quantity of data, and improper handling of or unauthorized access to such data may adversely affect our business. In light of recent events
indicating greater oversight by the Cyberspace Administration of China, or CAC, over data security, particularly for companies seeking
to list on a foreign exchange, we are subject to a variety of laws and other obligations regarding cybersecurity and data protection,
and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business, our listing on
Nasdaq, financial condition, results of operations, and the offering.
We face risks related to complying with applicable
laws, rules, and regulations relating to the collection, use, disclosure, and security of personal information, as well as any requests
from regulatory and government authorities relating to such data. We could be subject to cybersecurity review in the future.
The PRC regulatory and enforcement regime with
regard to data security and data protection has continued to evolve. There are uncertainties on how certain laws and regulations will
be implemented in practice. PRC regulators have been increasingly focused on regulating data security and data protection. We expect that
these areas will receive greater attention from regulators, as well as attract public scrutiny and attention going forward. This greater
attention, scrutiny, and enforcement, including more frequent inspections, could increase our compliance costs and subject us to heightened
risks and challenges associated with data security and protection. If we are unable to manage these risks, our reputation and results
of operations could be materially and adversely affected. See "Item 4. Information on the Company—B. Business Overview—Regulation—Regulations
Relating to Internet Security."
48
The Cybersecurity Law, which was adopted by the
National People's Congress on November 7, 2016 and came into force on June 1, 2017, and the Cybersecurity Review Measures, or the
"2020 Review Measures," which were promulgated on April 13, 2020, provide that personal information and important data collected
and generated by a critical information infrastructure operator in the course of its operations in China must be stored in China, and
if a critical information infrastructure operator purchases internet products and services that affect or may affect national security,
it should be subject to cybersecurity review by the CAC (defined hereinafter). In addition, a cybersecurity review is required where critical
information infrastructure operators, or the "CIIOs," purchase network-related products and services, which products and services
affect or may affect national security. Due to the lack of further interpretations, the exact scope of what constitute a "CIIO"
remains unclear.
On June 10, 2021,
the Standing Committee of the National People's Congress promulgated the Data Security Law which will take effect in September 2021.
The Data Security Law requires that data shall not be collected by theft or other illegal means, and it also provides that a data classification
and hierarchical protection system. The data classification and hierarchical protection system protects data according to its importance
in economic and social development, and the damages it may cause to national security, public interests, or the legitimate rights and
interests of individuals and organizations if the data is falsified, damaged, disclosed, illegally obtained or illegally used, which protection
system is expected to be built by the state for data security in the near future. In addition, the Office of the Central Cyberspace Affairs
Commission and the Office of Cybersecurity Review under the CAC published the Cybersecurity Review Measures (Revised Draft for Comments),
or the "Review Measures Draft," on July 10, 2021, which provides that, aside from CIIOs that intend to purchase internet products
and services, data processing operators engaging in data processing activities that affect or may affect national security must be subject
to the cybersecurity review by the Cybersecurity Review Office. According to the Review Measures Draft, a cybersecurity review is conducted
by the CAC, to assesses potential national security risks that may be brought about by any procurement, data processing, or overseas listing.
The Review Measures Draft further requires that critical information infrastructure operators and services and data processing operators
that possess personal data of at least one (1) million users must apply for a review by the Cybersecurity Review Office of PRC, if they
plan to conduct listings in foreign countries. The deadline for public comments to the Review Measures Draft was July 25, 2021. On November
14, 2021, CAC published the Administration Measures for Cyber Data Security (Draft for Public Comments), or the "Cyber Data Security
Measure (Draft)." The Cyber Data Security Measure (Draft) provides that data processors shall apply for cybersecurity review under
certain circumstances, such as mergers, restructurings, divisions of internet platform operators that hold large amount of data relating
to national security, economic development or public interest which affects or may affect the national security, overseas listings of
data processors that process personal data for more than one million individuals, Hong Kong listings of data processors that affect or
may affect national security, and other data processing activities that affect or may affect the national security. On December 28, 2021,
the CAC, the NDRC, the Ministry of Industry and Information Technology, or "MIIT," the Ministry of Public Security, the Ministry
of State Security, the Ministry of Finance, the Ministry of Commerce, People's Bank of China, or "PBOC," the State Administration
for Market Regulation, or "SAMR," the State Administration of Radio and Television, CSRC, the State Secrecy Administration
and the State Cryptography Administration jointly promulgated the Cybersecurity Review Measures, or the "Cybersecurity Review Measures,"
which became effective on February 15, 2022, and will replace the original Cybersecurity Review Measures promulgated on April 13, 2020.
Pursuant to the Cybersecurity Review Measures, if critical information infrastructure operators purchase network products and services,
or network platform operators conduct data processing activities that affect or may affect national security, they will be subject to
cybersecurity review. A network platform operator holding more than one million users/users' individual information also shall be
subject to cybersecurity review before listing abroad. The cybersecurity review will evaluate, among others, the risk of critical information
infrastructure, core data, important data, or a large amount of personal information being influenced, controlled or maliciously used
by foreign governments and risk of network data security after going public overseas. As of the date of this annual report, we have not
received any notice from any authorities identifying us as a CIIO or requiring us to undertake a cybersecurity review by the CAC. We also
believe we are not subject to the cybersecurity review by the CAC for this offering, given that: (i) we presently possesses personal information
of less than one (1) million individual users in our business operations as of the date of this annual report; and (ii) data processed
in our business is less likely to have a bearing on national security, thus it may not be classified as core or important data by the
authorities.  However, there remains uncertainty as to how the Cybersecurity Review Measures will be interpreted or implemented and
whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation
related to the Cybersecurity Review Measures. If any such new laws, regulations, rules, or implementation and interpretation come into
effect, we expect to take all reasonable measures and actions to comply. We cannot assure you that PRC regulatory agencies, including
the CAC, would take the same view as we do, and there is no assurance that we can fully or timely comply with such laws should they be
deemed applicable to our operations. We may be required to suspend new user registration in China or experience other disruptions to our
operations should we be required to have a cybersecurity review by the CAC. Any cybersecurity review could also result in negative publicity
with respect to our Company, diversion of our managerial and financial resources, and decrease in value of our Class A Ordinary Shares.
There is no certainty as to how such review or prescribed actions would impact our operations and we cannot guarantee that any clearance
can be obtained or any actions that may be required can be taken in a timely manner, or at all.
49
We, through the VIE and the VIE's subsidiaries,
currently offer our mobile and desktop applications in China, and use authorization systems which granted different users with different
access authority based on their positions and roles, to protect personal information in our system for data security protection. Although
we have taken measures to protect personal information and privacy in our systems and platforms, we can provide no assurance that the
measures we have taken are effective and that our systems and platforms are not subject to data breach. The regulatory requirements with
respect to cybersecurity and data privacy are constantly evolving and can be subject to varying interpretations, and significant changes,
resulting in uncertainties about the scope of our responsibilities in that regard. Failure to comply with the cybersecurity and data privacy
requirements in a timely manner, or at all, may subject us to government enforcement actions and investigations, fines, penalties, suspension
or disruption of our operations, among other things.
We also grant limited access to specified data
on our technology platform to certain other ecosystem participants. These third parties face the same challenges and risks inherent in
handling and protecting large volumes of data. Any system failure or security breach or lapse on our part or on the part of any of such
third parties that results in the release of user data could harm our reputation and brand and, consequently, our business, in addition
to exposing us to potential legal liability.
See "Item 4. Information on the Company—B.
Business Overview—Regulations—Regulations relating to Internet Information Security and Privacy Protection
."
We have limited insurance coverage which
could expose us to significant costs and business disruption.
We maintain various insurance policies to safeguard
against risks and unexpected events. We, through the VIE and the VIE's subsidiaries, have purchased compulsory motor vehicle liability
insurance and commercial insurance such as automobile third-party liability insurance, property insurance, and cargo insurance. We, through
the VIE and the VIE's subsidiaries, have purchased employer liability insurance. We also provide work-related injury insurance to
our employees. We are not legally required to maintain insurance for freight transportation of non-hazardous items. We do not maintain
business interruption insurance, nor do we maintain key-man life insurance. We cannot assure you that our insurance coverage is sufficient
to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policies on a timely
basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less
than our actual loss, our business, financial condition, and results of operations could be materially and adversely affected.
If we fail to comply with regulations on
commercial franchising may result in penalties to us.
Pursuant to the
Regulations on Commercial Franchising promulgated by the State Council in February 2007 and Provisions on Administration of the Record
Filing of Commercial Franchises issued by Ministry of Commerce in December 2011, collectively the Regulations and Provisions on Commercial
Franchising, commercial franchising refers to the business activities where an enterprise that possesses the registered trademarks, enterprise
logos, patents, proprietary technology, or any other business resources allows such business resources to be used by another business
operator through contract and the franchisee follows the uniform business model to conduct business operation and pay franchising fees
according to the contract. We and certain of our network partners may therefore be subject to regulations on commercial franchising. Under
the relevant regulations, we may be required to file our cooperation arrangements with the network partners with the Ministry of Commerce
or its local counterparts, but we have not made such filings. As of the date of this annual report, we have not received any order from
any governmental authorities to make such filing. If relevant authorities determine that we have failed to report franchising activities
in accordance with the regulations, we may be subject to fines ranging from RMB10,000 (approximately USD1,400) to RMB50,000 (approximately
USD7,200) and if we fail to comply within the rectification period determined by the competent governmental authority, we may be subject
to an additional fine ranging from RMB50,000 (approximately USD7,200) to RMB100,000 (approximately USD14,000) and the relevant authority
may issue a public reprimand.
50
We face challenges associated with diversifying
our service offerings.
We, through the VIE and the VIE's subsidiaries,
have in the past launched new service lines such as cloud storage services and other initiatives, and intend to continue to diversify
our service offerings in the future. New services or new types of clients may involve risks and challenges we do not currently face. Such
new initiatives may require us to devote significant financial and managerial resources and may not perform as expected.
In addition, we may not be able to successfully
anticipate and address client demand and preferences in connection with new service offerings and our existing network and facilities
may not be adaptable to the new services or clients. For example, different service offerings may impose different requirements and service
standards. We may also be inexperienced with the operating models and cost structures associated with a new type of client or service
offerings. If we take ineffective measures and cannot promptly adopt new and more effective measures, we may suffer losses. Further, we
may not be able to ensure adequate service quality, and therefore may receive complaints or incur costly liability claims, which would
harm our overall reputation and financial performance. We may not be able to achieve profitability or recoup our investments with respect
to any new services or new types of clients in time or at all.
Risks Relating to Our Class A Ordinary Shares
and the Trading Market
If we fail to establish and maintain an
effective system of internal control over financial reporting, our ability to accurately and timely report our financial results or prevent
fraud may be adversely affected, and investor confidence and the market price of our Class A Ordinary Shares may be adversely impacted.
We are subject to reporting obligations under
U.S. securities laws. The SEC adopted rules pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 requiring every public company to
include a management report on such company's internal control over financial reporting in its annual report, which contains management's
assessment of the effectiveness of its internal control over financial reporting.
Our independent registered public accounting firm has not conducted
an audit of our internal control over financial reporting. However, in preparing our consolidated financial statements as of and for the
years ended December 31, 2022, we have identified material weaknesses in our internal control over financial reporting, as defined in
the standards established by the PCAOB, and other control deficiencies. The material weakness identified are a lack of accounting staff
and resources with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements and lack of sufficient controls designed
and implemented in IT environment and IT general control activities, which mainly associated with areas of segregation of duties, program
change and cybersecurity. See "Item 15. Controls and Procedures—Disclosure Controls and Procedures".
Our management is currently in the process of evaluating the steps
necessary to remediate the ineffectiveness, such as (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting
experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; (ii)
implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting
personnel; and (iii) Strengthen the supervision and controls on the IT functions, including the enhancement of logical security and job
management. Measures that we implement may not fully address the material weakness in our internal control over financial reporting and
we may not be able to conclude that the material weakness has been fully remedied.
Failure to correct the material weakness and other
control deficiencies or failure to discover and address any other control deficiencies could result in inaccuracies in our consolidated
financial statements and could also impair our ability to comply with applicable financial reporting requirements and make related regulatory
filings on a timely basis. As a result, our business, financial condition, results of operations, and prospects, as well as the trading
price of our Class A Ordinary Shares, may be materially and adversely affected. Due to the material weakness in our internal control over
financial reporting as described above, our management concluded that our internal control over financial reporting was not effective
as of December 31, 2022. This could adversely affect the market price of our Class A Ordinary Shares due to a loss of investor confidence
in the reliability of our reporting processes.
51
The dual class structure of our ordinary
shares has the effect of concentrating voting control with our Chairman, and his interest may not be aligned with the interests of our
other shareholders.
We have a dual-class voting structure consisting
of Class A Ordinary Shares and Class B Ordinary Shares. Under this structure, holders of Class A Ordinary Shares are entitled to one vote
per one Class A Ordinary Share, and holders of Class B Ordinary Shares are entitled to 10 votes per one Class B Ordinary Share, which
may cause the holders of Class B Ordinary Shares to have an unbalanced, higher concentration of voting power. As of the date of this annual
report, Mr. Yongxu Liu, our chief executive officer and Chairman, beneficially owns 41,880,000, or 100%, of our issued Class B Ordinary
Shares, representing approximately 91.18% of the voting rights in our Company. As a result, until such time as Mr. Yongxu Liu's
voting power is below 50%, Mr. Yongxu Liu as the controlling shareholder has substantial influence over our business, including decisions
regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant
corporate actions. He may take actions that are not in the best interests of us or our other shareholders. These corporate actions may
be taken even if they are opposed by our other shareholders. Further, such concentration of voting power may discourage, prevent, or delay
the consummation of change of control transactions that shareholders may consider favorable, including transactions in which shareholders
might otherwise receive a premium for their shares. Future issuances of Class B Ordinary Shares may also be dilutive to the holders of
Class A Ordinary Shares. As a result, the market price of our Class A Ordinary Shares could be adversely affected.
The dual-class structure of our ordinary
shares may adversely affect the trading market for our Class A Ordinary Shares.
Several shareholder advisory firms have announced
their opposition to the use of multiple class structures. As a result, the dual class structure of our ordinary shares may cause shareholder
advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital
structure. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure
could also adversely affect the value of our Class A Ordinary Shares.
Since we are a "controlled company"
within the meaning of the Nasdaq listing rules, we may follow certain exemptions from certain corporate governance requirements that could
adversely affect our public shareholders.
Our largest shareholder, Mr. Yongxu Liu, owns
more than a majority of the voting power of our outstanding ordinary shares. Under the Nasdaq listing rules, a company of which more than
50% of the voting power is held by an individual, group, or another company is a "controlled company" and is permitted to
phase in its compliance with the independent committee requirements. Although we do not intend to rely on the "controlled company"
exemptions under the Nasdaq listing rules even if we are a "controlled company," we could elect to rely on these exemptions
in the future. If we were to elect to rely on the "controlled company" exemptions, a majority of the members of our board
of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist
entirely of independent directors. Accordingly, if we rely on the exemptions, during the period we remain a controlled company and during
any transition period following a time when we are no longer a controlled company, you would not have the same protections afforded to
shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.
52
Substantial future sales of our Class A
Ordinary Shares or the anticipation of future sales of our Class A Ordinary Shares in the public market could cause the price of our Class
A Ordinary Shares to decline.
Sales of substantial amounts of our Class A Ordinary
Shares in the public market, or the perception that these sales could occur, could cause the market price of our Class A Ordinary Shares
to decline. An aggregate of 40,520,000 Class A Ordinary Shares are outstanding as of the date of this annual report. Sales of these shares
into the market could cause the market price of our Class A Ordinary Shares to decline.
We do not intend to pay dividends for the
foreseeable future.
We currently intend to retain any future earnings
to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.
As a result, you may only receive a return on your investment in our Class A Ordinary Shares if the market price of our Class A Ordinary
Shares increases.
If securities or industry analysts do not
publish research or reports about our business, or if the publish a negative report regarding our Class A Ordinary Shares, the price of
our Class A Ordinary Shares and trading volume could decline.
Any trading market for our Class A Ordinary Shares
may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any
control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our Class A Ordinary Shares would
likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose
visibility in the financial markets, which could cause the price of our Class A Ordinary Shares and the trading volume to decline.
The market price of our Class A Ordinary
Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above
the public offering price.
From the closing of our initial public offering
on April 3, 2023 to the date of this annual report, the closing price of our Class A Ordinary Shares has ranged from $4.04 per share.
The trading price of our Class A Ordinary Shares is likely to continue to be volatile and could fluctuate widely due to factors beyond
our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices
of other companies with business operations located mainly in China that have listed their securities in the United States. The securities
of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial
price declines in their trading prices. The trading performances of other Chinese companies' securities after their offerings may
affect the attitudes of investors toward Chinese companies listed in the United States in general and consequently may impact the trading
performance of our Class A Ordinary Shares, regardless of our actual operating performance.
The market price of our Class A Ordinary Shares
may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
●
actual or anticipated fluctuations in our revenue and other operating results;
●
the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
●
actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
●
announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;
●
price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
●
lawsuits threatened or filed against us; and
●
other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.
In addition, the stock markets have experienced
extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies.
In the past, shareholders have filed securities class action litigation following periods of market volatility. If we were to become involved
in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business,
and adversely affect our business.
53
The price of our Class A Ordinary Shares
could be subject to rapid and substantial volatility. Such volatility, including any stock run-ups, may be unrelated to our actual or
expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly
changing value of our Class A Ordinary Shares.
There have been instances of extreme stock price
run-ups followed by rapid price declines and strong stock price volatility with recent initial public offerings, especially among those
with relatively smaller public floats. As a relatively small-capitalization company with a relatively small public float, we may experience
greater share price volatility, extreme price run-ups, lower trading volume, and less liquidity than large-capitalization companies. In
particular, our Class A Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades, and large spreads
in bid and ask prices. Such volatility, including any stock run-ups, may be unrelated to our actual or expected operating performance
and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Class
A Ordinary Shares.
In addition, if the trading volumes of our Class
A Ordinary Shares are low, persons buying or selling in relatively small quantities may easily influence the price of our Class A Ordinary
Shares. This low volume of trades could also cause the price of our Class A Ordinary Shares to fluctuate greatly, with large percentage
changes in price occurring in any trading day session. Holders of our Class A Ordinary Shares may also not be able to readily liquidate
their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic
and political conditions may also adversely affect the market price of our Class A Ordinary Shares. As a result of this volatility, investors
may experience losses on their investment in our Class A Ordinary Shares. A decline in the market price of our Class A Ordinary Shares
also could adversely affect our ability to issue additional Class A Ordinary Shares or other securities and our ability to obtain additional
financing in the future. No assurance can be given that an active market in our Class A Ordinary Shares will develop or be sustained.
If an active market does not develop, holders of our Class A Ordinary Shares may be unable to readily sell the shares they hold or may
not be able to sell their shares at all.
If we cease to qualify as a foreign private
issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers,
and we would incur significant additional legal, accounting, and other expenses that we would not incur as a foreign private issuer.
As a foreign private issuer, we are exempt from
the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors, and principal
shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In
addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as
promptly as United States domestic issuers, and we are not required to disclose in our periodic reports all of the information that United
States domestic issuers are required to disclose. While we currently are deemed to be a foreign private issuer, we may cease to qualify
as a foreign private issuer in the future, in which case we would incur significant additional expenses that could have a material adverse
effect on our results of operations.
Because we are a foreign private issuer
and are exempt from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would
have if we were a domestic issuer.
As a Cayman Islands company listed on the Nasdaq
Capital Market, we are subject to the Nasdaq corporate governance listing standards. Nasdaq rules, however, 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.
Nasdaq Listing Rule 5635 generally provides that
shareholder approval is required of U.S. domestic companies listed on Nasdaq prior to issuance (or potential issuance) of securities (i)
equaling 20% or more of the company's common stock or voting power for less than the greater of market or book value (ii) resulting
in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase plan to be established or
materially amended or other equity compensation arrangement made or materially amended. Notwithstanding this general requirement, Nasdaq
Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home country practice rather than these shareholder approval
requirements. The Cayman Islands do not require shareholder approval prior to any of the foregoing types of issuances. We, therefore,
are not required to obtain such shareholder approval prior to entering into a transaction with the potential to issue securities as described
above. We intend to comply with the requirements of Nasdaq listing rules in determining whether shareholder approval is required on such
matters. We may, however, consider following home country practice in lieu of the requirements under Nasdaq listing rules with respect
to certain corporate governance standards which may afford less protection to investors.
Nasdaq Listing Rule 5605(b)(1) requires listed
companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted
to, and we may follow home country practice in lieu of the above requirement. The corporate governance practice in our home country, the
Cayman Islands, does not require a majority of our board to consist of independent directors. Currently, a majority of our board members
are independent. However, if we change our board composition such that independent directors do not constitute a majority of our board
of directors, our shareholders may be afforded less protection than they would otherwise enjoy under Nasdaq's corporate governance
requirements applicable to U.S. domestic issuers.
If we cannot satisfy, or continue to satisfy,
the continued listing requirements and other rules of the Nasdaq Capital Market, our securities may not be listed or may be delisted,
which could negatively impact the price of our securities and your ability to sell them.
Our Class A Ordinary Shares are listed on the
Nasdaq Capital Market. In order to maintain our listing on the Nasdaq Capital Market, we are required to comply with certain rules of
the Nasdaq Capital Market, including those regarding minimum stockholders' equity, minimum share price, minimum market value of
publicly held shares, and various additional requirements. Even if we currently meet the listing requirements and other applicable rules
of the Nasdaq Capital Market, we may not be able to continue to satisfy these requirements and applicable rules. If we are unable to satisfy
the Nasdaq Capital Market criteria for maintaining our listing, our securities could be subject to delisting.
54
If the Nasdaq Capital Market subsequently delists
our securities from trading, we could face significant consequences, including:
●
a limited availability for market quotations for our securities;
●
reduced liquidity with respect to our securities;
●
a determination that our Class A Ordinary Share is a "penny stock," which will require brokers trading in our Class A Ordinary Share to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Class A Ordinary Share;
●
limited amount of news and analyst coverage; and
●
a decreased ability to issue additional securities or obtain additional financing in the future.
Because we are an "emerging growth
company," we may not be subject to requirements that other public companies are subject to, which could affect investor confidence
in us and our Class A Ordinary Shares.
For as long as we remain an "emerging growth
company," as defined in the Jumpstart Our Business Startups Act of 2012, we will elect to take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of
2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory
requirements, our shareholders would be left without information or rights available to shareholders of more mature companies. If some
investors find our Class A Ordinary Shares less attractive as a result, there may be a less active trading market for our Class A Ordinary
Shares and our share price may be more volatile.
The laws of the Cayman Islands may not provide
our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States.
We are an exempted company incorporated under
the laws of the Cayman Islands with limited liability. Our corporate affairs are governed by our amended and restated memorandum and articles
of association, by the Companies Act (2021 Revision) of the Cayman Islands and by the common law of the Cayman Islands. The rights of
shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors
to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands
is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law. Decisions of the Privy
Council (which is the final Court of Appeal for British overseas territories such as the Cayman Islands) are binding on a court in the
Cayman Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal are generally of persuasive
authority but are not binding in the courts of the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly
of persuasive but not binding authority. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman
Islands law are not as clearly established as they would be under statutes or judicial precedents in the U.S. In particular, the Cayman
Islands has a less developed body of securities laws relative to the U.S. Therefore, our public shareholders may have more difficulty
protecting their interests in the face of actions by our management, directors or controlling shareholders than would shareholders of
a corporation incorporated in a jurisdiction in the U.S.
55
Shareholders of Cayman Islands exempted companies
like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of the register of members of
these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions,
our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make
it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies
from other shareholders in connection with a proxy contest.
As a result of all of the above, public shareholders
may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors,
or controlling shareholders than they would as public shareholders of a company incorporated in the U.S.
You may be unable to present proposals before
annual general meetings or extraordinary general meetings not called by shareholders.
Cayman Islands law provides shareholders with
only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general
meeting. These rights, however, may be provided in a company's articles of association. Our articles of association allow our shareholders
holding shares representing in aggregate not less than 10% of our voting share capital in issue, to requisition a general meeting of our
shareholders, in which case our directors are obliged to call such meeting. Advance notice of at least 21 clear days is required for the
convening of our annual general shareholders' meeting and at least 14 clear days' notice any other general meeting of our
shareholders. A quorum required for a meeting of shareholders consists of at least one or more shareholders present or by proxy, representing
not less than one-third of the total issued shares carrying the right to vote at a general meeting of the Company. For these purposes,
"clear days" means that period excluding (a) the day when the notice is given or deemed to be given and (b) the day for which
it is given or on which it is to take effect.
If we are classified as a PFIC, United States
taxpayers who own our Class A Ordinary Shares may have adverse United States federal income tax consequences.
A non-U.S. corporation such as ourselves will
be classified as a PFIC, for any taxable year if, for such year, either:
●
At least 75% of our gross income for the year is passive income; or
●
The average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%.
Passive income generally includes dividends, interest,
rents and royalties (other than rents or royalties derived from the active conduct of a trade or business), and gains from the disposition
of passive assets.
If we are determined to be a PFIC for any taxable
year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Class A Ordinary Shares, the U.S. taxpayer
may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.
Depending on the amount of cash we have and any
other assets held for the production of passive income, it is possible that, for our current taxable year or for any subsequent year,
more than 50% of our assets may be assets which produce passive income, in which case we would be deemed a PFIC, which could have adverse
U.S. federal income tax consequences for U.S. taxpayers who are shareholders. We will make this determination following the end of any
particular tax year.
Although the law in this regard is unclear, we
treat the PRC operating entities as being owned by us for United States federal income tax purposes, not only because we exercise effective
control over the operations of such entities but also because we are entitled to substantially all of their economic benefits, and, as
a result, we consolidate their operating results in our consolidated financial statements. For purposes of the PFIC analysis, in general,
a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own
at least 25% of the equity by value.
56
For a more detailed discussion of the application
of the PFIC rules to us and the consequences to U.S. taxpayers if we were or are determined to be a PFIC, see "Item 10. Additional
Information—E. Taxation—United States Federal Income Taxation—PFIC."
Anti-takeover provisions in our amended
and restated memorandum and articles of association may discourage, delay, or prevent a change in control.
Some provisions of our amended and restated memorandum
and articles of association may discourage, delay, or prevent a change in control of our company or management that shareholders may consider
favorable, including, among other things, the following:
●
provisions that authorize our board of directors to issue shares with preferred, deferred, or other special rights or restrictions without any further vote or action by our shareholders; and
●
provisions that restrict the ability of our shareholders to call meetings and to propose special matters for consideration at shareholder meetings.
Item 4. INFORMATION ON THE COMPANY
A.
History and Development of the Company
For the history and development of the Company,
please refer to "Item 3. Key Information—Our Corporate History."
On March 31, 2023, our Class A Ordinary Shares
commenced trading on the Nasdaq Capital Market under the symbol "SFWL." On April 4, 2023, we closed our initial public offering.
We raised $9.60 million in gross proceeds from our initial public offering, before deducting underwriting discounts and other related
expenses.
Corporate Information
Our principal executive office is located at Shengfeng
Building, No. 478 Fuxin East Road, Jin'an District, Fuzhou City, Fujian Province, China, and our phone number is +86-591-83619860.
Our registered office in the Cayman Islands is located at Suite 102, Cannon Place, P.O. Box 712, North Sound Rd., George Town Grand Cayman,
KY1-9006 Cayman Islands, and the phone number of our registered office is +1-(345) 947-7275. We maintain corporate websites at sfwl.com.cn.
The information contained in, or accessible from, our websites or any other website does not constitute a part of this annual report.
Our agent for service of process in the U.S. is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.
The SEC maintains a website at www.sec.gov that
contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC using
its EDGAR system.
For information regarding our principal capital
expenditures, see "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditures."
B.
Business Overview
Our Mission
The VIE is one of the leading contract logistics
service providers in China. Since the establishment of the VIE in 2001, our mission has been to provide logistics solutions to companies
in need of storage and delivery assistance in China. Through our experienced management team, we apply our well-established management
system and operation procedures to assist companies in China to increase efficiency and improve their own management systems with respect
to transportation, warehousing and time management. We aim to provide our clients with superior and customized services. Our business
slogan is "When you entrust us with your goods, we cherish them as our own."
Overview
Contract logistics is a comprehensive process
that merges traditional logistics with supply chain management. Contract logistics companies outsource resource management tasks to third-party
companies and handle activities such as planning and designing supply chains, designing facilities, processing orders, collecting payments,
managing inventories, and providing client services.
57
We are a contract logistics company with consolidated
revenue of approximately $370.3 million, $346.7 million and $287.5 million for the fiscal year ended December 31, 2022, 2021 and 2020,
respectively.
Our
integrated logistics solutions are comprised of three segments: (1) B2B freight transportation services; (2) cloud storage services; and
(3) value-added services. Since the VIE's inception, we, through the VIE and the VIE's subsidiaries, have developed extensive
and reliable transportation networks in China, covering 341 cities across 31 provinces, as of December 31, 2022. Furthermore, we, through
the VIE and the VIE's subsidiaries, serve more than 4,000 manufacturers and trading companies (medium-scale to large-scale) throughout
China, including brand names such as CATL Battery, Bright Dairy, SF Express, Schneider Electric, Tesla and Xiaomi.
We, through the VIE and the VIE's subsidiaries,
operate on a scalable integrated network model, which we believe is best suited to support our business and maintain the quality of our
comprehensive logistics services. As a contract logistics company, we, through the VIE and the VIE's subsidiaries, directly operate
all of our regional sorting centers, Cloud OFCs and service outlets. We, through the VIE and the VIE's subsidiaries, also own and
operate our fleets. In order to establish broader network and provide more efficient services, we, through the VIE and the VIE's
subsidiaries, cooperate with third-party transportation providers in providing freight transportation services and with some network partners
to promote our business. The integrated network model aims to satisfy the need for reliability, visuality, and timeliness; while we concentrate
on the establishment of our network, continuous improvement in our comprehensive logistics services, and construction of our logistics
ecosystem. We believe this network model allows us to achieve strong operating results while maintaining and minimizing fixed costs and
capital requirements, which results in higher return on earnings and equities.
Operational efficiency, cost management, and competitive
pricing are critical to the success of a contract logistics company. We, through the VIE and the VIE's subsidiaries, have achieved
strong operational efficiency through centralized control and management of 35 regional sorting centers, 22 Cloud OFCs, 42 service outlets,
approximately 600 self-owned trucks and vehicles, and over 40,000 transportation providers, route planning and optimization, and transportation
and management system.
Our goal is to provide high-quality professional
services to our clients. We, through the VIE and the VIE's subsidiaries, have established proven systems and procedures that are
critical in achieving standardization and control over the quality of services rendered by us and third-party transportation providers.
We constantly monitor and attempt to improve on our series of key metrics in service-quality control and management such as late delivery
rate, complaint rate, and damaged or lost freight rate, as we strive to become the best in the industry by improving each of the stated
key metrics. Our superior service quality was demonstrated when the VIE was ranked 32
nd
among the 50 listed privately owned
logistics companies by CFLP, the first association in the logistics and procurement industry in China and an association approved by the
State Council of China, on August 24, 2022. In September 2020, the VIE was recognized by CFLP as one of the leading freight companies
for our high-quality and professional services during the COVID-19 pandemic.
The VIE and the VIE's subsidiaries'
total transportation volume increased from approximately 6,360,000 tons for the fiscal year ended December 31, 2021 to approximately 7,800,000
tons for the fiscal year ended December 31, 2022, representing an increase of approximately 22.64%. For the fiscal years ended December
31, 2022 and 2021, net revenue generated from providing our services provided by the VIE and the VIE's subsidiaries were approximately
$370.3 million and $346.7 million, respectively. Our total net revenue increased by approximately 6.8% during 2022 compared to 2021. We,
through the VIE and the VIE's subsidiaries, generated operating profit of approximately $9.8 million and $8.6 million for the fiscal
years ended December 31, 2022 and 2021, respectively. Our operating profit margin was approximately 2.7% and 2.5% for the fiscal years
ended December 31, 2022 and 2021, respectively. We recorded net profit of approximately $7.8 million and $6.6 million for the fiscal years
ended December 31, 2022 and 2021, respectively.
Shengfeng Development Limited is a holding company
incorporated in the Cayman Islands and it is not a Chinese operating company. As a holding company with no material operations of its
own, its operations have been conducted in China by its subsidiaries and through contractual arrangements, or the VIE Agreements, with
a VIE, Shengfeng Logistics, and the VIE's subsidiaries. For accounting purposes, we control and receive the economic benefits of
the VIE and the VIE's subsidiaries' business operations through the VIE Agreements, which enables us to consolidate the financial
results of the VIE and the VIE's subsidiaries in our consolidated financial statement under U.S. GAAP. Neither we nor our subsidiaries
own any equity interests in the VIE or the VIE's subsidiaries. As an investor in this offering, you may be subject to unique risks
due to our VIE structure. The VIE Agreements are designed to provide our wholly owned subsidiary, Tianyu, with the power, rights, and
obligations to Shengfeng Logistics, including control rights and the rights to the assets, property, and revenue of the VIE, as set forth
under the VIE Agreements. Our VIE Agreements have not been tested in a court of law in China, as of the date of this annual report, and
may not be effective in providing control over the VIE. We are, therefore, subject to risks due to the uncertainty of the interpretation
and application of the laws and regulations of the PRC, regarding the VIE and the VIE structure, including, but not limited to, regulatory
review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangements
with the VIE. We have evaluated the guidance in FASB ASC 810 and determined that we are regarded as the primary beneficiary of the VIE,
for accounting purposes, as a result of our direct ownership in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat
the VIE and the VIE's subsidiaries as our consolidated entities under U.S. GAAP. We have consolidated the financial results of the
VIE and the VIE's subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.
58
Our Class A Ordinary Shares offered in this offering
are shares of our offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE's subsidiaries in China,
therefore, you will not directly hold equity interests in the VIE or the VIE's subsidiaries, and you may never directly hold equity
interests in the VIE or the VIE's subsidiaries through your investment in this offering. For a description of the VIE Agreements,
see "Item 3. Key Information
—
Our VIE Agreements
.
"
Our Competitive Strengths
We believe we have the following competitive strengths:
Contract Logistics Service Provider with Established Operating
History in China
Since 2001, and as of the date of this annual
report, we, through the VIE and the VIE's subsidiaries, have operated as a contract logistics service provider for 22 years. Our
main business operates as a less than truckload, or "LTL," freight carriers in China, and we, through the VIE and the VIE's
subsidiaries, also provide full truckload, "FTL," freight transportation services.
Through years of operation, we, through the VIE
and the VIE's subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities across 31
provinces, as of December 31, 2022. We, through the VIE and the VIE's subsidiaries, have also established a broad clientele base
across more than 4,000 manufacturers and trading companies (medium-scale to large-scale) throughout China, including brand names such
as CATL Battery, Bright Dairy, SF Express, Schneider Electric, and Xiaomi.
We, through the VIE and the VIE's subsidiaries,
have achieved significant growth while maintaining profitability. We had an annual net profit growth of approximately 213.4% in 2020,
approximately 10.0% in 2021, and approximately 17.8% in 2022. Our net profit amounted to approximately $7.8 million, $6.6 million and
$6.1 million for the fiscal years ended December 31, 2022, 2021 and 2020, respectively; our net profit margins for the fiscal years ended
December 31, 2022, 2021 and 2020 were approximately 2.1%, 1.9% and 2.1%, respectively.
Operational Efficiency Driven by Detailed
Operational Guidelines
We, through the VIE, have designed and implemented
a series of systematic guidelines as part of our daily business operations to ensure efficiency.
Systematic Clients Management
– Every
client's order is tracked on a real-time basis. Furthermore, we generate a summary report, periodically, for each client with respect
to its orders. Our client management systematically allows us to analyze current conditions, which in turn will help us to improve our
efficiency and increase our margin. For orders with a gross margin below 5%, we will conduct cost analyzations and adjust unit prices,
frights units, frights types, and/or transportation routes accordingly in order to conserve resources and mitigate cost.
Through Shengfeng TMS and our Customer Relationship
Management System (the "CRM"), we maintain a profile for each client, which includes the client's information and corresponding
contract details, in order to closely and efficiently monitor our performance for each order. We will also follow up with clients on a
regular basis to collect feedbacks in order to improve our efficiency. See "—Our Technology Infrastructure."
Streamline Purchase Orders Management
–
Our real-time tracking is available throughout the entire process. Moreover, revenue will be recognized and costs will be incurred at
every stage of our operations, i.e. receipt, trunk, and distribution, and split between each cooperative branch. By tracking the whole
process, we are able to further meticulously analyze revenue and cost for each order.
Prioritize Capacity Arrangement
–
On a daily basis, every station and routing center will, based on our system's support and their industry experience, adjust, arrange,
and prioritize each and every order based on clients, weights, and routes in order to fulfill every order and maximize cost efficiency.
59
Finance and Accounting Management
–
We, through the VIE, have retained Marcum Asia to perform annual auditing of our financial positions. Part of our management in finance
and accounting management process is to utilize our Shengfeng TMS, which allows us to monitor cash inflows and outflows and costs incurred
on a real time basis. This process also allows us to analyze and evaluate the profitability of our line-haul and short-haul routes and
execute decisions strategically so that we can improve efficiency.
Interdepartmental Management Meeting
–
In order to connect all departments, from headquarters to our 35 operating branches, we hold monthly business meetings during which we
summarize our monthly operations, provide feedbacks to market changes, track business progress, boost employee morals, and ensure meeting
objectives.
Scalable Integrated Network Model
We believe our scalable integrated network model
is best suited to support our growth. We believe that we have the capability to utilize our integrated network model to influence, support,
and serve these ongoing, high market demands. Our model is well-suited to serve fragmented market clientele base and cope with seasonal
demand. Furthermore, our national network's fast growth allows us to provide clients with greater geographic reach at a lower cost.
We, through the VIE and the VIE's subsidiaries,
own and operate our own regional sorting centers, Cloud OFCs and service outlets. We, through the VIE and the VIE's subsidiaries,
also directly own and operate our fleets. In order to establish broader network and provide more efficient services, we, through the VIE
and the VIE's subsidiaries, cooperate with third-party transportation providers in providing freight transportation services and
with some network partners to promote our business. As of December 31, 2022, the VIE and the VIE's subsidiaries' transportation
and sorting network is comprised of 35 regional sorting centers, 22 Cloud OFCs and 42 service outlets. Our network in China covered 341
cities in over 31 provinces as of December 31, 2022.
Extensive and Growing Ecosystem
Our ecosystem is comprised of the Company, clients,
and transportation providers. We, through the VIE and the VIE's subsidiaries, have established business relationships with over
4,000 medium to large-scale corporate clients, and over 40,000 transportation providers, as of December 31, 2022. Moreover, our reach
extends to individual consumers, small and medium corporate clients, and large-cap companies through our network. We, through the VIE
and the VIE's subsidiaries, serve various industries and have developed a strong presence in the manufacturing, fast moving consumer
goods and publishing industry.
Superior Service Quality
We endeavor to consistently provide superior services
to our clients. We believe we have successfully designed, established and streamlined policies and processes to achieve standardization
and control over service quality delivered across our networks. We constantly monitor a variety of key service quality metrics, such as
delivery date rate, complaint rate, and damaged or lost freight rate, and we continuously strive to improve each of these rates. In addition,
we, through the VIE and the VIE's subsidiaries, operate a call center system to provide real-time assistance to our clients 10 hours
a day, 7 days a week. We believe that our clients choose our services due to our superior service quality.
Experienced Management Team with a Proven
Track Record
Our management has extensive experience, knowledge,
and proven track records within the logistics industry, which brings us to a deeper understanding of business operations as well as deep
industry connections. The majority of our senior management team has been with the Company for many years, and some of them have been
with us since our inception in 2001. Mr. Yongxu Liu, our Chairman, chief executive officer and President, has over 20 years of experience
in the logistics industry. Mr. Yongxu Liu founded our Company with a vision to provide accessible, reliable, and high-quality logistics
solutions to Chinese businesses and to become a leading player in the industry. Under his leadership, our Company started off in 2001
from being a small-sized logistics service provider with only 60 employees, to becoming one of the largest logistics service providers
in China with total transportation volume of approximately 7,800,000 tons for the fiscal year ended December 31, 2022 and we have 1,550
employees as of December 31, 2022. For further details on our directors and senior management, see "Management."
60
Our Growth Strategies
We aspire to be a leading company in the contract
logistics market in China, and we intend to pursue the following strategies in furtherance of our growth:
Expand Market Share
We currently intend to build our business upon
our current position and presence with the goal to become more influential in the contract logistics market in China. We will continue
working on enhancing our brand recognition and image, improving value propositions, and achieving greater economies of scale. This will
also help us to attract new clients and increase our share of existing clients' logistics budgets through more frequent use of our
services.
Broaden Our Service Offerings
We intend to broaden our service offerings. Through
our existing transportation network, we aim to provide express delivery services and supplement our current cloud storage services with
supply chain management solutions. In addition, we plan to continue enhancing the quality of our services in order to meet the individual
needs of our clients and enhance client retention.
Further Strengthen Our Nationwide Transportation
Networks
We plan to further strengthen our nationwide transportation
networks to cover more geographic areas in China and boost future growth. Specifically, we intend to enhance our network density by penetrating
into the greater Beijing area, Yangtze River Delta, western China, and northeastern China by setting up additional regional sorting centers,
Cloud OFCs, and service outlets as well as expanding our existing ones.
Enhance Our Technology Platform and Infrastructure
We intend to continue investing in information
technology and equipment in order to enhance our operational efficiency, reliability, and scalability, improve client experience, and
reduce costs. Our initiatives include route planning optimization, sorting automation, and supply chain automation. To this end, we plan
to hire, train, and retain the best talents in the industry and invest in research and development, including automated, smart, and high-tech
warehouse equipment and systems. Our ultimate goal is to be able to fulfill various demands and requests from our clients by providing
them with an integrated and one-stop warehousing and distribution services and experience.
Pursue Strategic Alliances and Acquisition
Opportunities
From time to time, we may selectively form strategic
alliances with other logistics companies or other business partners that bring synergies with our business. We may also selectively pursue
acquisitions that will complement our business and operations. As of the date of this annual report, we have not identified any specific
strategic alliances or acquisition opportunities.
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Our Service Offerings
Through our integrated
network model, we, through the VIE and the VIE's subsidiaries, provide B2B freight transportation services and cloud storage services
to our clients. As an integral part of our freight transportation services and cloud storage services, we, through the VIE and the VIE's
subsidiaries, also provide a wide range of value-added logistics services, such as collection on delivery services, customs declaration
services, packaging services, and shipment protection services. We, through the VIE and the VIE's subsidiaries, execute these service
commitments by investing in and retaining talented employees, developing innovative proprietary systems and processes, and utilizing a
network of transportation provided by us and third-party transportation providers. While industry definitions vary, given our extensive
contracting to create a flexible network of solutions, we are generally referred to in the industry as a contract logistics company.
The following chart sets out the services provided by us through the
VIE and the VIE's subsidiaries.
Freight Transportation Services (Transportation Services)
Freight transportation service is currently the
largest segment in our business and source of income. The revenue from freight transportation service increased from approximately $327.8
million, or 94.6% of the total revenue for the fiscal year ended December 31, 2021 to approximately $346.0 million, or 93.4% of the total
revenue for the fiscal year ended December 31, 2022.
We, through the VIE and the VIE's subsidiaries,
mainly offer FTL freight transportation and LTL freight transportation to enterprises for goods weighing over 500 kilograms as follows:
●
FTL
: We provide professional transportation solutions with accurate FTL and special-truck delivery services. FTL freight transportation services are specially designed for heavy shipments which typically weigh over 3,000 kilograms. We have access to dry vans, flatbeds, hazardous parcel vans, and bulk capacity. We may connect our clients with our transportation network and third-party transportation providers that specialize in their transportation lanes and product types, and optimize the usage of our equipment.
●
LTL
: LTL freight transportation involves the shipment of single or multiple pallets of freight. LTL shipments typically weigh between 15 kilograms and 3,000 kilograms. We mainly provide transportation services for B2B LTL shipments weighing between 500 kilograms and 3,000 kilograms.
We, through the VIE and the VIE's subsidiaries,
offer FTL freight transportation services when (i) the freight is large enough to require its own truck, (ii) the freight is fragile
and it requires special handling, or (iii) the shipment has time critical or time-definite restrictions on the transit time of the freight;
otherwise, we, through the VIE and the VIE's subsidiaries, offer LTL freight transportation services, and our vehicles carry as
many different orders of freight as they can manage and deliver them in whichever order best suits the journey. About 30% of our freight
transportation services are provided by our self-owned fleet and the rest are provided by third-party transportation providers. For further
details on these transportation providers, see
"—
Our Transportation Providers."
To meet our clients'
different needs, we typically provide individualized transportation services on a contractual basis. We, through the VIE and the VIE's
subsidiaries, usually enter into freight transportation agreements directly with our clients for a series of freight transportation orders
over a year. The service pricing, freight routes, settlement terms and other terms will be set forth in the agreements. Other than the
clients who enter into service agreements with us for LTL or FTL freight transportation services, we also provide LTL freight transportation
services to some retail clients based on the shipment orders generated from time to time.
For the fiscal years ended December 31, 2022,
2021, and 2020, we, through the VIE and the VIE's subsidiaries, provided freight transportation services for 2,291, 2,226 and 2,431
clients, respectively, in the industries of, among others, manufacturing, energy, telecommunications, internet, fashion, fast moving consumer
goods, publishing, agriculture and e-commerce.
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Shipment Flow
The following diagram illustrates the process
for the completion of a typical freight transportation order.
Step 1: Freight Pickup
Our regional sorting center arranges for vans
to collect the freight from the senders once it receives shipment orders. These vans are provided either by us or by third-party transportation
providers. Through each waybill, we assign a unique tracking number and corresponding barcode to each parcel. The waybills, coupled with
our automated systems, enable us to track the status of each individual parcel throughout the entire pickup, sorting, transportation,
and delivery process. Our service outlets also receive small shipment orders and collect and send freight to our regional sorting centers
from time to time.
Step 2: Freight Sorting and Line-Haul Transportation
Upon receiving freight, the regional sorting center
will sort, pack, and dispatch the freights to the destination regional sorting center (line-haul transportation services between our regional
sorting centers are provided). Barcodes attached to the freight are scanned as they pass each sorting and transportation gateway so that
we and our clients can keep track of real-time delivery progress.
Step 3: Freight Delivery
Our destination regional sorting center unloads
and sorts the freight, which is then delivered directly to the recipients' sites using vans operated by us or third-party transportation
providers. Recipients may also elect to pick up their freight at our delivery outlets. Once the recipient confirms receipt through signature,
our whole service cycle is completed and the settlement of delivery service fee promptly appears on our payment settlement system.
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For FTL shipments, we generally pick up the freight
directly from the clients' sites and transport them to the recipients' destination using our line-haul transportation, without
combining orders from different clients for an FTL shipment. For LTL shipments, we combine orders from different clients into an FTL shipment
at our sorting centers and transport them to the designated location. Through our line-haul and short-haul transportation lines, regional
sorting centers, and information system, we have consolidated freight and freight information to best provide valuable and concise information
to our clients.
Freight Transportation Services Pricing
Our pricing, for each order of freight transportation,
depends on the weight, route, type, and value-added services.
We determine our pricing based on various factors,
including, but not limited to, operating costs, general market conditions, competitions, and service quality. Our service pricing may
also be influenced by market conditions and competitions. From time to time, we may evaluate and adjust our service pricing based on,
among other factors, market conditions and operating costs.
Cloud Storage Services (Warehouse Storage and Management Services)
We, through the VIE and the VIE's subsidiaries,
offer warehouse management, order fulfillment, delivery process management, in-warehouse processing, and inventory optimization management
services to our clients to optimize their inventory and delivery process management. We, through the VIE and the VIE's subsidiaries,
also provide and arrange transportation services and coordinate shipments from merchants to our Cloud OFCs and from there to other locations
designated by our clients as part of our order fulfillment services.
Inventory Management
Cloud OFCs differ
from traditional warehouses in that they can support direct order fulfillment and dispatch operations in addition to storage functions.
They are "cloud-based" because we take full responsibility for the optimal allocation of our clients' inventory into
different Cloud OFCs and save our clients from the hassle of day-to-day operations, therefore, from our clients' point of view,
these Cloud OFCs are "in the cloud."
As of December 31, 2022, we, through the VIE and
the VIE's subsidiaries, directly operated 22 Cloud OFCs across China with a total area of approximately 2,444,000 square feet, among
which 5 Cloud OFCs were multistory facilities. All the Cloud OFCs use our technology infrastructure and are connected to various information
systems across our platform. Therefore, we can allocate inventory of our clients effectively within our Cloud OFCs and coordinate our
services, including subsequent transportation and delivery, accordingly. We constantly monitor the service quality of our Cloud OFCs to
ensure we uphold the standard of our services. The following map illustrates our Cloud OFCs network as of December 31, 2022.
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By utilizing our Cloud OFCs, we provide the following
services to our clients through the VIE and the VIE's subsidiaries:
●
Storage.
We offer reliable and convenient storage solutions for a variety of commercial needs through the warehouses owned or leased by us. Our warehouse facilities are temperature-controlled, secured, and fire-preventive to protect the integrity of our client's products.
●
Pick and Pack.
After receiving pick tickets from our clients, our team of trained professionals retrieve clients' orders according to the instructions on the corresponding pick tickets and pack the items in preparation for shipping.
●
Kitting and Assembly.
Based on the instructions of our clients, we arrange individual items and assemble the separate pieces into a single ready-to-ship set according to specified combinations.
●
Fulfillment.
We receive orders from clients via our WMS or e-mail. We then generate pick-up tickets, and send these tickets to the warehouse for packing, before the goods are picked up by the clients' designated transportation carriers. Ownership and responsibility of the goods are then transferred to such carriers.
●
Delivery Process Management.
We conduct the handover of the shipments of our clients to their transportation and distribution carriers pursuant to the standard operating procedures set forth in our agreements with the clients.
●
Other Value-added Services.
We also offer some value-added services such as inbound qualify testing, repackaging, labeling, and inventory shelf life management.
●
Inventory Optimization Management.
We regularly provide to our clients different reports reflecting the status of their storage and inventory so that they can make business decisions accordingly to optimize their inventory structure.
With our WMS, we are able to effectively monitor
the capacity of our warehouses on a real-time basis and track each and every movement of a good from its entry into our warehouse to its
delivery at its destination, including receiving, storing, packing, and shipping. For details of our WMS, see "—Our technology
infrastructure."
We normally enter into 1-year to 5-year service
contracts with our cloud storage service clients. Our contracts specify the details of our services based on the client's expected
sale volumes and the floor areas to be used. Our contracts typically state the unit price of each service we provide. The amount of revenue
we generate depends on the unit price and volume.
Logistics
We, through the
VIE and the VIE's subsidiaries, have integrated our transportation network and Shengfeng TMS with our client's respective
logistics network and systems. By leveraging our technologies and professional expertise, we are capable of creating and designing solutions
for optimizing, transforming, and upgrading our clients' supply chains as well as reducing their costs. Our national footprint allows
us to provide these services to our clients and their manufacturing partners across many regions of China.
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The following diagram illustrates the product
flow in a typical supply chain. Each client, based on its individual needs and recommendations from our solution design, may elect to
use any combination of the various services we provide at each step of the product flow.
●
Inbound Logistics.
We craft and optimize inbound logistics networks for our clients to ensure that the flow of goods and materials into their business meets their operational objectives. We use different delivery methods specific to the various goods we handle. For instance, a milk run is a delivery method used to transport mixed loads of raw materials from various suppliers to one client. Instead of having each of our client's suppliers transport raw materials individually, we will visit the client's suppliers on a prearranged date, pick up raw materials, and deliver them to the client.
●
Line-haul and Short-haul Distribution.
We assist clients in the transportation of intermediate goods and products between their factories and warehouses and between warehouses in different regions. Our line-haul and short-haul transportation network makes the process efficient and keeps the costs low for our clients.
●
Outbound Logistics.
We assist clients in the transportation of products to ender users or distribution centers through line-haul and short-haul transportation, regional distribution, or last mile delivery, depending on the destinations and the amount of freight.
●
Reverse Logistics.
In reverse logistics, the goods move from the end user back to the seller or manufacturer, our clients. We help clients manage activities after the initial sales, including returns, refurbishing, packaging, and unsold goods. Through the process, we aim to reduce storage and distribution costs, improve clients' reputation among its end users, satisfy client's needs, and create a more sustainable supply chain for our clients.
Value-added Services
In addition to our B2B freight transportation
and cloud storage services, we, through the VIE and the VIE's subsidiaries, provide a wide range of value-added services to our
clients to meet their diversified needs.
Collection on delivery services.
Under
circumstances where a seller ships goods to a buyer, we provide the seller with the option to authorize us to collect payments from the
recipient on its behalf. We charge collection fees equal to 4% of the collected payment for a transaction, and we wire the collected payment
back to the seller on the same day of collection.
Customs declaration
services.
Some of our clients require international shipping services, in response, we provide customs declaration on an as-needed
basis to assist them in meeting the legal requirements such as import and export, and trade. We engage third-party service providers that
maintain the licenses required under applicable PRC laws and regulations for providing customs declaration services.
Delivery upstairs services.
We offer door-to-door
delivery services. In China, it is customary for logistics companies to charge additional fees based on the floor level. The higher the
floor, the higher the fees. Fees are calculated based on a number of factors, including, but not limited to, weight of the goods, destination
floor, and elevator availability.
Packaging services
. We provide shipment
packaging services to our clients. In addition to regular packaging materials, we provide a few other options. For instance, we have introduced
temperature control materials for packing fruits and vegetables or otherwise perishable goods, shock absorbing materials for packing fragile
goods in order to reduce damages that may occur during transportation, and wooden materials for carrying heavier goods.
Other than the regular and necessary packaging
protection on shipments we provide at no additional costs to the clients, we also provide additional packaging protection services in
two options: active protection and protection upon request. Active protection will be provided free of charge based on our own judgment
and experience without requests from our clients. It mostly involves shipments of special products or under certain extreme natural conditions,
such as high precision instruments which need special fixing protection, or liquids being sent to cold areas in the winter which need
cold resistant protection. Additional packaging protection upon request from our clients will incur additional fees based on the shipment
and the requests.
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Pay-at-arrival services
. We typically require
senders to pay for shipment fees as we collect freight from them. Alternatively, senders may select the pay-at-arrival option, which authorizes
us to collect shipment fees from recipients upon freight arrival. In this case, the Company will deliver the shipment upon the receipt
of shipment fees from the recipients.
Return proof of delivery
. For this service,
we issue receipts with either the recipients' signatures or other credible documentations back to the senders, which allows senders
to obtain proof of receipt from recipients. We also offer senders the option to receive and view such receipts electronically on their
desktop or phones.
Shipment protection
. We provide shipment
protection services to our clients. For the clients who enter into service agreements with us, terms and conditions of shipment insurance
are generally set forth under the service agreements, and they are usually responsible for the insurance premium in the amounts as set
forth under the agreements on a case-by-case basis. For the retail clients, they can decide on whether to purchase shipment protection
insurance policy or not at their sole discretion. If they choose to purchase such insurance policy, they will usually be charged an insurance
premium of approximately 0.3% of the declared value of the shipments. If a client has purchased shipment protection services, in case
of lost, stolen, or damaged shipment during transit, he/she should first provide us with a claim letter and proof of value. Once we verify
those materials, we will reimburse the client's loss accordingly based on the terms and conditions set forth under the service agreements.
Afterwards, we will claim for reimbursement from the insurance company based on the insurance policies. The insurance company will then
claim for reimbursement from the parties at fault, if the Company is not at fault. If a client has not purchased shipment protection services,
then in case of lost, stolen, or damaged shipment during transit, we will reimburse for the client's loss in the amount equal to
1 to 3 times of the shipping fees.
Our Network and Infrastructure
Our network consists of regional sorting centers,
Cloud OFCs, service outlets, the line-haul and short-haul transportation network operated by us, and our network partners across China.
Regional Sorting Centers
Our regional sorting centers are connected by a line-haul transportation
network that we operate. They collect freight directly from clients or from service outlets within their coverage area, sort it according
to destinations, and dispatch the freight to the designated regional sorting centers. As of December 31, 2022, we, through the VIE and
the VIE's subsidiaries, operated 35 regional sorting hubs in Fujian, Guangdong, Shanghai, Beijing, Zhejiang, Hubei, and 16 other
provinces in China. Under our operational guidelines, our regional sorting centers did not experience any significant service interruption
during the COVID-19 pandemic or peak seasons.
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The following map shows our nationwide sorting center network as of
December 31, 2022.
Our centralized planning team coordinates the
development and expansion of new and existing regional sorting centers, including site selection, facility layout design, and equipment
purchase. As we strive to provide seamless and efficient logistic solutions to our clients, we regularly contemplate our opportunities
to improve our services. We will consider adding new regional sorting centers if they help optimize our route or increase our capacity
in the surrounding areas. We select the locations based on certain factors, including, but not limited to: (i) client density, (ii) ease
of access, (iii) rent pricing, (iv) payment method, (v) regulatory compliance, (vi) safety, and (vii) surrounding infrastructure and environment.
We design our regional sorting centers in a uniform
manner to deliver a consistent brand image and build in extra capacity for volume growth in the foreseeable future. We hire 20 to 400
employees in each of our regional sorting center, depending on the local freight volume, and we provide each center with sorting and loading
equipment.
When planning routes, we prioritize the efficiency
of the entire network. We dispatch freight to the regional sorting center closest to its destination even if the regional sorting center
and the destination are located in different administrative regions. This reduces transportation time and lowers our and our clients'
transportation costs. Our route planning and management benefit from our years of experiences and information technology infrastructures,
and they enable us to track freight movement on a real-time basis.
Among our regional sorting centers, 2 are located
on lands that we own and the remaining 33 are located on leased lands.
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Cloud OFCs
See "—Service Offerings by
Us—Cloud Storage Services" above.
Line-haul and Short-haul Transportation Network
We, through the VIE and the VIE's subsidiaries,
operate over 600 line-haul and short-haul routes. We utilize our self-owned fleet in addition to the vehicles owned and operated by third-party
transportation providers to form both our line-haul transportation network for long-distance, high-capacity transportation, and our short-haul
transportation network for short-distance, low-capacity pickup and delivery. Because we control route planning and vehicle dispatch of
our entire line-haul and short-haul transportation system, we plan our routes with the goal to lower transportation costs and transit
times.
As of December 31, 2022, our own line-haul fleet
is comprised of 294 truck headstocks and over 1,000 cabinets for ordinary shipments and 10 truck headstocks and 15 cabinets for hazardous
shipments. We, through the VIE and the VIE's subsidiaries, invest in our fleet with our own funds so we are able to adjust the ratio
of different vehicle models swiftly to react to changes based on operational needs. We mostly use 16-meter-long trucks, which have nearly
twice the loading capacity of 9.6-meter-long trucks (commonly used in the industry), to minimize marginal costs and lower unit line-haul
transportation costs. The uniform design of our regional sorting centers with extra parking space also allows us to lower transportation
cost of freight. To increase our transportation efficiency, we utilize the drop and pull transportation method.
As of December 31, 2022, we, through the VIE and
the VIE's subsidiaries, also owned 242 vehicles for our short-haul transportation.
For the fiscal years ended December 31, 2022 and
2021, approximately 30% and 29% of our freight transportation services were provided by our self-owned fleet and the balance was outsourced
and provided by independent third-party transportation providers. For the fiscal years ended December 31, 2022 and 2021, we had 56,370
and 49,036 outsourced vehicles for over 5.54 million and 4.84 million shipments, respectively. The price we pay to third-party transportation
providers is based on our market insights on cost factors, including (i) toll cost based on route, (ii) fuel cost based on route, type
of truck used, and fuel price, and (iii) other costs such as drivers' compensation, depreciation, and maintenance cost. For details
on third-party transportation providers, see "—Our Transportation Providers."
Service Outlets
As of December 31, 2022, we, through the VIE and
the VIE's subsidiaries, operated 36 service outlets across China. Our service outlets, in their assigned geographical areas, will
(1) create shipment orders and accept goods for shipment from our LTL clients; (2) deliver goods for shipment to our regional sorting
centers for freight transportation; and (3) accept shipments from regional sorting centers for the clients to pick up. Each service outlet
typically has 3 to 5 employees.
We will consider adding new service outlets if
they help optimize our route or increase our capacity in the surrounding areas. We select the locations based on certain factors, including,
but not limited to: (i) client density, (ii) ease of access, (iii) rent pricing, (iv) internal layout, (v) regulatory compliance, and
(vi) surrounding infrastructure and environment.
Network Partners
To increase our client base and network coverage,
we, through the VIE and the VIE's subsidiaries, have also entered into some network partner agreements. Our network partners will
create shipment orders and accept goods for shipment from their clients. Afterwards, they will deliver the goods to our regional sorting
centers for our freight transportation. The network partners are solely responsible for the rights and obligations under the service agreements
entered into by and between them and their clients. For the fiscal year ended December 31, 2022, our network partners contributed approximately
0.31% of our income from operations. For the year ended December 31, 2021, our network partners contributed approximately
0.49% of our income from operations.
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Our Ecosystem
We have built a
growing ecosystem with various types of participants, including the Company, clients, and transportation providers. As our Company continues
to expand, we expect that more participants will join our ecosystem, which in turn, we believe, will bring us more business. The current
ecosystem has enhanced our user experience and brand value. We expect this will drive our growth.
The following graphic illustrates the participants
and the network effect of our ecosystem.
Our Clients
We, through the VIE and the VIE's subsidiaries, mainly serve
clients in connection with the delivery of their products to consumers and other businesses. We have clients in various industries, including
manufacturing, energy, telecommunications, internet, fashion, fast moving consumer goods, publishing, agriculture and e-commerce. Our
largest clients include CATL Battery, Bright Dairy, SF Express, Schneider Electric, Tesla and Xiaomi. We served 2,634 and 2,535 clients
during the fiscal years ended December 31, 2022 and 2021, respectively, and no client accounted for more than 5% of our total revenue
during those years. The following table sets forth the top three industries our clients are in by percentage as of December 31, 2022:
Industry
Percentage
Manufacturing
15.37
%
Fast moving customer goods
14.30
%
Publishing
7.00
%
Total
36.67
%
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Client Service
We believe that our client service enhances our
client loyalty and brand image. Therefore, we provide ongoing trainings to our employees and transportation providers, and we conduct
regular performance reviews to ensure the quality of our services.
We, through the
VIE and the VIE's subsidiaries, operate a call center system to provide real-time assistance to our clients by our approximately
245 client service representatives 10 hours a day, 7 days a week. Our automated system continues to respond to inquiries outside of the
normal business hours and forwards complicated inquiries to our client service representatives for further handling. Our call centers
are localized with branch offices in over 20 provinces in China with mostly local hires to leverage their local knowledge. All branches
can be reached via a unified number and use the same call system and database. Our call system automatically forwards incoming calls to
the local branch near the caller's location. Our client service representatives adhere to the same client service standards nationwide
and their local knowledge contributes to enhanced client service effectiveness. At the end of each call, we ask the caller to grade the
quality of our client service and a designated call-back team will follow up on all incidences of dissatisfaction. In addition, we hold
regular training sessions for our client service representatives and conduct regular performance reviews to ensure that they provide high
quality client service.
Our Transportation Providers
During the fiscal years ended December 31, 2022
and 2021, we, through the VIE and the VIE's subsidiaries, cooperated with approximately 45,558 and 36,736 transportation providers,
respectively. These transportation providers are of all sizes, including owner-operators of a single truck, private fleets, and large
trucking companies. All these transportation providers provide vehicles to carry out transportation tasks within our line-haul and short-haul
transportation network. The table below sets out the number of each category of transportation providers.
Fiscal Years Ended
December 31,
2022
2021
Owner-operators of a single truck (#)
43,932
35,224
Private fleets (#)
25
54
Large trucking companies (#)
1,601
1,458
Total transportation providers
45,558
36,736
To strengthen and maintain our relationships with
transportation providers, our employees regularly communicate with them and try to assist them by increasing their equipment utilization,
reducing their empty miles, and repositioning their equipment.
To ensure that we only cooperate and work with
qualified transportation providers, our management formed an evaluation standard to control the quality of their services:
●
Selection
. We carefully examine transportation
    providers' operating permits, vehicle condition, vehicle model, and whether the vehicles are connected with the BeiDou Navigation
    Satellite System, a Chinese satellite navigation system, and select qualified and reliable providers.
Regarding the cooperation with owner-operators
    of a single truck and private fleets, we also participate in the process to select drivers. We will verify and examine the drivers'
    licenses and take into consideration the history of cooperation between the Company and the drivers.
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●
Inspection
. After a transportation provider begins cooperating with us, we regularly inspect its performance during different stages of the cooperation according to detailed specifications and timeline for services in our agreement.
●
Review
. We review the performance of each provider and rate them according to quality of services, timeliness, prices, and client services. Depending on the performance, we can increase, decrease, or terminate the cooperation with a provider.
We, through the VIE and the VIE's subsidiaries,
typically enter into transportation contracts with providers (i) for a specific period of time, typically one year, or (ii) for a specific
order. Our contracts will specify the rights and obligations of the Company and the service providers, including, but not limited to,
quantities, specification, unit price, delivery timeline, payment date, liabilities and remedies. Service providers shall be responsible
for accidents, including economic loss caused to the Company, if they are at fault.
We, through Shengfeng Logistics, entered into a Road Freight Transportation
Cooperation Agreement with Hubei Luge on June 30, 2019. This agreement provided that Hubei Luge, as an Internet logistics platform, should
provide road freight transportation services in China to Shengfeng Logistics, and its designated subsidiaries, through its platform, on
the goods agreed upon and confirmed by both parties from time to time. The term of the agreement was from July 1, 2019 to December 31,
2020. Shengfeng Logistics should pay Hubei Luge a shipping fee per shipment equal to the amount of shipping fee paid by Hubei Luge to
the actual operator divided by 95.1%.
Additionally, we, through Shengfeng Logistics, entered into a Road
Freight Transportation Platform Cooperation Agreement with Hefei Weitian Yuntong Information Technology Co., Ltd., or "Hefei Weitian,"
on September 1, 2020. This agreement provides that Hefei Weitian, including Hubei Luge and Anhui Luge as its designated subsidiaries,
as an Internet logistics platform, shall provide road freight transportation services in China to Shengfeng Logistics, and its designated
subsidiaries, through its platform, on the goods agreed upon and confirmed by both parties from time to time. The term of agreement was
from September 1, 2020 to August 31, 2021. We, through Shengfeng Logistics, have renewed the agreement in which the new term is from September
1, 2021 to December 31, 2023. Shengfeng Logistics shall pay Hefei Weitian a shipping fee per shipment equal to the amount of shipping
fee paid by Hefei Weitian to the actual operator divided by 95.1%. Anhui Luge and Hubei Luge are affiliates under the control of Hefei
Weitian.
Security and Safety
We have designed and integrated safety policies
and procedures across the full scope of our business. Our key safety measures include:
Operational Security and Safety
We, through the VIE and the VIE's subsidiaries,
have established security screening protocols to inspect freights before acceptance. We have listed prohibited items for ground transportation
such as flammables, explosives, gunpowder, and gasoline. We also implement X-ray screenings to find hazardous or prohibited items. Our
safety screening system will continue to evolve in order to meet ever changing technologies.
Workplace safety and transportation safety are
important to our business. We have implemented protocols for safety of ground transportation for the operations of our regional sorting
centers, Cloud OFCs, and service outlets to minimize risks of accidents. We provide periodic trainings to our employees and transportation
providers to recognize hazards, mitigate risks and avoid injuries of themselves and others at work.
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Data Privacy and Safety
We, through the VIE and the VIE's subsidiaries,
have designed and implemented comprehensive procedures and guidelines to regulate our employees and transportation providers' actions
in relation to confidential data and information to ensure data security. We employ a variety of technical solutions to prevent and detect
risks and vulnerabilities in our data privacy and safety, such as encryption and a firewall. We store and transmit all confidential data
and information in encrypted format on separate servers and back up our data and information on a regular basis. We do not share our data
or allow third parties to access our data stored on our servers without prior authorization, and we periodically test our systems and
procedures to detect and eliminate information security risks and privacy risks.
Our Technology Infrastructure
In order to build our core technology systems
and software to meet our needs, we, through the VIE and the VIE's subsidiaries, maintain an in-house team for our technology research
and development. For details of our research and development, see "—Research and Development." We, through the VIE
and the VIE's subsidiaries, have also contracted with some third-party software design companies for licenses to use some of the
systems they designed and developed, such as some financial reporting and accounting systems. Our goal is to utilize these technologies
to increase efficiency in operations, enhance client experience, and contribute to our success.
Shengfeng TMS is the main system for our transportation
services, which is a comprehensive management system that allows us to effectively monitor and manage the various stages of transportation,
payment, and client service. Shengfeng TMS has the following key functions:
Shipment transportation
and tracking management.
Our shipments are sorted and dispatched based on the automatic routing calculation function provided by Shengfeng
TMS. Our GPS trackers, attached to every vehicle, is synchronized with Shengfeng TMS, which will allow us to track the status and location
of each shipment on a real time basis. We also integrate our GPS tracking with BeiDou Navigation Satellite System, WeChat mini programs,
and manual recording, also available on our website and official WeChat account. This integration will allow our clients to track shipments
and search our service outlet locations and sorting center locations.
Payment calculation
. Shengfeng TMS tracks
each client's order and allows us to view and issue bills to our clients and track client payments.
Client portal and service support.
We maintain
an online client portal, where our clients may register their own accounts. Through our online client portal, our clients may view all
of their order histories, track shipment status in real time, and make direct service requests. Our client service representatives have
access to Shengfeng TMS's database through which they can provide a better and more effective service to our clients on a real time
basis. In particular, our employees will load and unload the shipments according to the preferences of the clients, stored in the TMS
system and sent through the portal, and our drivers will provide delivery services based on the instructions and requirements sent from
the portal to cater for the needs of the clients.
Portals for third-party transportation providers.
Our management relies on Shengfeng TMS to effectively manage transport providers. We create an individual profile for each of our
service providers and store all corporate records or other material information into the system. Service providers are required to register
for accounts on the system prior to their cooperation with us, which allows them to monitor the real-time status and location of each
shipment they have been assigned. This also allows us to keep track of those shipments in the hands of third-party transportation providers,
as service providers are required to report location and shipments status of transport to Shengfeng TMS on a regular basis. In addition,
Shengfeng TMS is also capable of handling payment settlements.
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We, through the VIE and the VIE's subsidiaries,
own and operate a data center to support our core operational systems such as Shengfeng TMS and WMS. Our data center provides the network
infrastructure for our managerial, network safety, authority authentication, data backup, and other non-core functions.
In order to optimize our warehouse storage and
management services, we utilize our WMS. It has six core functions: a) storage location management; b) order management; c) "First-In,
First-Out" management; d) order and operation review; e) bar code management and tracking; and f) storage management. With WMS,
we are able to increase the accuracy of goods dispatching, to enhance the efficiency of the operation, to improve the quality management
and to control and realize the warehouse management process visualization.
Our WMS operates according to certain rules of
warehouse management including rules of pick-up, quality inspection, warehouse and storage separation and arrangement. Rules of the WMS
can be set based on the characteristics of different projects on site. Depending on the features of the goods, we perform certain procedures
accordingly after their receipt, such as counting, quality inspection, box combination, storage location designation, and storage on the
shelves. After the goods are stored in our warehouse, we keep track of their storage locations and we may move them from time to time
in preparation of upcoming shipments or for better utilization of storage space. Once we receive any order for shipment, we make plans,
create good pick-up orders, pick up the goods and verify the process again to control our accuracy and our service quality. Goods will
also be tracked until delivery and such result will be reflected in our system. With our WMS, we are able to effectively monitor the capacity
of our warehouses on a real-time basis and track each and every movement of a good from its entry into our warehouse to its delivery at
its destination, including receiving, storing, packing, and shipping.
Intellectual Property
We rely on a combination of trademark, patents,
copyrights, trade secret, and contractual agreements to protect our proprietary rights.
Trademark
As of the date of
this annual report, we had registered, through the VIE and the VIE's subsidiaries, 36 trademarks, including 33 trademarks with the
Trademark Office of the State Administration for Industry and Commerce in China, such as our Company's Chinese name, "Shengfeng
(
盛丰
)," 1 trademark with the Economic Affairs Bureau
of Macao Special Administrative Region, 1 trademark with Trade Marks Registry Intellectual Property Department of the Government of the
Hong Kong Special Administrative Region and 1 trademark with the Intellectual Property Office of Taiwan.
Copyright
As of the date of this annual report, we had registered,
through the VIE and the VIE's subsidiaries, 79 computer software copyrights, including those that relate to Shengfeng TMS, with
the PRC National Copyright Administration.
Patent
As of the date of this annual report, we had registered,
through Guangdong Shengfeng Logistics Co., Ltd., one of the VIE's subsidiaries, 2 invention patents and 12 utility model patents
with the National Intellectual Property Administration.
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Domain Name
As of the date of this annual report, we had registered,
through the VIE, 8 domain names, including our main website. The following table summarizes our domain name registration:
Domain Name
Territory
sfwl.com.cn
China
sfwl.ink
International
sfwl.net
International
sfwl.online
International
sfwl.vip
International
4008556688.cn
China
4008556688.com.cn
China
4008556688.net
International
Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to infringe upon our intellectual property rights. In addition, third parties may initiate litigation
against us alleging infringement of their proprietary rights. See "Item 3. Key Information—D. Risk Factors—Risks Related
to Our Business and Industry—We may not be able to prevent others from unauthorized use of our intellectual property, which could
harm our business and competitive position
.
"
As of the date of this annual report, we have
not been subject to any material dispute or claims for infringement upon third-party trademarks, licenses, and other intellectual property
rights in China.
Competition
The contract logistics industry in China is highly
fragmented, and we compete with many local, regional, and national logistics companies with more resources including Sinotrans Logistics
Ltd., Beijing Changjiu Logistics Co., Ltd., and Kerry Logistics (EAS) Limited. The competitions among contract logistics companies are
primarily based off of service pricing, transportation speeds, service offerings, and other factors. We believe our relatively long operating
history, superior operational capabilities, well-established national transportation networks, and high-quality services give us the competitive
advantages over others.
Entry into the contract logistics industry requires
significant initial investment in network construction, equipment and vehicle purchases, and formulation and attraction of new business
partners. However, other express delivery service providers or e-commerce companies which may be more established, may utilize or further
improve their existing proprietary delivery and transportation infrastructure to compete with us. Furthermore, as we look to expand our
service offerings and client base, we may face competition from players in those new sectors.
Branding and Marketing
We strive to enhance our brand awareness through high service quality
and various marketing initiatives. Shengfeng Logistics was recognized as one of China's outstanding logistics companies by the China
Communications and Transportation Association (the "CCTA"). Furthermore, Shengfeng Logistics was classified as an AAAAA class
logistics company and among the top 10 companies with logistics informatization capacity by the China Federation of Logistics and Purchasing
in 2018. Shengfeng Logistics was also recognized as a top 100 logistics companies in China by the CCTA in 2016 and 2018, respectively.
Shengfeng Logistics was also ranked 32
nd
out of the top 50 privately-owned logistics companies in China by CFLP as of December
31, 2022.
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We, through the VIE and the VIE's subsidiaries,
launched various programs and marketing activities to promote our brand and services. We rely on various social network mobile applications
such as WeChat to distribute business updates and corporate news. Additionally, we offer convenient features such as shipment tracking,
service outlet locator, shipment booking through our WeChat official account.
We participate in conferences and exhibitions
in different industries to expand our pool of potential clients. We also design and develop different service packages to cater for the
demands of clients in different industries so that we could extend our reach of potential clients in similar industries and upstream and
downstream suppliers. We pay close attention to the development of innovative industries such as new energy vehicles, shared bikes and
Internet TV, and have formed cooperation relationships with companies in such industries.
We bring in new clients through promotion activities
by our sales employees, market bidding activities, research on upstream and downstream entities of our current clients, participation
in conferences and exhibitions, meetings, calls, referrals, and other activities. In addition, we require our own fleet to apply our logos
onto transportation vehicles and personnel uniforms in a consistent and unified manner in order to further enhance our brand recognition
during interactions with the clients.
We plan to develop and improve our marketing strategies
by focusing on the following: a) maintaining existing client relationships; b) establishing new client relationships; c) enhancing our
service quality and efficiency; and d) managing our marketing system and expertise. We will make specific marketing plans and take different
approaches based on the various industries, sizes, contract amounts and needs of our clients.
Employees
As of December 31, 2022, 2021, and 2020, we, through the VIE and the
VIE's subsidiaries, had a total of 1,550, 1,543 and 1,583 full-time employees located in China, respectively. The following table
sets forth the breakdown of our employees by function as of December 31, 2022:
Function
Number
% of Total
Stevedore
46
2.97
%
Transportation
263
16.97
%
Management Administration
350
22.58
%
Client Service
217
14.00
%
Operation Support
569
36.71
%
Sales and Marketing
83
5.35
%
Technology and Engineering
22
1.42
%
Total
1,550
100
%
In addition to our own full-time employees, our
workforce also includes 666 dispatched workers and 576 contractors, as of December 31, 2022. In addition, third-party transportation providers
retain their own employees according to their individual operational needs.
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We believe our employees' compensation packages
are competitive and we have created a merit-based work environment that encourages initiative. As a result, we have generally been able
to attract and retain qualified personnel and maintain a stable core management team.
We are required by applicable PRC laws and regulations to participate
in various statutory employee benefit plans, including social insurance, medical insurance, maternity insurance, workplace injury insurance,
unemployment insurance, and pension benefits through a PRC government-mandated multi-employer defined contribution plan. Pursuant to PRC
regulations, we are required to contribute specific percentage of salaries, bonuses, and allowances (up to a maximum amount, specified
by local governmental regulations) to the employee benefit plan. As of the date of this annual report, we have not made adequate social
insurance and housing fund contributions for all employees as required by PRC regulations, but we have taken measures to comply with related
laws and regulations. Such measures include, but are not limited to, outsourcing our labor-related matters and making payments for unpaid
social insurance and housing fund contributions, which may increase the costs of our business and operation.
We enter into standard labor agreements with our
full-time employees with standard confidentiality and non-compete provisions.
We believe that we maintain a good working relationship
with our employees, and we have not experienced any major labor disputes.
Research and Development
As information technology plays an essential role
in our business and services, we endeavor to develop and adopt advanced information technology to increase efficiency and accuracy in
operations, enhance client experience and satisfaction, and ultimately contribute to our growth and success.
We, through the VIE and the VIE's subsidiaries,
maintain an in-house R&D team which consists of four departments in Shengfeng Logistics: Product Department (8 employees and 1 manager),
Operation and Maintenance Department (3 employees and 1 manager), TMS Research and Development Department (10 employees and 1 manager)
and WMS Research and Development Department (3 employees and 1 manager). All of the said departments are under the supervision of the
Director of the Information Section of Shengfeng Logistics. Product Department is mainly responsible for the gathering of product development
requests and opinions, coordinating the communication among different parties on product development and providing necessary trainings
to support new products. Operation and Maintenance Department is mainly responsible for maintaining the computer network, operating systems,
software and hardware, and other equipment to ensure they function properly and are secured. TMS Research and Development Department and
WMS Research and Development Department are mainly responsible for the research and development of TMS and WMS. At least once or twice
per year, the Director of the Information Section will call for a meeting with certain managers and qualified employees from the R&D
departments to discuss the necessity and possibility of new information technology developments and technology upgrades. Any proposal
discussed and approved during the meeting will be presented to the management for further discussion and decision.
From time to time, we contract with some third-party
software design companies for licenses to use some of the systems they designed and developed, such as some financial reporting and accounting
systems. They will also maintain the systems and provide necessary supports to us.
Our passion and dedication for improvement and innovation have been
translated into our ability to develop and introduce new and diversified services with a fast pace, converting our advantage in research
and development into our commercial competitive advantage in the logistic industry. Through years of effort, as of December 31, 2022,
we have registered 43 computer software copyrights with the PRC National Copyright Administration and 1 invention patent with the National
Intellectual Property Administration. Since 2012, Shengfeng TMS has been our main system, which is a comprehensive management system that
allows us to effectively monitor and manage the various stages of transportation, payment, and client service. It is the Company's
plan to continue its dedication to the research and development on information technology to enhance efficiency and client experience.
For more details on our technology infrastructure
and intellectual property, please refer to "—Our Technology Infrastructure" and "—Intellectual Property."
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Properties
and Facilities
Our principal executive office is located at Shengfeng
Building, No. 478 Fuxin East Road, Jin'an District, Fuzhou City, Fujian Province, People's Republic of China, 350001, where
we, through Shengfeng Logistics, lease such property from a related party, Fuzhou Tianyu Shengfeng Industrial Co., Ltd., a company controlled
by Yongteng Liu, who is the brother of Yongxu Liu, our CEO and Chairman, with an area of approximately 24,886.16 square feet, with a lease
term from November 1, 2020 to October 31, 2022 and was renewed to October 31, 2024 with a monthly rent of RMB115,648 (approximately US$17,194).
We also need to pay a monthly property management fee of RMB15,564 (approximately US$2,314). We have priority to renew the lease as long
as we use the property for the same purpose, but we are required to notify the landlord at least two months in advance if we would like
to renew the lease.
As of December 31, 2022, we, through two of the VIE's
subsidiaries, owned 2 office buildings in China with aggregate gross floor areas of approximately 58,348.58 square feet are on the land
we own, and we, through the VIE and the VIE's subsidiaries, leased 34 office buildings in China with aggregate gross floor areas
of approximately 255,868.48 square feet. The terms of such leases range from 1 to 5 years.
As of December 31,2022, we, through one of the VIE's
subsidiaries, owned 4 land use rights with aggregate gross areas of approximately 340,388.43 square feet in Tong Zhou District, Beijing,
China. The use terms of the lands are 50 years. We have not commenced construction on the lands as of the date of this annual report.
In addition, as of December 31, 2022, 2 of the
regional sorting centers operated by the VIE and the VIE's subsidiaries with an aggregate gross floor area of approximate 64,838.16
square feet are on the land we own, and 33 of the regional sorting centers operated by the VIE and the VIE's subsidiaries with an
aggregate gross floor area of approximately 1,626,419.11 square feet are on leased land. The terms of such leases range from 1 to 5 years.
As of the date of this annual report, we, through
the VIE and the VIE's subsidiaries, directly operate 22 Cloud OFCs across China to provide warehouse storage and management services.
As of December 31, 2022, 2 of the Cloud OFCs operated by the VIE and the VIE's subsidiaries with an aggregate gross floor area of
approximate 819,989.20 square feet are on the land we own, and 20 of the Cloud OFCs operated by the VIE and the VIE's subsidiaries
with an aggregate gross floor area of approximately 1,623,861.95 square feet are on the land we leased. The terms of such leases range
from 1 to 3 years.
As of the date of this annual report, we, through the VIE and the VIE's
subsidiaries, directly operate 36 service outlets across China. As of December 31, 2022, all of the service outlets operated by us with
an aggregate gross floor area of approximately 134,476.76 square feet are on the land we leased. The terms of such leases range from 1
to 5 years.
The areas of self-owned properties and leased
premises are based on the figures specified in the certificates of land use or the corresponding lease agreements.
78
The
following table shows the information of the
properties we, through
three of the VIE's subsidiaries, own as of December 31, 2022:
Location
Area (Square Feet)
Term of Use
Current Use
Tong Zhou District, Beijing, China
159,901.66
October 31, 1994 to October 30, 2044
Construction
    has not been commenced as of the date of this annual report.
Tong Zhou District, Beijing, China
155,027.65
October 31, 1994 to October 30, 2044
Construction
    has not been commenced as of the date of this annual report.
Tong Zhou District, Beijing, China
12,531.02
January 23, 1995 to January 22, 2045
Construction
    has not been commenced as of the date of this annual report.
Tong Zhou District, Beijing, China
12,928.10
January 23, 1995 to January 22, 2045
Construction
    has not been commenced as of the date of this annual report.
Fuqing City, Fuzhou Province, China
349,132.7
Until April 10, 2063
318,390.98 for Warehouse Storage and Management Services, 28,588.95 for Regional Sorting Center and 2,152.78 for offices
Suzhou City, Jiangsu Province, China
187,515.50
Until December 30, 2056
131,319.7 for Warehouse Storage and Management Services and 56,195.8 for offices
Suzhou City, Jiangsu Province, China
406,527.71
Until January 29, 2058
370,278.5 for Warehouse Storage and Management Services and 36,249.21 for Regional Sorting Center
We believe that the facilities that we currently
own and lease are generally adequate to meet our current needs, but we expect to seek additional space as needed to accommodate our future growth.
As of December 31, 2022, we, through the VIE and
the VIE's subsidiaries, operated 35 regional sorting hubs in Fujian, Guangdong, Shanghai, Beijing, Zhejiang, Hubei, and 16 other
provinces in China. Among our regional sorting centers, two are located on lands that we own and the remaining 33 are located on leased
lands. We provide each center with sorting and loading equipment.
As of December 31, 2022, our, through the VIE
and the VIE's subsidiaries, own line-haul fleet is comprised of 262 truck headstocks and over 1,000 cabinets for ordinary shipments
and 10 truck headstocks and 15 cabinets for hazardous shipments. We also owned 262 vehicles for our short-haul transportation as of the
same date.
Tangible properties of our regional sorting centers,
Cloud OFCs, service outlets, and line-haul and short-haul transportation network operated by the VIE and the VIE's subsidiaries
across China include transportation and electronic equipment.
Seasonality
Our operating results have been subject to seasonal
trends as a result of, or influenced by, numerous factors, including national holidays, weather patterns, consumer demands, economic conditions,
and others. Although seasonal changes have not significantly impacted on our cash flow or affected our operations, we cannot guarantee
that it will not adversely impact us in the future.
Insurance
We, through the VIE and the VIE's subsidiaries,
maintain various insurance policies to safeguard against risks and unexpected events. We have purchased compulsory motor vehicle liability
insurance and commercial insurance such as automobile third-party liability insurance, property insurance, and cargo insurance. We have
purchased employer liability insurance. We also provide work-related injury insurance to our employees.
79
We do not purchase insurance for items delivered by us. Instead, our
clients may purchase shipment protection services for valuable items, and we will compensate those clients based on the declared value
in the event of loss or damage that was caused by us. For more details, please see "—Value-added Services—Shipment Protection."
Our clients are responsible for purchasing insurance for hazardous items delivered in the shipments, subject to the provisions set forth
under the respective shipping agreements. We do not maintain business interruption insurance nor key-man insurance. Our management will
evaluate the adequacy of our insurance coverages from time to time and purchase additional insurance policies as needed.
Unless otherwise set forth in their respective
agreements, third-party transportation providers will be responsible solely for the shipment insurance. When an accident occurs, a transportation
provider will reimburse and compensate our loss pursuant to our agreements and any third parties' loss. If the transportation provider
is not able to compensate the full amount of the loss to us or any other third parties, our insurance company will pay for the compensation
under our insurance policies. Afterwards, the transportation provider shall reimburse our insurance company.
Legal Proceedings
From time to time, we are subject to legal proceedings,
investigations, and claims incidental to the conduct of our business. We are not a party to, nor are we aware of, any legal proceeding,
investigation, or claim which, in the opinion of our management, is likely to have an adverse material effect on our business, financial
condition, or operation result. We may periodically be subject to legal proceedings, investigations, and claims relating to our business.
We may also initiate legal proceedings to protect our rights and interests.
Regulations
This section sets forth a summary of the principal
laws and regulations relevant to our business and operations in the PRC and the U.S.
PRC Regulations
This section sets forth a summary of the most
significant rules and regulations that affect our business activities in China.
Regulations Relating to Foreign Investment
The Foreign Investment Law, promulgated by the
National People's Congress on March 15, 2019, has come into effect on January 1, 2020 and has replaced the major existing laws and
regulations governing foreign investment in the PRC, including the Sino-foreign Equity Joint Ventures Enterprises Law, the Sino-foreign
Co-operative Enterprises Law, the Wholly Foreign-invested Enterprise Law, and their implementation rules and ancillary regulations. Pursuant
to Foreign Investment Law, the existing foreign invested enterprises established prior to the effective date of the Foreign Investment
Law may keep their corporate organization forms within five years after the effective date of the Foreign Investment Law before such existing
foreign invested enterprise change their organization forms, organization structures, and their activities of foreign-invested enterprises
in accordance with the Company Law, the Partnership Enterprise Law and other laws. According to the Foreign Investment Law, "foreign-invested
enterprises" thereof refers to enterprises that are wholly or partly invested by foreign investors and registered within China under
the PRC laws, "foreign investment" thereof refers to any foreign investor's direct or indirect investment in China,
including: (1) establishing foreign-invested enterprises in China either individually or jointly with other investors; (2) obtaining stock
shares, stock equity, property shares, other similar interests in Chinese domestic enterprises; (3) investing in new projects in China
either individually or jointly with other investors; and (4) making investment through other means provided by laws, administrative regulations,
or State Council provisions.
80
Investments conducted by foreign investors in
the PRC are subject to the Catalogue of Industries for Encouraging Foreign Investment, or the Catalogue, and the Negative List, which
were jointly issued by the NDRC and the MOFCOM. The version of the Catalogue currently in force was amended in 2020 and became effective
on January 27, 2021, and the version of the Negative List currently in force was amended in 2021 and became effective on January 1, 2022,
both of which further reduce restrictions on foreign investment.
On December 26, 2019 the State Council issued
the Implementation Regulations for the Foreign Investment Law, or the Implementation Regulations which came into effect on January 1,
2020. According to the Implementation Regulations, in the event of any discrepancies between the Foreign Investment Law, the Implementation
Regulations and relevant provisions on foreign investment promulgated prior to January 1, 2020, the Foreign Investment Law and the Implementation
Regulations shall prevail. The Implementation Regulations also indicated that foreign investors that invest in sectors on the Negative
List in which foreign investment is restricted shall comply with special management measures with respect to shareholding, senior management
personnel and other matters in the Negative List.
Regulations Relating to Road Transportation
Pursuant to the PRC Regulations on Road Transportation
promulgated by the State Council in April 2004 and most recently amended in March 2019, and the Provisions on Administration of Road Freight
Transportation and Stations (Sites) issued by the Ministry of Transportation in June 2005 and most recently amended in June 2019, or the
Road Freight Provisions, the business operations of road freight transportation refer to commercial road freight transportation activities
that provide public services. The road freight transportation includes general road freight transportation, special road freight transportation,
road transportation of large articles, and road transportation of dangerous cargos. Special road freight transportation refers to freight
transportation using special vehicles such as vehicles with containers, refrigeration equipment, or tank containers. The Road Freight
Provisions set forth detailed requirements with respect to vehicles and drivers.
Under the Road Freight Provisions, anyone engaging
in the business of operating road freight transportation or stations (sites) must obtain a road transportation operation permit from the
local county-level road transportation administrative bureau, and each vehicle used for road freight transportation must have a road transportation
certificate from the same authority. The incorporation of a subsidiary of a road freight transportation operator that intends to engage
in road transportation business is subject to the same approval procedure. If a road freight transportation operator intends to establish
a branch, it should file with the local road transportation administrative bureau where the branch is to be established.
Although the road transportation operation permits
have no limitation with respect to geographical scope, several provincial governments in China, including Shanghai and Beijing, promulgated
local rules on administration of road transportation, stipulating that permitted operators of road freight transportation registered in
other provinces should also make filings with the local road transportation administrative bureau where it carries out its business.
The VIE and the VIE's subsidiaries have
obtained road transportation operation permits to operate general road freight transportation or station (sites).
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Pursuant to the Measures for the Administration
of Road Transportation Safety of Hazardous Goods, or the "Measures," jointly promulgated by the Ministry of Transport, the
Ministry of Industry & Information Technology, the Ministry of Public Security, the Ministry of Ecology and Environment, the Ministry
of Emergency Management and the State Administration for Market Regulation in China, which took effect on January 1, 2020, the transportation
of hazardous goods with road transportation vehicles and relevant activities shall be governed by the Measures. Under the Measures, carriers
of hazardous goods shall carry hazardous goods within the business scope permitted by the competent transport departments. Carriers of
hazardous goods shall maintain carrier's liability insurance for the hazardous goods they carry. The Measures set forth detailed
requirements with respect to consignors, carriers, loaders and drivers.
Regulations Relating to Cargo Vehicles
Pursuant to the Administrative Provisions concerning
the Running of Cargo Vehicles with Out-of-Gauge Goods promulgated by the Ministry of Transportation, or the "Cargo Provisions,"
took effect in August 2016 and most recently amended in August 2021, cargo vehicles running on public roads shall not carry cargo weighing
more than the limits prescribed by this regulation and their dimensions shall not exceed those as set forth in the same regulation. Vehicle
operators who violate this regulation may be subject to a fine of up to RMB30,000 (approximately USD4,300) for each violation. In the
event of repeated violations, the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business
operation registration of the relevant vehicle. Under the Cargo Provisions and the Regulations on Protecting Highway Safety promulgated
by the State Council in China, or the "Highway Regulations," which took effect on July 1, 2011, in the event of repeated violations,
the regulatory authority may suspend the operating license of the vehicle operator and/or revoke the business operation registration of
the relevant vehicle. In the event that more than 10% of the total vehicles of any road transportation enterprise are not in compliance
with the Highway Regulations in any year, such road transportation enterprise's business shall be suspended for rectification and
its road transportation license may be revoked.
We rely on trucks and other vehicles owned and
operated by third-party trucking companies, and the operation of our fleet is subject to this new regulation. We have an obligation to
educate and manage vehicle operators as well as to urge them to comply with this regulation. We weigh and measure each cargo truck as
they enter and leave our hubs and sortation centers to ensure their compliance with this regulation in terms of cargo weight. If any truck
is not in compliance with this regulation, we will replace it with another vehicle that complies with this regulation. Otherwise, we may
be subject to penalties under this regulation if we operate those trucks that exceed the limits set forth in the regulation.
Regulations Relating to Product Quality
Pursuant to the Product Quality Law of the PRC,
or the Product Quality Law, which was promulgated by the Standing Committee of the National People's Congress on February 22, 1993,
became effective on September 1, 1993, and was recently amended on December 29, 2018, business operators, including manufacturers and
sellers, are required to assume certain obligations in respect of product quality. Violations of the Product Quality Law may result in
the imposition of fines. In addition, a company in violation of the Product Quality Law may be ordered to suspend its operations and its
business license may be revoked. Criminal liability may be incurred under severe circumstances. A consumer or other victim who suffers
injury or property losses due to product defects may demand compensation from the manufacturer as well as from the seller. Where the responsibility
lies with the manufacturer, the seller shall, after settling compensation with the consumer, have the right to recover such compensation
from the manufacturer, and vice versa.
82
Regulations Relating to Pricing
In China, the prices of a small number of products
and services are guided or fixed by the government. According to the Pricing Law of the PRC, or the Pricing Law promulgated by the SCNPC
on December 29, 1997 and became effective on May 1, 1998, business operators must, as required by the government departments in charge
of pricing, mark the prices explicitly and indicate the name, origin of production, specifications and other related particulars clearly.
Business operators may not sell products at a premium or charge any fees that are not explicitly indicated. Business operators must not
commit the specified unlawful pricing activities, such as colluding with others to manipulate the market price, using false or misleading
prices to deceive consumers to transact, or conducting price discrimination against other business operators. Any business operator who
fails to comply with the Pricing Law may be subject to administrative sanctions such as warning, ceasing unlawful activities, compensation,
confiscating illegal gains and fines. The business operators may be ordered to suspend business for rectification or have their business
licenses revoked under severe circumstances.
We are subject to the Pricing Law as a service
provider and believe that our pricing activities are currently in compliance with the law in all material aspects.
Regulations Relating to Leasing
Pursuant to the Law on Administration of Urban
Real Estate of the PRC promulgated by the SCNPC on July 5, 1994, amended on August 30, 2007, August 27, 2009, August 26, 2019 and took
effect on January 1, 2020, when leasing premises, the lessor and lessee are required to enter into a written lease contract, containing
provisions such as the leasing term, use of the premises, rental and repair liabilities, and other rights and obligations of both parties.
Pursuant to the Administrative Measures for Commodity House Leasing promulgated by the Ministry of Housing & Urban-Rural Development
in China promulgated on December 2010 and took effect in February 1, 2011, both lessor and lessee are also required to register the lease
with the real estate administration department. If the lessor and lessee fail to complete the registration procedures, both lessor and
lessee may be subject to fines ranging from RMB1,000 (approximately USD$140) to RMB10,000 (approximately USD$1,400). In addition, although
the unregistered lease agreements are considered binding agreements, in practice, some of the remedies generally available to the registered
lease agreements may not be fully applicable to the unregistered lease agreements, such as specific performance of lease agreement against
new purchasers of the property. Some of our leases have not completed the registration.
According to the Civil Code of the PRC, the lessee
may sublease the leased and occupies premises to a third party, subject to the consent of the lessor. Where the lessee subleases the premises,
the lease contract between the lessee and the lessor remains valid. The lessor is entitled to terminate the lease contract if the lessee
subleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises, the lease contract between
the lessee and the lessor will still remain valid.
Pursuant to the Civil Code of the PRC, if a mortgagor
leases the mortgaged property before the mortgage contract is executed, the previously established leasehold interest will not be affected
by the subsequent mortgage.
The Supreme People's Court has revised a judicial interpretation
regarding disputes over lease contracts on urban buildings, which took effect in January 2021, providing that if the ownership of the
leased premises changes during the term of lessee's occupation in accordance with the lease contract, and the lessee requests the
assignee of such premises to continue to perform the original lease contract, the PRC court shall support such request unless the mortgage
right has been established before the leasing and the ownership changes due to the mortgagee's realization of the mortgage right.
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Regulations relating to Internet Information Security and Privacy
Protection
On December 28, 2000, the SCNPC enacted the Decision
on the Protection of Internet Security, as amended on August 27, 2009, which provides that the following activities conducted through
the internet are subject to criminal liabilities: (1) gaining improper entry into any of the computer information networks relating to
state affairs, national defensive affairs, or cutting-edge science and technology; (2) violation of relevant provisions of the State in
the form of unauthorized interruption of any computer network or communication service resulting in the computer network or communication
system's malfunction ; (3) spreading rumors, slanders or other harmful information via the internet for the purpose of inciting
subversion of the state political power; (4) stealing or divulging state secrets, intelligence or military secrets via internet; (5) spreading
false or inappropriate commercial information; or (6) infringing on the intellectual property.
On December 13, 2005, the Ministry of Public Security
issued the Provisions on the Technical Measures for Internet Security Protection, which took effect on March 1, 2006. These regulations
require internet service providers to take proper measures including anti-virus, data back-up, keeping records of certain information
such as the login-in and exit time of users, and other related measures, and to keep records of certain information about their users
for at least 60 days. On June 22, 2007, the Ministry of Public Security, State Secrecy Bureau, State Cryptography Administration and the
Information Office of the State Council jointly promulgated the Administrative Measures for the Multi-level Protection of Information
Security, under which the security protection grade of an information system may be classified into five grades which are (a) Level I,
the destruction of such information system will cause damage to the legitimate rights and interests of citizens, legal persons and other
organizations, but will cause no damage to national security, social order or public interest; (b) Level II, the destruction of such information
system will cause material damage to the legitimate rights and interests of citizens, legal persons and other organizations or cause damage
to social order and public interests, but will not damage national security; (c) Level III, the destruction of such information system
will cause material damage to social order and public interests or will cause damage to national security; (d) Level IV, the destruction
of such information system will cause particularly material damage to social order and public interests or will cause material damage
to national security; (e) Level V, the destruction of such information system will cause particularly material damage to national security.
Companies operating and using information systems shall protect the information systems and any system equal to or above level II as determined
in accordance with these measures, and a record-filing with the competent authority is required.
The Cybersecurity Law of the PRC, as adopted by
the National People's Congress on November 7, 2016, has come into force on June 1, 2017. Considered as the fundamental law in the
area of cybersecurity in China, the Cybersecurity Law regulates network operators and others from the following perspectives: the principle
of Cyberspace sovereignty, security obligations of network operators and providers of network products and services, protection of personal
information, protection of critical information infrastructure, data use and cross-border transfer, network interoperability and standardization.
Network operators shall, according to the requirements of the rules for graded protection of cybersecurity, fulfill security protection
obligations to ensure that the network is free from interference, damage or unauthorized access, and prevent network data from being divulged,
stolen or falsified. In addition, any network operators collecting personal information shall follow the principles of legitimacy, rationality
and necessity and shall not collect or use any personal information without due authorization of the person whose personal information
is collected. Each individual is entitled to request a network operator to delete his or her personal information if he or she finds that
the collection and use of such information by such operator violate the laws, administrative regulations or the agreement by and between
such network operator and such individual; and is entitled to request any network operator to make corrections if he or she finds errors
in such information collected and stored by such network operator. Such network operator shall take measures to delete the information
or correct the errors.
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On April 13, 2020, NDRC, the MIIT, the Ministry
of Public Security, the MOF, MOFCOM, PBOC, the SAMR, the State Administration of Radio and Television, the State Secrecy Administration
and the State Cryptography Administration promulgated the Cybersecurity Review Measures, or the "2020 Review Measures," which
provides that a cybersecurity review is required where critical information infrastructure operators, or the "CIIOs," purchase
network-related products or services, which affects or may affect national security. Critical information infrastructure in important
industries and sectors such as public communications, information service, energy, transport, water conservancy, finance, public service
and e-government, and other critical information infrastructure that, once damaged, disabled or have data disclosed, may severely threaten
the national security, national economy, people's livelihood and public interests, will be given extra protection on the basis of
the graded system for cybersecurity protection. Prior to the purchase of a network product or service, CIIOs shall assess the possible
risks to national security resulting from the use of such product or service. Where national security is or may be affected, an application
for cybersecurity review shall be filed by such CIIOs with the cybersecurity review authority. There, however, has not been a clear scope
of critical information infrastructure or parameters for determining what constitutes a CIIO.
According to the Regulations for Security Protection
of Critical Information Infrastructure published by CAC in July 2017 (currently in draft version soliciting public opinion), entities
providing cloud computing, big data and other large-scale public information network services fall within the scope of what constitutes
a CIIO, as damage, dysfunction or data leakage of the network facilities and information systems operated and administered by them may
severely jeopardize national security, people's livelihood and public interest. We have purchased certain server or network facilities
for our mobile and desktop application which we believe are less likely to severely jeopardize national security, people's livelihood
and public interests. As of the date of this annual report, we have not received any notice from any authorities identifying us as a CIIO.
Due to the unclear scope of what may constitute a CIIO, we cannot assure you that the PRC regulatory agencies would agree with our conclusion.
If we are identified as a CIIO, we may be required to, among others: (i) ensure that our data centers to be constructed have the function
of supporting the stable and continuous operation of business; (ii) perform security protection obligations to protect critical information
infrastructure from being disturbed, damaged or unauthorized accessed, and to prevent network data from leakage, theft or tampering; (iii)
have a dedicated cybersecurity management body and person in charge of cybersecurity, conduct background reviews on the person-in-charge
and other persons holding key positions, conduct cybersecurity education, technology trainings and skill assessments for relevant staff
on a regular basis, implement disaster recovery backup for important systems and databases, adopt remedial measures to promptly address
security risks such as system vulnerabilities, and make emergency plans for cybersecurity incidents and conduct regular rehearsals of
these plans; and (iv) establish and improve a security inspection and evaluation system. In addition, if our purchase of a network product
or service may affect national security, we have to pass a cybersecurity review conducted by the cybersecurity review authority in advance,
and enter into a security and confidentiality agreement with the provider.
On July 10, 2021, the Office of the Central Cyberspace
Affairs Commission and the Office of Cybersecurity Review under the CAC promulgated the Review Measures Draft to solicit public opinion
and comments. The Review Measures Draft provides that data processors who engage in data processing activities that affect or may affect
national security, are included in the scope of cybersecurity review. The deadline for public comments to the Review Measures Draft was
July 25, 2021. The Review Measures Draft further requires that critical information infrastructure operators and services and data processing
operators that possess personal data of at least one (1) million users must apply for a review by the Cybersecurity Review Office of PRC,
if they plan to conduct listings in foreign countries.
On November 14, 2021, CAC published the Administration
Measures for Cyber Data Security (Draft for Public Comments), or the "Cyber Data Security Measure (Draft)." The Cyber Data
Security Measure (Draft) provides that data processors shall apply for cybersecurity review under certain circumstances, such as mergers,
restructurings, divisions of internet platform operators that hold large amount of data relating to national security, economic development
or public interest which affects or may affect the national security, overseas listings of data processors that process personal data
for more than one million individuals, Hong Kong listings of data processors that affect or may affect national security, and other data
processing activities that affect or may affect the national security.
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On December 28, 2021, the CAC, NDRC, MIIT, the
Ministry of Public Security, the Ministry of State Security, the Ministry of Finance, the Ministry of Commerce, PBOC, SAMR, the State
Administration of Radio and Television, CSRC, the State Secrecy Administration and the State Cryptography Administration jointly promulgated
the Cybersecurity Review Measures, or the "Cybersecurity Review Measures," which became effective on February 15, 2022, and
will replace the original Cybersecurity Review Measures promulgated on April 13, 2020. Pursuant to the Cybersecurity Review Measures,
if critical information infrastructure operators purchase network products and services, or network platform operators conduct data processing
activities that affect or may affect national security, they will be subject to cybersecurity review. A network platform operator holding
more than one million users/users' individual information also shall be subject to cybersecurity review before listing abroad. The
cybersecurity review will evaluate, among others, the risk of critical information infrastructure, core data, important data, or a large
amount of personal information being influenced, controlled or maliciously used by foreign governments and risk of network data security
after going public overseas.
As of the date of this annual report, we have not received any notice
from any authorities requiring us to undertake a cybersecurity review by the CAC. Pursuant to the Cybersecurity Review Measures, we believe
we are not subject to the cybersecurity review by the CAC for this offering, given that: (i) we presently possesses personal information
of less than one (1) million individual users in our business operations, as of the date of this annual report; and (ii) data processed
in our business is less likely to have a bearing on national security, thus it may not be classified as core or important data by the
authorities. However, there remains uncertainty as to how the Cybersecurity Review Measures will be interpreted or implemented and whether
the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation
related to the Cybersecurity Review Measures. If any such new laws, regulations, rules, or implementation and interpretation come into
effect, we will take all reasonable measures and actions to comply. We cannot assure you that PRC regulatory agencies, including the CAC,
would take the same view as we do, and there is no assurance that we can fully or timely comply with such laws should they be deemed applicable
to our operations. There is no certainty as to how such review or prescribed actions would impact our operations and we cannot guarantee
that any clearance can be obtained or any actions that may be required can be taken in a timely manner, or at all. As the Cybersecurity
Review Measures have not taken effect as of the date of this annual report and there are no detailed rules or official interpretation
being introduced yet, the definition of "online platform operators listing in a foreign country with more than one (1) million users'
personal information data" remains unclear as of the date of this annual report. It is possible that CAC may require us to file
the cybersecurity review. The cybersecurity review procedure usually takes 45-70 business days, and sometimes even longer in special situations,
to complete. See "Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Our Industry—Our business
generates and processes a large quantity of data, and improper handling of or unauthorized access to such data may adversely affect our
business
.
"
On December 29, 2011, the MIIT promulgated the
Several Provisions on Regulating the Market Order of Internet Information Services, which became effective on March 15, 2012. On December
28, 2012, the SCNPC promulgated the Decision on Strengthening Network Information Protection to enhance the legal protection of information
security and privacy on the internet. The Provisions on Protection of Personal Information of Telecommunications and Internet Users promulgated
by the MIIT on July 16, 2013 contain detailed requirements on the use and collection of personal information as well as the security measures
to be taken by internet service providers. Specifically, (1) the users' personal information shall not be collected without prior
consent; (2) the personal information shall not be collected or used other than those necessary for internet service providers to provide
services; (3) the personal information shall be kept strictly confidential; and (4) a series of detailed measures shall be taken to prevent
any divulge, damage, tamper or loss of personal information of users.
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Pursuant to the Notice of the Supreme People's
Court, the Supreme People's Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing
upon the Personal Information of Citizens, issued in April 2013, and the Interpretation of the Supreme People's Court and the Supreme
People's Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information
of Citizens, which was issued on May 8, 2017 and took effect on June 1, 2017, the following activities may constitute the crime of infringing
upon a citizen's personal information: (1) providing a citizen's personal information to specified persons or releasing a
citizen's personal information online or through other methods in violation of relevant national provisions; (2) providing legitimately
collected information relating to a citizen to others without such citizen's consent (unless the information is processed, not traceable
to a specific person and not recoverable); (3) collecting a citizen's personal information in violation of applicable rules and
regulations when performing a duty or providing services; or (4) collecting a citizen's personal information by purchasing, accepting
or exchanging such information in violation of applicable rules and regulations. In addition, on May 28, 2020, the National People's
Congress of the PRC approved the PRC Civil Code, which took effect on January 1, 2021. Pursuant to the PRC Civil Code, the collection,
storage, use, process, transmission, provision and disclosure of personal information shall follow the principles of legitimacy, properness
and necessity.
On March 12, 2021, the CAC, MIIT, the Ministry
of Public Security and the SAMR, announced the Provisions on the Scope of Necessary Personal Information for Common Types of Mobile Internet
Applications, which provide that the operators of mobile internet applications shall not deny the users who do not consent to the collection
of unnecessary information from using basic functional services of such applications. Specifically, such provisions further provide that
the basic functional service of mail and express delivery refers to "delivery service of items such as mails, packages and printed
matters" and the necessary personal information for that category shall include identity information (i.e. name, type and number
of ID cards) of the sender, the address and contact phone of the sender, the name and address and contact phone of the recipient as well
as the name and nature and amount of the items for delivery. Violations could be reported to the proper authority and will be dealt with
in accordance with PRC laws.
We, through the VIE and the VIE's subsidiaries,
adopted certain policies to protect the privacy of our clients, such as the policies in our software for our client. Our current software
and systems are in compliance with PRC laws and regulations in material respects. Any failure, or perceived failure, by us to comply with
any regulatory requirements or privacy protection related laws, rules and regulations could result in proceedings or actions against
us by governmental entities or other proper authorities. These proceedings or actions could subject us to significant penalties and negative
publicity, require us to change our business practices, increase our costs and severely disrupt our business.
Regulations relating to Intellectual Property
Rights
Patent
Patents
in the PRC are principally protected under the Patent Law of the PRC promulgated by the SCNPC in 1984 and then respectively amended in
1992, 2000, 2008, 2020, of which the amendment in 2020 will be effective on June 1, 2021, and its implementation rules. Novelty, inventiveness
and practicality are three essential ingredients of patens in the PRC. The latest amendment provides that, in general, the protection
period is 20 years for an invention patent, 10 years for a utility model patent and 15 years for a design patent, commencing from their
respective application dates.
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Copyright
The PRC
Copyright Law, promulgated in 1990 and amended in 2001, 2010 and 2020, of which the amendment in 2020 will be effective on June 1, 2021,
or the Copyright Law, and its related implementing regulations, promulgated in 2002 and amended in 2013, are the principal laws and regulations
governing copyright related matters. The Copyright Law provides that Chinese citizens, legal persons, or other organizations shall, whether
published or not, enjoy copyright of their works, which includes, among others, works of literature, art, natural science, social science,
engineering technology and computer software. Under the Copyright Law, the term of protection for copyrighted software is 50 years. The
Regulation on the Protection of the Right to Communicate Works to the Public over Information Networks, which was most recently amended
on January 30, 2013, provides specific rules on fair use, statutory license, and a safe harbor for the use of copyrights and copyright
management technology, and specifies the liabilities of various entities for violations, including copyright holders, libraries and internet
service providers.
Trademark
The PRC
Trademark Law was adopted in 1982 and then amended in 1993, 2001, 2013 and 2019 respectively. The implementation rules of the PRC Trademark
Law were adopted in 2002 and amended in 2014. Registered trademarks are protected under the Trademark Law of the PRC and related rules
and regulations. The Trademark Office of National Intellectual Property Administration handles trademark registrations and grants a protection
term of ten years to registered trademarks. Where registration is sought for a trademark that is identical or similar to another trademark
which has already been registered or given preliminary examination and approval for use in the same or similar category of commodities
or services, such application for registration of this trademark may be rejected. Trademark registrations are effective for a renewable
ten-year period, unless otherwise revoked.
Domain name
The MIIT,
promulgated the Administrative Measures on Internet Domain Name, or the Domain Name Measure on August 24, 2017 to protect domain names.
According to the Domain Name Measures, domain name applicants are required to duly register their domain names with domain name registration
service institutions. The applicants will become the holder of such domain names upon the completion of the registration procedures. The
permits for registered domain names are effective for five years, which are subject to renewals, cancellations or revocations.
Trade secrets
According
to the PRC Anti-Unfair Competition Law, promulgated by the SCNPC in September 1993, as amended in November 4, 2017 and April 23, 2019
respectively, the term "trade secrets" refers to technical, operational or other commercial information that is unknown to
the public, has utility, may create business interests or profits for its legal owners or holders, and is maintained as a secret by its
legal owners or holders through corresponding confidentiality measures. Under the PRC Anti-Unfair Competition Law, business persons are
prohibited from infringing others' trade secrets by: (1) obtaining the trade secrets from the legal owners or holders by any unfair
methods such as theft, bribery, fraud, coercion, electronic intrusion, or any other illicit means; (2) disclosing, using or permitting
others to use the trade secrets obtained illegally under item (1) above; or (3) disclosing, using or permitting others to use the trade
secrets, in violation of any contractual agreements or any requirements of the legal owners or holders to keep such trade secrets in confidence.
Pursuant to the PRC Civil Code, if one intentionally infringes upon the intellectual property rights of others and the circumstance is
severe, the infringed party is entitled to the corresponding punitive compensation; or (4) abetting a person, or tempting, or aiding a
person into or in acquiring, disclosing, using, or allowing another person to use the trade secret of the rightful holder in violation
of his or her non-disclosure obligations or the requirements of the rightful holder for keeping the trade secret confidential.
88
Regulations relating to Employment
The Labor Law and the Labor Contract Law
According
to the Labor Law of the PRC, or the Labor Law, which was promulgated on July 5, 1994 and last amended and came into effect on December
29, 2018, enterprises and institutions shall establish, provide and improve their system of workplace safety and sanitation, strictly
follow state rules and standards on workplace safety and the relevant articles of occupational protection, and educate employees in occupational
safety and sanitation in the PRC. Occupational safety and sanitation facilities shall comply with state-fixed standards.
The Labor
Contract Law of the PRC, or the Labor Contract Law, which was issued on June 29, 2007, amended on December 28, 2012 and became effective
on July 1, 2013, and its implementation rules provide requirements concerning employment contracts between an employer and its employees.
If an employer fails to enter into a written employment contract with an employee after the lapse of more than one month, but less than
one year from the date on which the employment relationship is established, the employer must rectify the situation by entering into a
written employment contract with the employee and pay the employee twice the employee's salary for the period from the date following
the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written
employment contract. The Labor Contract Law and its implementation rules also require compensation to be paid upon certain terminations.
In addition, if an employer intends to enforce a
non-compete
provision in an employment
contract or
non-competition
agreement with an employee, it has to compensate the
employee on a monthly basis during the term of the restriction period after the termination or expiration of the labor contract. Employers
in most cases are also required to provide severance payments to their employees after their employment relationships are terminated.
The Labor Contract Law also provides that enterprises accepting labor dispatch services shall strictly control the number of dispatched
workers and the proportion of dispatched workers shall not exceed the percentage prescribed by competent labor administrative departments.
As of the date of this annual report, other than that we have not made adequate social insurance and housing fund contributions for all
employees as required by PRC regulations, and that our number of dispatched workers has exceeded the limitation required by PRC regulations,
we believe that we are currently compliant with the foregoing laws and regulation in all material respects.
The Interim Provisions on Labor Dispatching
The Interim Provisions on Labor
Dispatching, issued by the Ministry of Human Resources and Social Security of the People's Republic of China on January 24, 2014,
which came into effect on March 1, 2014, require the number of dispatched workers not to exceed 10% of the total number of 1) the employees
that are employed directly by an enterprise and 2) the dispatched workers. As of the date of this annual report, the number of dispatched
workers has exceeded 10% of the total number of the employees and the dispatched workers of the Company. Therefore, Company is currently
not in compliance with the Interim Provisions on Labor Dispatching. See "Item 3. Key Information—D. Risk Factors—Risks
Relating to Doing Business in the PRC—Increases in labor costs in the PRC may adversely affect our business and our profitability"
and "Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in the PRC—Our number of dispatched
workers has exceeded the 10% limitation required by PRC regulations, which may subject us to penalties."
89
Social Insurance and Housing Funds
Pursuant to the Interim Regulations on Levying
Social Insurance Premiums, promulgated on January 22, 1999 and revised on March 24, 2019, Decisions of the State Council on Modifying
the Basic Endowment Insurance System for Enterprise Employees, promulgated on December 3, 2005, Decision on Establishment of Basic Medical
System for Urban Employee, issued by State Council and became effective on December 14, 1998, the Regulations on Unemployment Insurance,
became effective on January 22, 1999, Regulations on Work-Related Injury Insurance, promulgated on April 27, 2003, amended on December
20, 2010 and became effective on January 1, 2011, and the Interim Measures concerning the Maternity Insurance for Enterprise Employees,
promulgated on December 14, 1994 and became effective on January 1, 1995, employers are required to register with the competent social
insurance authorities and provide their employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance,
work-related injury insurance and medical insurance.
Pursuant to Opinions of the General Office of
the State Council on Comprehensively Advancing Combined Implementation of Maternity Insurance and Basic Medical Insurance for Employees,
promulgated by the General Office of State Council on March 6, 2019, maternity insurance funds shall merge into the basic medical care
insurance funds for employees so as to unify payment and harmonize consolidation level. The new ratio of employers' contribution
to basic medical care insurance for employees is determined based on the aggregate of the ratios of employers' contribution to maternity
insurance and basic medical care insurance for employees, and an individual is not required to pay for maternity insurance. Therefore,
after March 6, 2019, our Company has no record of maternity insurance funds in the payment details of social security, since it has been
merged into the basic medical care insurance funds.
Pursuant to the Social Insurance Law of the PRC,
or the Social Insurance Law, which became effective on July 1, 2011 with last amendment on December 29, 2018, all employees are required
to participate in basic pension insurance, basic medical insurance schemes and unemployment insurance, which must be contributed by both
the employers and the employees. All employees are required to participate in work-related injury insurance and maternity insurance schemes,
which must be contributed by the employers. Employers are required to complete registrations with local social insurance authorities.
Moreover, the employers must timely make all social insurance contributions. Except for mandatory exceptions such as force majeure, social
insurance premiums shall not be paid late, reduced or be exempted. Where an employer fails to make social insurance contributions in full
and on time, the social insurance contribution collection agencies shall order it to make all or outstanding contributions within a specified
period and impose a late payment fee at the rate of 0.05% per day from the date on which the contribution becomes due. If such employer
fails to make the overdue contributions within such time limit, the relevant administrative department may impose a fine equivalent to
1—3 times the overdue amount. We are in compliance with laws and regulations related to social insurance and housing funds in China
in material aspects.
Pursuant to the Emergency Notice on Practicing
Principles of the State Council Executive Meeting and Stabilizing Work on Collecting Social Insurance Premiums, promulgated by the Ministry
of Human Resources and Social Security on September 21, 2018, local authorities are prohibited from recovering the unpaid social insurance
premiums from enterprises.
Pursuant to the Administrative Regulations on
the Housing Provident Fund, which became effective on April 3, 1999 and was amended on March 24, 2002 and March 24, 2019, enterprises
are required to register with the competent administrative centers of housing provident fund and open bank accounts for housing provident
funds for their employees. Employers are also required to timely pay all housing fund contributions for their employees. Where an employer
fails to submit and deposit registration of housing provident funds or fails to complete the formalities of opening housing provident
fund accounts for its employees, the housing provident fund management center shall order it to complete the formalities within a prescribed
time limit. Failing to comply by the expiration of the time limit will subject the employer to a fine ranging from RMB10,000 (approximately
USD1,400) to RMB50,000 (approximately USD7,200). When an employer fails to pay housing provident funds due in full and on time, housing
provident fund center is entitled to order it to rectify, and failing to comply could result in enforcement exerted by the court.
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Regulations Relating to Tax
Enterprise income tax
According to the Enterprise Income Tax Law of
the PRC, or the EIT Law, which was promulgated on March 16, 2007, became effective from January 1, 2008 and was amended on February 24,
2017 and December 29, 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. The Implementing Rules of the Enterprise Income Law of the PRC, or the Implementing Rules of the EIT Law defines a "de facto
management body" as a managing body that in practice exercises "substantial and overall management and control over the production
and operations, personnel, accounting, and properties" of the enterprise. Non-PRC resident enterprises without any branches in the
PRC pay an enterprise income tax in connection with their income originating from the PRC at the tax rate of 10%.
Enterprises that are recognized as high and new
technology enterprises in accordance with the Administrative Measures for the Determination of High and New Tech Enterprises issued by
the Ministry of Science, the MOF, and the State Administration of Taxation, or the SAT, are entitled to enjoy a preferential enterprise
income tax rate of 15%. The validity period of the high and new technology enterprise qualification shall be three years from the date
of issuance of the certificate. An enterprise can re-apply for such recognition before or after the previous certificate expires.
On February 3, 2015, the SAT issued the Announcement
on Several Issues Concerning the Enterprise Income Tax on Indirect Transfer of Assets by Non-Resident Enterprises, or the SAT Circular
7. The SAT Circular 7 repeals certain provisions in the Notice of the State Administration of Taxation on Strengthening the Administration
of Enterprise Income Tax on Income from Equity Transfer by Non-Resident Enterprises, or the SAT Circular 698, issued by SAT on December
10, 2009, and the Announcement on Several Issues Relating to the Administration of Income Tax on Non-resident Enterprises, issued by SAT
on March 28, 2011, and clarifies certain provisions in the SAT Circular 698. The SAT Circular 7 provides comprehensive guidelines relating
to, and heightens the Chinese tax authorities' scrutiny on, indirect transfers of assets by a non-resident enterprise (including
assets of organizations and premises in PRC, immovable property in the PRC, equity investments in PRC resident enterprises), or the PRC
Taxable Assets. For instance, when a non-resident enterprise transfers equity interests in an overseas holding company that directly or
indirectly holds certain PRC Taxable Assets and if the transfer is believed by the PRC tax authorities to have no reasonable commercial
purpose other than to evade enterprise income tax, the SAT Circular 7 allows the PRC tax authorities to reclassify the indirect transfer
of PRC Taxable Assets into a direct transfer and therefore impose a 10% rate of PRC enterprise income tax on the non-resident enterprise.
The SAT Circular 7 lists several factors to be taken into consideration by tax authorities in determining if an indirect transfer has
a reasonable commercial purpose. However, regardless of these factors, the overall arrangements in relation to an indirect transfer satisfying
all the following criteria will be deemed lack of a reasonable commercial purpose: (i) 75% or more of the equity value of the intermediary
enterprise being transferred is derived directly or indirectly from PRC Taxable Assets; (ii) at any time during the one-year period before
the indirect transfer, 90% or more of the asset value of the intermediary enterprise (excluding cash) is comprised directly or indirectly
of investments in the PRC, or during the one-year period before the indirect transfer, 90% or more of its income is derived directly or
indirectly from the PRC; (iii) the functions performed and risks assumed by the intermediary enterprise and any of its subsidiaries and
branches that directly or indirectly hold the PRC Taxable Assets are limited and are insufficient to prove their economic substance; and
(iv) the foreign tax payable on the gain derived from the indirect transfer of the PRC Taxable Assets is lower than the potential PRC
tax on the direct transfer of those assets. However, indirect transfers falling into the scope of the safe harbors under the SAT Circular
7 may not be subject to PRC tax under the SAT Circular 7. The safe harbors include qualified group restructurings, public market trades
and exemptions under tax treaties or arrangements.
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On October 17, 2017, SAT issued the Announcement
on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or the SAT Circular 37, which took effect on December
1, 2017. Certain provisions of the SAT Circular 37 were repealed by the Announcement of the State Administration of Taxation on Revising
Certain Taxation Normative Documents. According to the SAT Circular 37, the balance after deducting the equity net value from the equity
transfer income shall be the taxable income amount for equity transfer income. Equity transfer income shall mean the consideration collected
by the equity transferor from the equity transfer, including various income in monetary form and non-monetary form. Equity net value shall
mean the tax computation basis for obtaining the said equity. The tax computation basis for equity shall be: (i) the capital contribution
costs actually paid by the equity transferor to a Chinese resident enterprise at the time of investment and equity participation, or (ii)
the equity transfer costs actually paid at the time of acquisition of such equity to the original transferor of the said equity. Where
there is reduction or appreciation of value during the equity holding period, and the gains or losses may be confirmed pursuant to the
rules of the finance and tax authorities of the State Council, the equity net value shall be adjusted accordingly. When an enterprise
computes equity transfer income, it shall not deduct the amount in the shareholders' retained earnings, such as undistributed profits,
from the investee enterprise, which may be distributed in accordance with the said equity. In the event of partial transfer of equity
under multiple investments or acquisitions, the enterprise shall determine the costs corresponding to the transferred equity in accordance
with the transfer ratio, out of all costs of the equity.
Under the SAT Circular 7 and the Law of the PRC
on the Administration of Tax Collection promulgated by the SCNPC on September 4, 1992 and newly amended on April 24, 2015, in the case
of an indirect transfer, entities or individuals obligated to pay the transfer price to the transferor shall act as withholding agents.
If they fail to make withholding or withhold the full amount of tax payable, the transferor of equity shall declare and pay taxes to the
relevant tax authorities within seven days from the occurrence of the tax payment obligation. Where the withholding agent does not make
the withholding, and the transferor of the equity does not pay the tax payable amount, the tax authority may impose late payment interest
on the transferor. In addition, the tax authority may also hold the withholding agents liable and impose a penalty ranging from 50% to
300% of the unpaid tax on them.
Value-added Tax
Pursuant to the Interim Regulations on Value-Added
Tax of the PRC, which was promulgated by the State Council on December 13, 1993 and amended on November 5, 2008, February 6, 2016 and
November 19, 2017, and the Implementation Rules for the Interim Regulations on Value-Added Tax of the PRC, which was promulgated by the
MOF and SAT on December 15, 2008, became effective on January 1, 2009 and amended on October 28, 2011, entities or individuals engaging
in sale of goods, provision of processing services, repairs and replacement services or importation of goods within the territory of the
PRC shall pay value-added tax, or the VAT. Unless otherwise provided, the rate of VAT is 17% on sales and 6% on the services. On April
4, 2018, MOF and SAT jointly promulgated the Circular of the MOF and the SAT on Adjustment of Value-Added Tax Rates, or the Circular 32,
according to which (i) for VAT taxable sales acts or import of goods originally subject to VAT rates of 17% and 11% respectively, such
tax rates shall be adjusted to 16% and 10%, respectively; (ii) for purchase of agricultural products originally subject to tax rate of
11%, such tax rate shall be adjusted to 10%; (iii) for purchase of agricultural products for the purposes of production and sales or consigned
processing of goods subject to tax rate of 16%, such tax shall be calculated at the tax rate of 12%; (iv) for exported goods originally
subject to tax rate of 17% and export tax refund rate of 17%, the export tax refund rate shall be adjusted to 16%; and (v) for exported
goods and cross-border taxable acts originally subject to tax rate of 11% and export tax refund rate of 11%, the export tax refund rate
shall be adjusted to 10%. Circular 32 became effective on May 1, 2018 and shall supersede existing provisions which are inconsistent with
Circular 32.
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Since November 16, 2011, the MOF and the SAT have
implemented the Pilot Plan for Imposition of Value- Added Tax to Replace Business Tax, or the VAT Pilot Plan, which imposes VAT in lieu
of business tax for certain "modern service industries" in certain regions and eventually expanded to nation-wide application
in 2013. According to the Implementation Rules for the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax released by
the MOF and the SAT on the VAT Pilot Program, the "modern service industries" include research, development and technology
services, information technology services, cultural innovation services, logistics support, lease of corporeal properties, attestation
and consulting services. The Notice on Comprehensively promoting the Pilot Plan of the Conversion of Business Tax to Value-Added Tax,
which was promulgated on March 23, 2016, became effective on May 1, 2016 and was amended on July 11, 2017, sets out that VAT in lieu of
business tax be collected in all regions and industries.
On March 20, 2019, MOF, SAT and the General Administration
of Customs jointly promulgated the Announcement on Relevant Policies for Deepening Value-Added Tax Reform, which became effective on April
1, 2019, and provides that (i) with respect to VAT taxable sales acts or import of goods originally subject to VAT rates of 16% and 10%
respectively, such tax rates shall be adjusted to 13% and 9%, respectively; (ii) with respect to purchase of agricultural products originally
subject to tax rate of 10%, such tax rate shall be adjusted to 9%; (iii) with respect to purchase of agricultural products for the purposes
of production or consigned processing of goods subject to tax rate of 13%, such tax shall be calculated at the tax rate of 10%; (iv) with
respect to export of goods and services originally subject to tax rate of 16% and export tax refund rate of 16%, the export tax refund
rate shall be adjusted to 13%; and (v) with respect to export of goods and cross-border taxable acts originally subject to tax rate of
10% and export tax refund rate of 10%, the export tax refund rate shall be adjusted to 9%.
Dividend withholding tax
Under the Law of the PRC on Wholly Foreign-Owned
Enterprises, which was promulgated by the National People's Congress of the PRC in 1986, revised by the SCNPC on October 31, 2000
and September 3, 2016 and repealed on January 1, 2020, foreign-invested enterprises in the PRC may pay dividends only out of their accumulated
profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises
in the PRC are also required to allocate at least 10% of their respective accumulated profits after tax each year, if any, to certain
reserve funds unless these accumulated reserves have reached 50% of the registered capital of such enterprises. These reserves are not
distributable as cash dividends.
According to the EIT Law and its implementing
rules, dividends paid to investors of an eligible PRC resident enterprise can be exempted from EIT and dividends paid to foreign investors
are subject to a withholding tax rate of 10%, unless relevant tax agreements entered into by the PRC government provide otherwise.
The PRC State Administration of Taxation, or the
SAT, and the government of Hong Kong entered into the Arrangement between the Mainland of the PRC and the Hong Kong Special Administrative
Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Incomes, or the Arrangement,
on August 21, 2006. According to the Arrangement, 5% withholding tax rate shall apply to the dividends paid by a mainland China company
to a Hong Kong resident, provided that such Hong Kong resident directly holds at least 25% of the equity interests in the mainland China
company, and 10% of withholding tax rate shall apply if the Hong Kong resident holds less than 25% of the equity interests in the mainland
China company.
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Pursuant to the Circular on Relevant Issues Relating
to the Implementation of Dividend Clauses in Tax Treaties, which was promulgated by the SAT and became effective on February 20, 2009,
all of the following requirements shall be satisfied when a fiscal resident as the other party of a tax agreement needs to be entitled
to be taxed at a tax rate specified in the tax agreement for the dividends paid to it by a PRC resident company: (i) such a fiscal resident
who obtains dividends shall be a company as provided in the tax agreement; (ii) owner's equity interests and voting shares of the
PRC resident company directly owned by such a fiscal resident reaches a specified percentage; and (iii) the equity interests of the PRC
resident company directly owned by such a fiscal resident, at any time during the 12 months prior to obtaining the dividends, reach a
percentage specified in the tax agreement.
According to the Tentative Administrative Measures
on Tax Convention Treatment for Non-Residents which was promulgated by the SAT on August 24, 2009 and became effective on October 1, 2009,
if a non-resident enterprise that receives dividends from a PRC resident enterprise wishes to enjoy the favorable tax benefits under the
tax arrangements, it shall submit an application for approval to the competent tax authority. Without being approved, the non-resident
enterprise may not enjoy the favorable tax treatment provided in the tax agreements.
The Tentative Administrative Measures on Tax Convention
Treatment for Non-Residents was repealed by the Administrative Measures on Tax Convention Treatment for Non-Resident Taxpayers, which
was promulgated by the SAT on August 27, 2015 and became effective on November 1, 2015 with last amendment on June 15, 2018, if a non-resident
enterprise receives dividends from a PRC resident enterprise, it could directly enjoy the favorable tax benefits under the tax arrangements
at tax returns, and be subject to the subsequent regulation of the competent tax authority. The Administrative Measures on Tax Convention
Treatment for Non-Resident Taxpayers has subsequently been repealed by the Administrative Measures on Treaty Benefits Treatment for Non-Resident
Taxpayers, promulgated by the SAT on October 14, 2019 and became effective on January 1, 2020, which still adopts the same provisions
as the Tentative Administrative Measures on Tax Convention Treatment for Non-Residents.
Regulations relating to Foreign Exchange
Pursuant to the
Foreign Exchange Administration Regulations of the PRC, or the Foreign Exchange Administrative Regulation, as amended in August 2008,
Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related
foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments
in securities outside of China, unless the SAFE's prior approval is obtained and prior registration with the SAFE is made. On May
10, 2013, the SAFE promulgated the Circular of the SAFE on Printing and Distributing the Administrative Provisions on Foreign Exchange
in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents, or the SAFE Circular No. 21, which was last amended
and became effective on December 31, 2019. It provided for and simplified the operational steps and regulations on foreign exchange matters
related to direct investment by foreign investors, including foreign exchange registration, account opening and use, receipt and payment
of funds, and settlement and sales of foreign exchange.
Pursuant to the Notice of the SAFE on Further
Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, or the SAFE Circular No. 59, promulgated by the
SAFE on November 19, 2012, became effective on December 17, 2012 and was further amended on May 4, 2015, approval is not required for
opening a foreign exchange account and depositing foreign exchange into the account relating to the direct investments. The SAFE Circular
No. 59 also simplified the capital verification and confirmation formalities for foreign invested entities, the foreign capital and foreign
exchange registration formalities required for the foreign investors to acquire equities from Chinese parties, and further improved the
administration on exchange settlement of foreign exchange capital of foreign invested entities.
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SAFE Circular 37
In July 2014, SAFE promulgated
SAFE Circular 37, which replaces the previous SAFE Circular 75. SAFE Circular 37 requires PRC residents, including PRC individuals and
PRC corporate entities, to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities.
SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we may
make in the future.
Under SAFE Circular 37,
PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special
purpose vehicles, or SPVs, are required to register such investments with SAFE or its local branches. In addition, any PRC resident who
is a direct or indirect shareholder of an SPV, is required to update its registration with the local branch of SAFE with respect to that
SPV, to reflect any change of basic information or material events. If any PRC resident shareholder of such SPV fails to make the required
registration or to update the registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the
proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional
capital contributions into its subsidiaries in China. In February 2015, SAFE promulgated SAFE Notice 13. Under SAFE Notice 13, applications
for foreign exchange registration of inbound foreign direct investments and outbound direct investments, including those required under
SAFE Circular 37, must be filed with qualified banks instead of SAFE. Qualified banks should examine the applications and process registrations
under the supervision of SAFE. As of the date of this annual report, Mr. Yongxu Liu has completed the initial registrations with the qualified
banks as required by the regulations.
Regulations Relating to Employee Stock Incentive
Plan
On February 15,
2012, the SAFE promulgated the Notice of the State Administration of Foreign Exchange on Issues concerning the Foreign Exchange Administration
of Domestic Individuals' Participation in Equity Incentive Plans of Overseas Listed Companies, or the "Notice". In accordance
with the Notice and relevant rules and regulations, PRC citizens or non-PRC citizens residing in China for a continuous period
of not less than one year, who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions,
are required to register with the SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company,
and complete certain procedures. We and our employees who are PRC citizens or who reside in China for a continuous period of not less
than one year and who participate in our stock incentive plan will be subject to such regulation. In addition, the SAT has issued circulars
concerning employee share options or restricted shares. Under these circulars, employees working in the PRC who exercise share options,
or whose restricted shares vest, will be subject to PRC individual income tax, or the IIT. The PRC subsidiaries of an overseas listed
company have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to
withhold IIT of those employees related to their share options or restricted shares. If the employees fail to pay, or the PRC subsidiaries
fail to withhold, their IIT according to relevant laws, rules and regulations, the PRC subsidiaries may face sanctions imposed by the
tax authorities or other PRC government authorities.
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Regulations relating to Dividend Distributions
The principal regulations governing distribution
of dividends of wholly foreign-owned enterprise, or the WFOE, include the PRC Company Law. Under these regulations, WFOEs in China may
pay dividends only out of their accumulated profits, if any, determined in accordance with the PRC accounting standards and regulations.
In addition, FIEs in the PRC are required to allocate at least 10% of their accumulated profits each year, if any, to fund certain reserve
funds unless these reserves have reached 50% of the registered capital of the enterprises. These reserves are not distributable as cash
dividends.
Regulations on Mergers & Acquisitions and
Overseas Listings
On August 8, 2006, six PRC regulatory agencies, including the CSRC,
promulgated the Rules on the Merger and Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective
on September 8, 2006 and were amended on June 22, 2009. The M&A Rules, among other things, require offshore special purpose vehicles
formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC domestic enterprises or individuals
to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle's securities on an overseas
stock exchange. In September 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by
special purpose vehicles. The CSRC approval procedures require the filing of a number of documents with the CSRC. Although (i) The CSRC
currently has not issued any definitive rule or interpretation concerning whether offerings like ours are subject to the M&A Rules;
and (ii) no provision in the M&A Rules clearly classifies contractual arrangements as a type of transaction subject to the M&A
Rules, the interpretation and application of the regulations remain unclear, this offering may ultimately require approval from the CSRC.
If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval and any failure to obtain or
delay in obtaining CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.
The M&A Rules, and other regulations and rules
concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities
by foreign investors more time-consuming and complex. For example, the M&A Rules require that MOFCOM be notified in advance of any
change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is
concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will
lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand.
In addition, according to the Notice on Establishing
the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors issued by the General Office of the
State Council on February 3, 2011 and became effective on March 4, 2011, the Rules on Implementation of Security Review System for the
Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by MOFCOM on August 25, 2011 and became effective on September
1, 2011, mergers and acquisitions by foreign investors that raise "national defense and security" concerns and mergers and
acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise "national security"
concerns are subject to strict review by MOFCOM, and the regulations prohibit any activities attempting to bypass such security review,
including by structuring the transaction through a proxy or contractual control arrangement.
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On July 6, 2021, 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." 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. Measures,
including promoting the construction of relevant regulatory systems, will be taken to control the risks and handle the incidents from
China-concept overseas listed companies. On December 24, 2021, the CSRC promulgated the draft of State Council Administration Rules in
respect of Overseas Securities Offering and Listing of Domestic Enterprise and the draft Recording Administrative Rules of Overseas Securities
Offering and Listing of Domestic Enterprise, or the "New Overseas Listing Rules," for public comments. The New Overseas Listing
Rules require Chinese domestic enterprises to complete filings with relevant governmental authorities and report related information under
certain circumstances, such as, a) an issuer making an application for initial public offering and listing in an overseas market; b) an
issuer making an overseas securities offering after having been listed on an overseas market; c) an issuer offering securities on an overseas
market to purchase assets after having been listed overseas; and d) a domestic company seeking an overseas direct or indirect listing
of its assets through single or multiple acquisition(s), share swap, transfer of shares or other means. On February 17, 2023, the CSRC
promulgated the Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. The Trial Measures and its supporting
guidelines, reiterate the basic principles of the New Overseas Listing Rules and impose substantially the same requirements for the overseas
securities offering and listing by domestic enterprises. Pursuant to the Trial Measures, domestic companies that seek to offer or list
securities overseas, both directly and indirectly, shall complete filing procedures with the CSRC pursuant to the requirements of the
Trial Measures within three working days following its submission of initial public offerings or listing application. According to the
Notice on the Administrative Arrangements for the Filing of the Overseas Securities Offering and Listing by Domestic Companies from the
CSRC, or the CSRC Notice, the domestic companies that have already been listed overseas 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 not
required to complete the filing procedures immediately, and they shall be required to file with the CSRC for any subsequent offerings.
Further, according to the CSRC Notice, domestic company obtained approval from overseas regulatory authorities or securities exchanges
(for example, the effectiveness of a registration statement for offering and listing in the U.S. has been obtained) for their overseas
offering and listing prior March 31, 2023 but have not yet completed their overseas issuance and listing, are granted a six-month transition
period from March 31, 2023 to September 30, 2023. Those that 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 offerings and listings. Within such six-month
transition period, however, if such domestic companies fail to complete their overseas issuance and listing, they shall complete the filing
procedures with the CSRC. If a domestic company fails to complete the required filing procedures or conceals any material fact or falsifies
any major content in its filing documents, such domestic company may be subject to administrative penalties, such as orders to rectify,
warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons
may also be subject to administrative penalties, such as warnings and fines.
On February 24, 2023, the CSRC, together with Ministry of Finance of
the PRC, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions, which
were issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009. The
revised Provisions were issued under the title "Provisions on Strengthening Confidentiality and Archives Administration of Overseas
Securities Offering and Listing by Domestic Companies", and came into effect on March 31, 2023 together with the Trial Measures.
One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as
is consistent with the Trial Measures. The revised Provisions require that, including, but not limited to, (a) a domestic company that
plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities
including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets
or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the
secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or indirectly through its
overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service
providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public
interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. As of the date of this annual report,
the revised Provisions have come into effect and we are not aware of any PRC laws or regulations in effect requiring that we obtain permission
from any PRC authorities to issue securities to foreign investors, nor have we received any inquiry, notice, warning, sanction or any
regulatory objection to this offering from the CSRC, the CAC, or any other Chinese authorities that have jurisdiction over our operations.
However, any failure or perceived failure by the Company, its PRC Subsidiary or the VIE to comply with the above confidentiality and archives
administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being
held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected
of committing a crime. The Opinions, the Trial Measures and any related implementing rules to be enacted may subject us to additional
compliance requirements in this offering and future financial activities. See "Item 3. Key Information—D. Risk Factors—Risks
Relating to Doing Business in the PRC—The M&A Rules and certain other PRC regulations establish complex procedures for certain
acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions
in China
.
"
97
C.
Organizational Structure
See "—A. History and Development of
the Company."
D.
Property, Plants and Equipment
See "—B. Business Overview—Properties."
Item 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
Item 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS
You should read the following discussion and
analysis of our financial condition and results of operations in conjunction with our combined financial statements and consolidated financial
statements and the related notes included in this annual report. This discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this annual report.
A.
Operating Results
Overview
We are a holding company incorporated in the Cayman
Islands and are not a Chinese operating company. As a holding company with no material operations of our own, our operations have been
conducted in China by our subsidiaries and through the VIE Agreements, with the VIE and the VIE's subsidiaries. For accounting purposes,
we control and receive the economic benefits of the VIE and the VIE's subsidiaries' business operations through such VIE Agreements,
which enables us to consolidate the financial results of the VIE and the VIE's subsidiaries in our consolidated financial statement
under U.S. GAAP. Neither we nor our subsidiaries own any equity interests in the VIE or the VIE's subsidiaries. We have evaluated
the guidance in FASB ASC 810 and determined that we are regarded as the primary beneficiary of the VIE, for accounting purposes, as a
result of our direct ownership in Tianyu and the provisions of the VIE Agreements. Accordingly, we treat the VIE and the VIE's subsidiaries
as our consolidated entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE's subsidiaries in
our consolidated financial statements in accordance with U.S. GAAP.
98
Our Class A Ordinary Shares are shares of our
offshore holding company in the Cayman Islands instead of shares of the VIE or the VIE's subsidiaries in China, therefore, as an
investor, you will not directly hold equity interests in the VIE or the VIE's subsidiaries, and you may never directly hold equity
interests in the VIE or the VIE's subsidiaries through your investment in our Class A Ordinary Shares. For a description of the
VIE Agreements, see "
Corporate History and Structure—Our VIE Agreements
."
The VIE is a contract logistics service provider
in China. Contract logistics is a comprehensive process that merges traditional logistics with supply chain management. Contract logistics
companies outsource resource management tasks to third-party companies and handle activities such as planning and designing supply chains,
designing facilities, processing orders, collecting payments, managing inventories, and providing client services.
Our integrated logistics solution services are
comprised of three segments: (1) B2B freight transportation; (2) cloud storage; and (3) value-added services. Since 2001, we, through
the VIE and the VIE's subsidiaries, have developed extensive and reliable transportation networks in China, covering 341 cities
in over 31 provinces as of December 31, 2022.
We, through the VIE and the VIE's subsidiaries,
operate on a scalable integrated network model, which we believe is best suited to support our business and maintain the quality of our
comprehensive logistics services. As a contract logistics company, we, through the VIE and the VIE's subsidiaries, directly own
and operate all of our regional sorting centers, Cloud OFCs, and service outlets. We, through the VIE and the VIE's subsidiaries,
also directly own and operate our fleets. In order to establish a broader network and provide more efficient services, we, through the
VIE and the VIE's subsidiaries, cooperate with third-party transportation providers in providing freight transportation services.
We believe this network model allows us to achieve strong operating results while maintaining and minimizing fixed costs and capital requirements,
which results in higher return on earnings and equities.
Operational efficiency, cost management, and competitive
pricing are critical to the success of a contract logistics company. We, through the VIE and the VIE's subsidiaries, have achieved
strong operational efficiency through centralized control and management of 35 regional sorting centers, 22 Cloud OFCs, 42 service outlets,
approximately 600 self-owned trucks and vehicles, and over 40,000 transportation providers, route planning and optimization, and transportation
and management system.
For the fiscal years ended December 31, 2022 and
2021, our net revenue, mainly generated from providing transportation and warehouse storage services, was approximately $370.3 million
and $346.7 million, respectively. Our total net revenue increased by approximately 6.8% during 2022 compared to 2021, primarily driven
by the higher net revenue from transportation services and warehouse storage and storage management services. We recorded net income of
approximately $7.8 million and $6.6 million for the years ended December 31, 2022 and 2021, respectively.
For the fiscal years ended December 31, 2021 and
2020, our net revenue, mainly generated from providing transportation and warehouse storage services, was approximately $346.7 million
and $287.5 million, respectively. Our total net revenue increased by approximately 20.6% during 2021 compared to 2020, primarily driven
by the higher net revenue from both transportation services, warehouse storage and storage management services. We recorded net income
of approximately $6.6 million and $6.0 million for the years ended December 31, 2021 and 2020, respectively.
General
Factors Affecting Our Results of Operations
Our business
and operating results are affected by a number of general factors in China's transportation industry, including, but not limited
to:
●
China's overall economic growth, level of urbanization and level of consumption;
●
the development of the manufacturing industry, fast moving consumer goods industry, telecommunication industry, and publishing industry; and
●
market competition.
Unfavorable changes in any of these general factors
could materially and adversely affect our business and our results of operations.
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Key Factors
Affecting Our Results of Operations
Our ability to expand our customer base
We will continue to seek to expand our customer
base to achieve sustainable growth. We aim to attract new customers and maintain our existing customers. We acquire customers for our
transportation services through the referral of our existing customers and our own efforts including online and off-line advertising.
We plan to strengthen our partnerships by improving the quality and variety of our services. Additionally, we plan to put on more efforts
to acquire more warehouse storage management service customers through our existing transportation service customers.
Strategic Acquisitions and Investments
We may selectively pursue acquisitions, investments,
joint ventures and partnerships that we believe are strategic and complementary to our operations and technology. The business or financial
performance of the companies we have invested in as well as our ability to successfully integrate these investments with our existing
business would impact our results of operations and financial conditions.
Impact of COVID-19 on Our Operations and Financial
Performance
The COVID-19 pandemic has spread in China and throughout the world.
As the majority of our net revenue is derived from transportation and warehouse storage management services in China, our results of operations
and financial condition have been, and could continue to be affected by the spread of COVID-19.
In connection with the intensifying efforts to
contain the spread of COVID-19, the Chinese government has taken a number of actions, which included extending the Chinese Spring
Festival in 2020, quarantining individuals infected with or suspected of having COVID-19, prohibiting residents from free travel,
encouraging employees of enterprises to work remotely from home and cancelling public activities, among others. The COVID-19 has
also resulted in temporary closure of many corporate offices, retail stores, manufacturing facilities and factories across China.
In response to the evolving dynamics related to
the COVID-19 pandemic, we have followed guidelines issued by local authorities to prioritize the health and safety of our employees and
suppliers including third-party transportation providers. As a result of the government-imposed restrictions, the VIE and the VIE's
subsidiaries' facilities and operations were mostly closed from February 2020 to late March 2020. The VIE and the VIE's subsidiaries
gradually resumed operation during February and March 2020, but it was not until April 2020 that we resumed full operation, which has
caused a decrease in our net revenue and also adversely affected our marketing activities during the closure. We, through the VIE and
the VIE's subsidiaries, took a series of measures in response to the pandemic, including, among others, the establishment of a special
team for epidemic prevention and control, the remote working arrangements for some of our employees, and the requirement for our employees
on site to take extra measures and procedures to lower the risks of COVID-19 exposure. We, through the VIE and the VIE's subsidiaries,
also donated some epidemic prevention materials to areas and entities in need. These measures reduced the capacity and efficiency of our
operations and increased our expenditures.
The spread of COVID-19 has caused us
to incur incremental costs. However, by leveraging our advantages in the logistics fields and our networks, we, through the VIE and the
VIE's subsidiaries, were able to resume a larger portion of our operations in late March 2020 and have seen an increase in demand
for our services since April 2020 as the COVID-19 pandemic became gradually under control starting from the 2
nd
quarter of
2020 in China. Furthermore, to mitigate any negative impacts that COVID-19 may have on our operations, we, through the VIE and
the VIE's subsidiaries, implemented a variety of measures, including disinfection of offices, free mask distribution, temperature
monitoring to ensure the safety of our employees returning to work, setting up quarantine rooms for employees and separate rest areas
for drivers to avoid unnecessary contact, and disinfection of all the vehicles in and out of our locations.
From April to May, 2022, Shanghai was shut down and all of the businesses
in Shanghai were closed, due to the COVID-19 Omicron variant. Our business in Shanghai dropped significantly and revenue decreased by
approximately $2 million, compared with revenue in March 2022. The shutdown was over in June 2022, and business in Shanghai has since
resumed. Many of the restrictive measures previously adopted by the PRC governments at various levels to control the spread of the COVID-19
virus have been revoked or replaced with more flexible measures since December 2022. While the revocation or replacement of the restrictive
measures to contain the COVID-19 pandemic could have a positive impact on our normal operations, the extent of the impact on the Company's
future financial results will be dependent on future developments such as the length and severity of the crisis, the potential resurgence
of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy
and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. Given this uncertainty, the Company
is currently unable to quantify the expected impact of the COVID-19 pandemic on its future operations, financial condition, liquidity
and results of operations if the current situation continues.
100
Results of Operations
The following consolidated results of operations
include the results of operations of the Company, its wholly owned subsidiaries and consolidated VIE and the VIE's subsidiaries.
The following table summarizes our consolidated
results of operations, both in absolute amounts and as percentages of our total net revenue for the periods presented. The operating results
in any historical period are not necessarily indicative of the results that may be expected for any future period.
For the years ended December 31, 2022 and
2021
Years Ended December 31,
2022
2021
Change
Amount
in thousand
%
Amount
in thousand
%
(Amount
in thousand)
%
Revenue
Transportation
$
346,039
93.4
%
$
327,848
94.6
%
$
18,191
5.5
%
Warehouse storage management services
20,322
5.5
%
16,885
4.9
%
3,437
20.4
%
Other revenue
3,964
1.1
%
1,966
0.5
%
1,998
101.6
%
Net revenue
370,325
100
%
346,699
100
%
23,626
6.8
%
Cost of revenue
(328,793
)
(88.8
)%
(305,354
)
(88.1
)%
(23,439
)
7.7
%
Gross profit
$
41,532
11.2
%
41,345
11.9
%
$
187
0.5
%
Net revenues
Transportation services
We, through the VIE and the VIE's subsidiaries,
provide transportation services to companies in mainland China. Our major customers are in the manufacturing industry, the fast-moving
consumer goods industry, the telecommunication industry, and the publishing industry. Revenue from transportation services is recognized
upon customers' receipt of the transported goods.
Warehouse storage management services
We, through the VIE and the VIE's subsidiaries,
generate revenue of warehouse storage management services through the provision of warehouse storage management services to various customers.
We help companies place the goods and maintain the daily input and output of the goods. We primarily charge our customers service fees
for our storage services and the daily management services. Revenue from the warehouse storage management services is recognized over
the service period.
Our net revenues were approximately $370.3 million
for the year ended December 31, 2022, increasing by approximately 6.8% from approximately $346.7 million for the year ended December 31,
2021. The increase of our net revenues was primarily driven by fast growth of e-Commerce business in China since the pandemic. Approximately
5.5% increase in the net revenues generated from our transportation services from approximately $327.8 million (which accounted for approximately
94.6% of our total net revenue) for the year ended December 31, 2021 to approximately $346.0 million (which accounted for approximately
93.4% of our total net revenue) for the year ended December 31, 2022, as result of the transportation services orders from Tesla increased
significantly for the year ended December 31, 2022 since it became our client in fiscal year 2021. In addition, we obtained a new customer
Meihua Holding Group Co., Ltd. in fiscal year 2022 with significant revenue.
Net revenue generated from our warehouse storage
management services increased by approximately 20.4% from approximately $16.9 million (which accounted for approximately 4.9% of our total
net revenue) for the year ended December 31, 2021 to approximately $20.3 million (which accounted for approximately 5.5% of our total
net revenue) for the year ended December 31, 2022, primarily due to the growth of our existing clients' business.
101
Cost of revenues
Our cost of revenue consists of cost of transportation
services and cost of warehouse storage management services. The cost of transportation services comprises cooperation cost (the payments
made to third-party transportation providers), depreciation and amortization expenses, toll fees, employee wages and benefits and fuel
cost. Cooperation cost is the direct cost of transportation paid by the Company to third-party transportation providers, who are independent
contractors and third-party carriers. The cost of warehouse storage management services consists of rental fees, handling fees, employee
wages and benefits in connection with our services to our clients.
Our cost of revenues was approximately $328.8
million for the year ended December 31, 2022, compared to approximately $305.4 million for the year ended December 31, 2021, which was
in line with the increase of revenue, and continuing increase of worldwide inflation has led to a sharp rise in fuel prices in 2022, which
might significantly increase the Company's operating costs in the future. The gross margin of the transportation service has decreased
as result of the increased costs. The Company will be considering changing the service prices if the price of fuel continues to rise.
The recent inflationary pressures have not materially impacted our operations. The management estimates that for every 1% change in fuel
prices, the Company's operating costs will increase by approximately 0.04% accordingly. As of the date of this annual report, we
believe that the impact of the increased price of fuel on Company's operating costs is not significant, and we have not identified any
actions to mitigate inflationary pressures.
Gross profit
Our overall gross profit increased by approximately
0.5% from approximately $41.3 million for the year ended December 31, 2021 to approximately $41.5 million for the year ended December
31, 2022. The gross profit increased by approximately $0.2 million, mainly due to stable orders offset by the increase of fuel prices,
as mentioned previously for the fiscal year 2022. For the years ended December 31, 2022 and 2021, our overall gross margin was approximately
11.2% and 11.9%, respectively. The gross margin slightly decreased due to the same reason.
Years ended December 31,
2022
2021
Change
(Amount
in thousand)
(Amount
in thousand)
(Amount
in thousand)
%
Operating expenses
Selling and marketing
$
(7,427
)
$
(7,720
)
$
293
(3.8
)%
General and administrative
(24,259
)
(25,038
)
779
(3.1
)%
Total operating expenses
$
(31,686
)
$
(32,758
)
$
1,072
(3.3
)%
Operating expenses
Our operating expenses decreased by approximately
3.3% from approximately $32.8 million for the year ended December 31, 2021 to approximately $31.7 million for the year ended December
31, 2022 for the following reasons:
Selling and marketing expenses
Our sales and marketing expenses consist primarily
of employee wages, rental expenses and benefits for sales and marketing staff, rental expense, depreciation expenses and other daily expenses
which are related to the sales and marketing functions. Selling and marketing expenses decrease by approximately $0.3 million from approximately
$7.7 million for the year ended December 31, 2021 to approximately $7.4 million for the year ended December 31, 2022, which was attributable
to decreased employee wages and benefits.
General and administrative expenses
Our general and administrative expenses consist
primarily of employee wages and benefits for corporate employees, rental expenses, depreciation and amortization expense and other expenses
which are related to the general corporate functions.
Our general and administrative expenses decreased
by approximately 3.1% from approximately $25.0 million for the year ended December 31, 2021 to approximately $24.3 million for year ended
December 31, 2022, which was attributable to the decrease in employee wages and benefits as some employees worked from home or worked
in alternating turns in the first half of fiscal year 2022, due to the COVID-19 Omicron variant.
102
Income from operations
As a result of the foregoing, our profit from
operations increased by approximately 14.7% from approximately $8.6 million for the year ended December 31, 2021 to approximately $9.8
million for the year ended December 31, 2022
.
December 31,
2022
2021
Change
(Amount in thousand)
(Amount in thousand)
(Amount in thousand)
%
Other income (expense)
Interest income
$
1,274
$
1,330
$
(56
)
(4.2
)%
Interest expense
(2,227
)
(2,315
)
88
(3.8
)%
Other income, net
532
559
(27
)
(4.8
)%
Total other expense, net
$
(421
)
$
(426
)
$
(5
)
(1.2
)%
Our total net other expense amounted to approximately
$0.4 million for the years ended December 31, 2022 and 2021.
Year Ended
December 31,
2022
2021
Change
(Amount
in thousand)
(Amount
in thousand)
(Amount
in thousand)
%
Income before income taxes
$
9,425
$
8,161
$
1,264
15.5
%
Provision for income taxes
(1,599
)
(1,517
)
(82
)
5.4
%
Net income
$
7,826
$
6,644
$
1,182
17.8
%
Income before income taxes
As a result of the foregoing, our income before
income taxes increased by approximately $1.3 million or approximately 15.5% to approximately $9.4 million for the year ended December
31, 2022 from approximately $8.2 million for the year ended December 31, 2021.
Provision for income taxes
The effective income tax rate decreased from approximately
18.6% for the year ended December 31, 2021 to approximately 17.0% for the year ended December 31, 2022, which is mainly due to the different
profit made in different VIE's subsidiaries. As more profit made in those entities' which has a preferential tax rate for
the year ended December 31, 2022, the provision for income tax decreased slightly.
Net income
As a result of the foregoing, our net income increased
by approximately $1.2 million or 17.8% to approximately $7.8 million for the year ended December 31, 2022 from approximately $6.6 million
for the year ended December 31, 2021.
For the years ended December 31, 2021 and
2020
Years Ended December 31,
2021
2020
Change
Amount
in thousand
%
Amount
in thousand
%
(Amount
in thousand)
%
Revenue
Transportation
$
327,848
94.6
%
$
273,685
95.2
%
$
54,163
19.8
%
Warehouse storage management services
16,885
4.9
%
12,364
4.3
%
4,521
36.6
%
Other revenue
1,966
0.5
%
1,415
0.5
%
551
38.9
%
Net revenue
346,699
100
%
287,464
100
%
59,235
20.6
%
Cost of revenue
(305,354
)
(88.1
)%
(251,489
)
(87.5
)%
(53,865
)
21.4
%
Gross profit
$
41,345
11.9
%
35,975
12.5
%
$
5,370
14.9
%
103
Net revenues
Transportation services
We, through the VIE and the VIE's subsidiaries,
provide transportation services to companies in mainland China. Our major customers are in the manufacturing industry, the fast moving
consumer goods industry, the telecommunications industry, and the publishing industry. Revenue from transportation services is recognized
upon customers' receipt of the transported goods.
Warehouse storage management services
We, through the VIE and the VIE's subsidiaries,
generate revenue of warehouse storage management services through the provision of warehouse storage management services to various customers.
We help companies place the goods and maintain the daily input and output of the goods. We primarily charge our customers service fees
for our storage services and the daily management services. Revenue from the warehouse storage management services is recognized over
the service period.
Our net revenues were approximately $346.7 million
for the year ended December 31, 2021, increasing by approximately 20.6% from approximately $287.5 million for the year ended December
31, 2020. The increase of our net revenues was primarily driven by fast growth of e-Commerce business in China since the COVID-19 pandemic.
Approximately 19.8% increase in the net revenues generated from our transportation services from approximately $273.7 million (which accounted
for approximately 95.2% of our total net revenue) for the year ended December 31, 2020 to approximately $327.8 million (which accounted
for approximately 94.6% of our total net revenue) for the year ended December 31, 2021, as a result of increased transportation service
orders processed during the year compared with prior year, which was mostly contributed by the existing clients, and was attributable
to the Company's strengthened sales efforts and the continuous increase in the market demand during the fiscal year 2021 as a result
of the development of e-commerce businesses in China. In addition, transportation services revenue from the auto parts industry grew rapidly
during the year ended December 31, 2021, as the Company obtained a new major client, Tesla Shanghai Co., Ltd.
Net revenue generated from our warehouse storage
management services also increased by approximately 36.6% from approximately $12.4 million (which accounted for approximately 4.3% of
our total net revenue) for the year ended December 31, 2020 to approximately $16.9 million (which accounted for approximately 4.9% of
our total net revenue) for the year ended December 31, 2021, primarily due to approximately 15.1% increase in client number and the growth
of our existing clients' business.
Cost of revenues
Our cost of revenue consists of cost of transportation
services and cost of warehouse storage management services. The cost of transportation services comprises cooperation cost (the payments
made to third-party transportation providers), depreciation and amortization expenses, toll fees, employee wages and benefits and fuel
cost. Cooperation cost is the direct cost of transportation paid by the Company to third-party transportation providers, who are independent
contractors and third-party carriers. The cost of warehouse storage management services consists of rental fees, handling fees, employee
wages and benefits in connection with our services to our clients.
Our cost of revenues was approximately $305.4
million for the year ended December 31, 2021, compared to approximately $251.5 million for the year ended December 31, 2020, which was
in line with the increase of revenue, and was mainly attributable to the increase in the cooperation cost, due to the sharp increase of
transportation revenue for the year ended December 31, 2021. Furthermore, because of significant increase in transportation revenue, the
Company's self-owned fleet was fully utilized. The Company had to engage third party subcontracting logistic companies to perform
some of the transportation services for its clients. In addition, the toll fees increased as a result of the expiration of a deduction
policy on toll fees from February to May 2020, due to the impact of the COVID-19 pandemic for such period as there was no deduction for
the year ended December 31, 2021. The worldwide inflation has led to a sharp rise in fuel prices, which might significantly increase the
Company's operating costs in the future. The gross margin of the transportation service has decreased as result of the increased
costs. The Company will be considering changing the service prices if the price of fuel continues to rise. The recent inflationary pressures
have not materially impacted our operations. The management estimates that for every 1% change in fuel prices, the Company's operating
costs will increase by approximately 0.04% accordingly.
Gross profit
Our overall gross profit increased by approximately
14.9% from approximately $36.0 million for the year ended December 31, 2020 to approximately $41.3 million for the year ended December
31, 2021. The gross profit increased by approximately $5.4 million mainly due to the increase of revenue without too much changes in gross
profit margin from fiscal year 2020 to fiscal year 2021. For the years ended December 31, 2021 and 2020, our overall gross margin was
approximately 11.9% and 12.5%, respectively. The gross margin slightly decreased mainly due to the increase in the cooperation cost for
the transportation service. As a result of the increased orders received during the year ended December 31, 2021, we were unable to fulfill
the orders by our self-owned fleet, and more orders were subcontracted to the third-party carriers compared with the year ended December
31, 2020. As the cooperation costs with the third-party carriers were relatively higher than the costs of using our self-owned fleet,
a proportional increase in cost of revenue related to transportation services was higher than the increase in revenue. In addition, the
toll fees increased as a result of the expiration of a deduction policy on toll fees, as previous mentioned.
104
December 31,
2021
2020
Change
(Amount
in thousand)
(Amount
in thousand)
(Amount
in thousand)
%
Operating expenses
Selling and marketing
$
(7,720
)
$
(6,139
)
$
(1,581
)
25.8
%
General and administrative
(25,038
)
(23,632
)
(1,406
)
5.9
%
Total operating expenses
$
(32,758
)
$
(29,771
)
$
(2,987
)
10.0
%
Operating expenses
Our operating expenses increased by approximately
10.0% from approximately $29.8 million for the year ended December 31, 2020 to approximately $32.8 million for the year ended December
31, 2021 for the following reasons:
Selling and marketing expenses
Our sales and marketing expenses consist primarily
of employee wages, rental expenses and benefits for sales and marketing staff, rental expense, depreciation expenses and other daily expenses
which are related to the sales and marketing functions.
Our sales and marketing expenses increased by
approximately 25.8% from approximately $6.1 million for the year ended December 31, 2020 to approximately $7.7 million for the year ended
December 31, 2021. Due to investing more resources in sales and marketing channels and the economic recovery after Covid-19 pandemic in
China, the Company's travel and promotion expenses increased in the year ended December 31, 2021 compared to the year ended December
31, 2020.
General and administrative expenses
Our general and administrative expenses consist
primarily of employee wages and benefits for corporate employees, rental expenses, depreciation and amortization expense and other expenses
which are related to the general corporate functions.
Our general and administrative expenses increased
by approximately 5.9% from approximately $23.6 million for the year ended December 31, 2020 to approximately $25.0 million for year ended
December 31, 2021, which was mainly attributable to the increase in employee wages and benefits from approximately $15.4 million for the
year ended December 31, 2020 to approximately $16.0 million for the year ended December 31, 2021. In early 2020, some employees worked
from home or worked in alternating turns, due to the COVID-19 pandemic, but the situation did not last long and it soon recovered.
Income from operations
As a result of the foregoing, our profit from
operations increased by approximately 38.4% from approximately $6.2 million for the year ended December 31, 2020 to approximately $8.6
million for the year ended December 31, 2021.
December 31,
2021
2020
Change
(Amount
in thousand)
(Amount
in thousand)
(Amount
in thousand)
%
Other income (expense)
Interest income
$
1,330
$
1,329
$
1
0.1
%
Interest expense
(2,315
)
(1,990
)
(325
)
16.3
%
Other income, net
559
2,070
(1,511
)
(73.0
)%
Total other income (expense), net
$
(426
)
$
1,409
$
(1,835
)
(130.2
)%
105
Our total net other income was approximately $1.4
million for the year ended December 31, 2020, decreased by approximately $1.8 million or approximately 130.2% to approximately $0.4 million
net total other expense for the year ended December 31, 2021 for the following reasons:
Interest expense
Our interest expense increased by approximately
16.3% from approximately $2.0 million for the year ended December 31, 2020 to approximately $2.3 million for the year ended December 31,
2021, as a result of an increased weighted average interest rate and average balance of bank loans during the year ended December 31,
2021 compared with 2020.
Other income, net
Our other income, net mainly consists of government
subsidies. The decrease was approximately $1.5 million or 73.0% from approximately $2.1 million for the year ended December 31, 2020 to
approximately $0.6 million for the year ended December 31, 2021, which was primarily due to the decrease of government subsidies received
in the fiscal year 2021 compared with previous year.
Year Ended
December 31,
2021
2020
Change
(Amount
in thousand)
(Amount
in thousand)
(Amount
in thousand)
%
Income before income taxes
$
8,161
$
7,613
$
548
7.2
%
Provision for income taxes
(1,517
)
(1,570
)
(53
)
(3.4
)%
Net income
$
6,644
$
6,043
$
601
9.9
%
Income before income taxes
As a result of the foregoing, our income before
income taxes increased by approximately $0.5 million or approximately 7.2% to approximately $8.2 million for the year ended December 31,
2021 from approximately $7.6 million for the year ended December 31, 2020.
Net income
As a result of the foregoing, our net income increased
by approximately $0.6 million or 9.9% to approximately $6.6 million for the year ended December 31, 2021 from approximately $6.0 million
for the year ended December 31, 2020.
Impact of Foreign Currency Fluctuations
The reporting currency of the Company is USD.
The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities
are translated at the unified exchange rate as quoted by the People's Bank of China at the end of the period. The statement of income
accounts is translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments
resulting from this process are included in accumulated other comprehensive income (loss). Transaction gains and losses that arise from
exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of
operations as incurred. The foreign currency translation from RMB to USD could materially affect our financial condition and results of
operations due to the fluctuation of exchange rate. The exchange rates in effect are shown below:
U.S. Dollar Exchange Rate
December 31,
2022
December 31,
2021
December 31,
2020
At the end of the period - USD: RMB
US$1=RMB 6.9646
US$1=RMB 6.3757
US$1=RMB 6.5249
Average rate for the period - USD: RMB
US$1=RMB 6.7261
US$1=RMB 6.4515
US$1=RMB 6.8976
We did not have any foreign currency investments
hedged by currency borrowings or other hedging instruments in years ended December 31, 2022, 2021 and 2020.
106
B. Liquidity and Capital Resources
The PRC government imposes controls on the convertibility
of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations,
our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE. Approval from or registration
with appropriate government authorities is, however, required where RMB is to be converted into foreign currency and remitted out of China
to pay capital expenses such as the repayment of loans denominated in foreign currencies. See "Risk Factors—Governmental control
of currency conversion may affect the value of your investment and our payment of dividends."
Current PRC regulations permit our PRC subsidiary
to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
In addition, our PRC subsidiary is required to set aside at least 10% of its respective accumulated profits each year, if any, to fund
certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. We had various outstanding
bank loans of approximately $47.7 million as of December 31, 2022. We have also entered into non-cancellable operating lease agreements
for several offices, operating facilities and warehouses. The following table sets forth our contractual obligations as of December 31,
2022:
Payments Due by Period (Amount in thousand)
Total
Within
1 Year
1-3 Years
3-5 Years
More than
5 Years
Borrowings
$
47,655
$
47,655
$
-
$
-
$
-
Operating leases commitments
31,206
9,924
11,450
5,126
4,706
Total
$
78,861
$
57,579
$
11,450
$
5,126
$
4,706
Cash flows and working capital
The following table sets forth a summary of our
cash flows for the periods indicated:
December 31,
December 31,
December 31,
2022
2021
2020
(Amount
in thousand)
(Amount
in thousand)
(Amount
in thousand)
Net cash provided by operating activities
$
6,930
$
16,592
$
2,332
Net cash used in investing activities
(6,715
)
(23,869
)
(7,821
)
Net cash flows provided by (used in) financing activities
6,049
(2,127
)
13,144
Effects of exchange rate changes on cash and restricted cash
(1,814
)
538
1,714
Cash and restricted cash, beginning of year
18,918
27,784
18,415
Cash and restricted cash, end of year
$
23,368
$
18,918
$
27,784
As a holding company with no material operations
of our own, we conduct a substantial majority of our operations through our PRC subsidiary and the VIE in China. We are permitted under
PRC laws and regulations to provide funding to our PRC subsidiary in China through capital contributions or loans, subject to the approval
of government authorities and limits on the amount of capital contributions and loans. In addition, our subsidiaries in China may provide
Renminbi funding to the VIE only through loans. All of the net proceeds from this offering would be immediately available to be loaned
to the VIE and the VIE's subsidiaries, subject to the respective loan agreements to be entered into between the Company and the
VIE and the VIE's subsidiaries. Foreign currency capital of a foreign-invested enterprise may be converted into Renminbi capital
at its will according to the actual operation of the enterprise, as long as it is within such enterprise's business scope.
Cash flows in Operating Activities
For the year ended December 31, 2022, net cash
generated from operating activities was approximately $6.9 million, primarily comprised of net income of approximately $7.8 million and
adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $7.0 million, approximately
$10.8 million for amortization of right-of-use assets and interest of lease liabilities, deferred income taxes expenses of approximately
$1.2 million, increased of notes payable approximately $2.1 million in operating activities, increased of accounts payable of approximately
$7.9 million. Net cash generated from operating activities was partially offset by approximately $11.3 million decrease in operating lease
liabilities, approximately $1.0 million decreased in salary and welfare payables, approximately $2.0 million increased in prepayments
and other current assets, approximately $17.0 million increased in account receivable and approximately $1.0 million increase in notes
receivable. The cash generated from operating activities was mainly resulted from the increased revenue for the year ended December 31,
2022 of approximately $23.6 million compared with prior year. Our net income increased by approximately $1.2 million to approximately
$7.8 million for the year ended December 31, 2022 from approximately $6.6 million for the year ended December 31, 2021.
107
For the year ended December 31, 2021, net cash
generated from operating activities was approximately $16.6 million, primarily comprised of net income of approximately $6.6 million and
adjusted for non-cash items such as depreciation and amortization expense for property and equipment of approximately $5.9 million, approximately
$9.5 million for amortization of right-of-use assets and interest of lease liabilities, deferred income taxes expenses of approximately
$1.5 million, the decrease of notes receivable of approximately $9.4 million in operating activities, decreased of inventories of approximately
$0.8 million and increase of accounts payable of approximately $2.5 million. Net cash generated from operating activities was partially
offset by approximately $9.4 million decrease in operating lease liabilities, approximately $3.2 million increase in accounts receivables,
approximately $2.3 million increased in prepayments and other current assets, approximately $3.8 million increase in other non-current
assets and approximately $2.4 million decrease in note payable. The cash generated from operating activities was mainly resulted from
the increased revenue in transportation services and warehouse storage and storage management services for the year ended December 31,
2021 of approximately $58.7 million. Our net income increased by approximately $0.6 million to approximately $6.6 million for the year
ended December 31, 2021 from approximately $6.0 million for the year ended December 31, 2020.
For the year ended December 31, 2020, net cash
provided by operating activities was approximately $2.3 million, primarily comprised of net income of approximately $6.0 million and adjusted
for non-cash items such as depreciation and amortization expense for property and equipment of approximately $4.7 million, approximately
$8.6 million for amortization of right-of-use assets and interest of lease liabilities, approximately $1.3 million deferred income taxes,
the increase in notes payable related to normal operating activities of approximately $1.5 million, the increase of accounts payable of
approximately $14.0 million, the increase in salary and welfare payable of approximately $1.3 million, the increase in accrued expenses
and other current liabilities of approximately $1.8 million and the increase in tax payable of approximately $2.3 million. Net cash provided
by operating activities was partially offset by approximately $18.7 million increase in accounts receivable, the increase in note receivable
of approximately $1.6 million, the increase in prepayments and other current assets of approximately $5.0 million, the increase in other
non-current assets of approximately $6.0 million and approximately $8.5 million decrease in operating lease liabilities. The cash provided
by operating activities was mainly resulted from the increased revenue in transportation services and warehouse storage and storage management
services for the year of approximately $54.8 million. Our net income increased by approximately $4.1 million to approximately $6.0 million
in the fiscal year ended December 31, 2020 from approximately $1.9 million for the fiscal year ended December 31, 2019.
Cash flows in Investing Activities
For the year ended December 31, 2022, net cash
used in investing activities was approximately $6.7 million, consisted primarily of cash used to acquire property and equipment of approximately
$6.9 million and approximately $0.3 million cash used for purchasing intangible assets, mainly offset by cash proceeds received from disposal
of property and equipment of approximately $0.5 million.
For the year ended December 31, 2021, net cash
used in investing activities was approximately $23.9 million, consisted primarily of cash used to acquire property and equipment of approximately
$25.4 million and approximately $0.3 million cash used for purchasing intangible assets, mainly offset by cash proceeds received from
disposal of property and equipment of approximately $1.3 million and disposal of subsidiaries of approximately $0.5 million.
For the year ended December 31, 2020, net cash
used in investing activities approximately of $7.8 million, consisted primarily of cash used to acquire property and equipment of approximately
$7.9 million, partially offset by proceeds from disposal of property and equipment of approximately $0.1 million.
Cash flows in Financing Activities
For the year ended December 31, 2022, net cash
generated from financing activities was approximately $6.0 million, consisted primarily of cash proceeds from bank loans of approximately
$61.3 million, partially offset by cash repaid for bank loans of approximately $55.5 million.
For the year ended December 31, 2021, net cash
used in financing activities was approximately $2.1 million, consisted primarily of cash repaid for bank loans of approximately $67.6
million, partially offset by capital contribution from non-controlling shareholders of approximately $3.4 million and cash proceeds from
bank loans of approximately $62.6 million.
108
For the year ended December 31, 2020, net cash
provided by financing activities of approximately $13.1 million, consisted primarily of cash proceeds from bank loans of approximately
$62.3 million and cash injection from the non-controlling shareholders of approximately $0.3 million, partially offset by cash repaid
for bank loans of approximately $50 million.
Capital Expenditures
Our capital expenditures are incurred primarily
in connection with purchase of fixed assets, including electronic equipment, office equipment and vehicles, and intangible assets. Our
capital expenditures were approximately $7.2 million, $25.7 million and $7.9 million for the fiscal years ended December 31, 2022, 2021
and 2020, respectively. Subsequent to December 31, 2022 and as of the date of this annual report, there have been no material commitments
for capital expenditures. We intend to fund our future capital expenditures with our existing cash balance, proceeds of bank loans and
proceeds from the initial public offering.
Off-Balance Sheet Commitments and Arrangements
We have no off-balance sheet arrangements including
arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.
C. Research and Development, Patents and Licenses, etc.
See "Item 4. Information on the Company—B.
Business Overview—Our Technology" and "Item 4. Information on the Company—B. Business Overview—Intellectual
Property."
D. Trend Information
Other than as described elsewhere in this annual
report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material adverse
effect on our revenue, income from continuing operations, profitability, liquidity or capital resources, or that would cause our reported
financial information not necessarily to be indicative of future operating results or financial condition.
E.
Critical Accounting Estimates
We prepare our consolidated financial statements
in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions. 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
and assumptions on our own historical data 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 and assumptions on an ongoing basis.
Our expectations regarding the future are based
on available information and assumptions that we believe to be reasonable and accurate, 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.
The critical accounting policies, judgments and
estimates that we believe to have the most significant impact on our consolidated financial statements are described below, which should
be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual
report. When reviewing our financial statements, you should consider.
●
our selection of critical accounting policies;
●
the judgments and other uncertainties affecting the application of such policies;
●
the sensitivity of reported results to changes in conditions and assumptions;
Our critical accounting policies and practices
include the following: (i) revenue recognition; (ii) accounts receivable, net; and (iii) income taxes. See Note 2—Summary of Significant
Accounting Policies to our consolidated financial statements for the disclosure of these accounting policies. We believe the following
accounting estimates involve the most significant judgments used in the preparation of our financial statements.
109
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. We consider our critical accounting estimates include (i) allowance for doubtful accounts for accounts receivable,
(ii) provision for prepayments and other assets, (iii) discount rate used in operating lease right-of-use assets, and (iv) valuation
allowance of deferred tax assets.
Allowance for doubtful accounts for accounts
receivable
We review on a periodic basis for doubtful accounts
for the outstanding trade receivable balances based on historical collection trends, aging of receivables and other information available.
Additionally, we evaluate individual client's financial condition, credit history, and the current economic condition to make specific
bad debt provisions when we deem necessary.
The allowance is based on our management's
best estimates of specific losses on individual exposures and a provision on historical trends of collections. The allowance rate will
fluctuate based upon the changes of the historical allowance rate and our management's estimate. If actual conditions are less favorable
than those projected by the management, additional doubtful accounts may be required, which could negatively impact our operating results.
If actual conditions are more favorable than those projected by the management, we may have a higher profit margin when account receivable
balances that have been previously reserved are eventually collected. A 1% increase or decrease of allowance rate for each aged account
receivable balances would result in a decrease or increase of approximately $0.14 million and $0.10 million in profit before tax for the
years ended December 31, 2022 and 2021, respectively.
Provision for prepayments and other assets
Prepayment and other assets primarily consist
of VAT recoverable, advances to vendors for purchasing goods, long-lived assets or services that have not been received or provided, advances
to employees, security deposits made to customers and advances to employees. Prepayment and other assets are classified as either current
or non-current based on the terms of the respective agreements. These advances are unsecured and are reviewed periodically to determine
whether their carrying value has become impaired. The Company considers the assets to be impaired if the collectability of the advance
becomes doubtful. The Company uses the aging method to estimate the allowance for uncollectible balances. The allowance is also based
on management's best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections
and utilizations. Actual amounts received or utilized may differ from management's estimate of credit worthiness and the economic
environment. The provisions for prepayments and other assets were approximately $0.5 million and $0.4 million as of December 31, 2022
and 2021, respectively.
Discount rate used in operating lease right-of-use
asset
Right-of-use asset ("ROU") assets
represent the Company'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.
As most of our leases do not provide an implicit
rate, we use the incremental borrowing rate based on the information available at lease commencement date to determine the present value
of lease payments.
Determining the incremental borrowing rate applied in calculating lease liabilities
requires the use of certain methodologies and assumptions. When determining the rate, management assesses various factors including the
lease term, nature of the asset and the level of security for the right-of-use asset. For the years ended December 31, 2022 and 2021,
the estimated weighted average discount rates used in
determining the present value of lease payments was 5.78% and 5.80%, respectively.
Valuation of deferred tax assets
Deferred income taxes are provided using assets
and liabilities method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on
the basis of the differences between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. Deferred tax assets are recognized to the extent that these assets are more
likely than not to be realized. In making such a determination, the management consider all positive and negative evidence, including
future reversals of projected future taxable income and results of recent operation. Deferred tax assets are then reduced by a valuation
allowance through a charge to income tax expense when, in the opinion of management, it is more likely than not that a portion of or all
of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management
considers the cumulative earnings and projected future taxable income in making this assessment. Recovery of substantially all of the
Company's deferred tax assets is dependent upon the generation of future income, exclusive of reversing taxable temporary differences.
Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax
assets are recoverable, valuation allowances of nil were provided for the Company's certain subsidiaries with continuous losses
as of December 31, 2022 and 2021. As of December 31, 2022 and 2021, there were approximately $9.5 million and $16.8 million net operating
losses carryforwards in certain subsidiaries, respectively. The net operating tax loss carryforwards will expire from 2023 to 2027.
110
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. The business address of all of our directors and executive
officers is Shengfeng Building, No. 478 Fuxin East Road, Jin'an District, Fuzhou City, Fujian Province, People's Republic
of China, 350001.
Name
Age
Position(s)
Yongxu Liu
50
Chief Executive Officer, Director, President and Chairman
Guoping Zheng
35
Chief Financial Officer and Vice President
Zhiping Yang
39
Director
Dan Liu
54
Independent Director
Wen Li
54
Independent Director
John F. Levy
66
Independent Director
The following is a brief biography of each of the executive officers
and directors listed above:
Yongxu Liu
has been our chief executive
officer, president and chairman since May 20, 2021 and director since July 16, 2020. Mr. Liu is the founder of Shengfeng Logistics and
has served as its chairman and chief executive officer since December 2001. Mr. Liu served as the vice chairman of Fujian Province Logistics
Association in 2006 and the vice chairman of Fuzhou City Logistics Association in 2007. Mr. Liu also served as the deputy to Fuzhou Municipal
People's Congress in 2011. Prior to founding Shengfeng Logistics, Mr. Liu was the manager of Department of Vehicle Management of
Shenghui Logistics Group Co., Ltd. from 1997 to 2001. Before the formal formation of Shenghui Logistics Group Co., Ltd., Mr. Liu worked
for such entity from 1992 to 1997 as a self-employed individual of logistics transportation. Mr. Liu received his master's degree
in Executive Master of Business Administration from Tsinghua University in 2016. Mr. Liu has been chosen as a director and our chairman
because of his knowledge and extensive experience in logistics industry and our business.
Guoping Zheng
has been our chief financial
officer and vice president since May 20, 2021. Mr. Zheng has served as the vice president and chief financial officer of Shengfeng Logistics,
principal of its Strategy Department and its Finance Department since 2016. Prior to that, Mr. Zheng served as the senior director
of the Financial Management Department of East China and North China in Deppon Logistics Co., Ltd. from 2008 to 2016. Mr. Zheng received
his bachelor's degree in Financial Management from Xiamen University in 2008.
Zhiping Yang
has been our director since
April 7, 2021. Mr. Yang joined Shengfeng Logistics in 2001. He has served as the vice president of Shengfeng Logistics since 2020 and
the general manager of the Operation Center in Shengfeng Logistics since 2014. Mr. Yang has served as the director of Shengfeng Logistics
from December 2018 to April 2021. From 2001 to 2013, he served as the General Manager of Beijing Shengfeng Supply Chain Management Co.,
Ltd., a subsidiary wholly owned by Shengfeng Logistics. Mr. Yang received his bachelor's degree in Applied Psychology from Xi 'an
Institute of Political Science of the People's Liberation Army in 2015. He also completed a Human Resources Advanced Training Class
conducted by Tsinghua University in 2014. Mr. Yang has been chosen as a director because of his knowledge and extensive experience in
logistics industry and our business.
Dan Liu
is an independent director.
Ms. Liu has been a professor in the School of Economics and Management of Fuzhou University since 2017. Prior to that, she served as an
associate professor in the same school of Fuzhou University from 2006 to 2017. From 2001 to 2006, Ms. Liu served as an associate professor
in Fuzhou Polytechnic. From 2000 to 2001, she was a senior lecturer of the Department of Vocational Education of Fujian Economics
and Management Cadre Institute after being a lecturer in the same department from 1994 to 2000. From 1987 to 1994, she served as a teaching
assistant under the same department. Ms. Liu received her bachelor's degree in Material Management Engineering from Huazhong University
of Science & Technology (formerly named Huazhong Institute of Technology) in 1987, her master's degree in Business Management
from Fuzhou University in 2005 and her Ph.D. in Logistics Management from Fuzhou University in 2012. Ms. Liu has been chosen as a director
appointee because of her extensive knowledge and experience in economics and management.
111
Wen Li
is an independent director. Ms.
Li has served as a financial director of Fujian Qunsheng Property Limited Company in China since 2013 and an independent director of Shenzhen
Coship Electronics Co., Ltd. since March 2021. From 2006 to 2012, she served as an independent director of Fufa Group Co., Ltd. in Fujian
Province. She also served as the financial director of Fuzhou TV Station from 2008 to 2013 and the financial director of Fujian Zhongcheng
Group from 2006 to 2008. Prior to that, she was the general manager of Department of Finance of Fujian Huafu Securities Company from 1997
to 2005 and the general manager of Department of Finance of Fujian Huafu Real Estate Company from 1989 to 1997. Ms. Li received her bachelor's
degree in Economics from Fuzhou University in 1989. She also completed a Master course in Finance conducted by Xiamen University
in 1999. She has been certified as a Senior Accountant in China since 2001, obtained Securities Practitioner qualification in China since
2002 and Independent Director qualification in Shenzhen Stock Exchange since 2007. Ms. Li has been chosen as a director appointee because
of her knowledge and extensive experience in finance.
John F. Levy
is an independent director.
Mr. Levy currently serves as the chief executive officer and principal consultant for Board Advisory (the "Levy Company").
He has held this role since May 2005. He also served as the chief executive officer of Sticky Fingers Restaurants, LLC from 2019 to 2020.
Mr. Levy is a recognized corporate governance and financial reporting expert with over 30 years of progressive financial, accounting and
business experience; including nine years in public accounting with three national accounting firms and having served as chief financial
officer of both public and private companies for over 13 years. Mr. Levy currently serves on the board of directors and audit committee
chair of Paranovus Entertainment Technology Ltd. (formerly Happiness Development Group Limited). Mr. Levy served on the board of directors
of Applied Minerals, Inc. from January 2008 to August 2022), Washington Prime Group, Inc. from June 2016 to October 2021), Singularity
Future Technology Limited (from November 2021 to February 2023), Takung Art Co., Ltd. (from March 2016 to June 2019), China Commercial
Credit, Inc. (from August 2013 to December 2016), Applied Energetics, Inc. (from June 2009 to February 2016), as well as several other
publicly held companies prior to 2016. Mr. Levy is a frequent lecturer and has written several articles and courses on accounting, finance
business and governance. Mr. Levy is a Certified Public Accountant. Mr. Levy is a graduate of the Wharton School of Business at the University
of Pennsylvania, and received his MBA from St. Joseph's University in Philadelphia, Pennsylvania. Mr. Levy has been chosen as a
director appointee because of his knowledge and extensive experience in financial, accounting, governance and business.
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
Female
Male
Non-
Binary
Did Not
Disclose
Gender
Part I: Gender Identity
Directors
2
3
0
0
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction
0
LGBTQ+
0
Did Not Disclose Demographic Background
0
112
Family Relationships
None of our directors or executive officers has
a family relationship as defined in Item 401 of Regulation S-K.
Controlled Company
Mr. Yongxu Liu, our chief executive officer, president
and chairman of the board of directors, currently beneficially owns approximately 91.18% of the aggregate voting power of our outstanding
ordinary shares. As a result, we are a "controlled company" within the meaning of the Nasdaq listing rules. As a controlled
company, we are permitted to elect to rely on certain exemptions from the obligations to comply with certain corporate governance requirements,
including:
●
the requirement that a majority of the board of directors consist of independent directors;
●
the requirement that our director nominees be selected or recommended solely by independent directors; and
●
the requirement that we have a nominating and corporate governance committee and a compensation committee that are composed entirely of independent directors with a written charter addressing the purposes and responsibilities of the committees.
Although we do not intend to rely on the controlled
company exemptions under the Nasdaq listing rules even if we are a controlled company, we could elect to rely on these exemptions in the
future, and if so, you would not have the same protection afforded to shareholders of companies that are subject to all of the corporate
governance requirements of Nasdaq.
Additionally, our biggest shareholder, Shengfeng
International Limited, has the ability to control the outcome of matters submitted to the shareholders for approval, including the election
of directors and any merger, consolidation, or sale of all or substantially all of our assets.
B.
Compensation
Yongxu Liu
$
89,430
Guoping Zheng
$
82,062
Zhiping Yang
$
89,267
C.
Board Practices
Board of Directors
Our board of directors consists of five (5) directors.
Our board of directors has determined that our three independent director, Dan Liu, Wen Li, and John F. Levy, satisfy the "independence"
requirements of the Nasdaq corporate governance rules.
Pursuant to our amended and restated articles
of association, the minimum number of directors shall consist of not less than one person unless otherwise determined by the shareholders
in a general meeting. Unless removed or re-appointed, each director shall be appointed for a term expiring at the next-following annual
general meeting, if any is held. At any annual general meeting held, our directors will be elected by a majority vote of shareholders
eligible to vote at that meeting. At each annual general meeting, each director so elected shall hold office for a one-year term and until
the election of their respective successors in office or removed.
113
Duties of Directors
Under Cayman Islands law, all of our directors
owe three types of duties to us: (i) statutory duties, (ii) fiduciary duties, and (iii) common law duties. The Companies Act (2021 Revision)
of the Cayman Islands imposes a number of statutory duties on a director. A Cayman Islands director's fiduciary duties are not codified,
however the courts of the Cayman Islands have held that a director owes the following fiduciary duties: (a) a duty to act in what the
director
bona fide
considers to be in the best interests of the company, (b) a duty to exercise their powers for the purposes they
were conferred, (c) a duty to avoid fettering his or her discretion in the future and (d) a duty to avoid conflicts of interest and of
duty. The common law duties owed by a director are those to act with skill, care and diligence that may reasonably be expected of a person
carrying out the same functions as are carried out by that director in relation to the company and, also, to act with the skill, care
and diligence in keeping with a standard of care commensurate with any particular skill they have which enables them to meet a higher
standard than a director without those skills. In fulfilling their duty of care to us, our directors must ensure compliance with our articles
of association, as amended and restated from time to time. We have the right to seek damages if a duty owed by any of our directors is
breached.
The functions and powers of our board of directors
include, among others:
●
appointing officers and determining the term of office of the officers;
●
exercising the borrowing powers of the company and mortgaging the property of the company; and
●
maintaining or registering a register of mortgages, charges, or other encumbrances of the company.
Terms of Directors and Executive Officers
Each of our directors holds office until a successor
has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office
until the next following annual meeting of shareholders at which time such director is eligible for reelection. All of our executive officers
are appointed by and serve at the discretion of our board of directors.
Qualification
There is currently no shareholding qualification
for directors, although a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution.
Employment Agreements
We have entered into employment agreements with
each of our executive officers. Pursuant to such employment agreements, we have agreed to employ each of our executive officers for a
specified time period, which may be renewed upon both parties' agreement 30 days before the end of the current employment term.
We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, including,
but not limited to, the commitments of any serious or persistent breach or non-observance of the terms and conditions of the employment,
conviction of a criminal offense, willful disobedience of a lawful and reasonable order, fraud or dishonesty, receipt of bribery, or severe
neglect of his or her duties. An executive officer may terminate his or her employment at any time with a one-month prior written notice.
Each executive officer agrees to hold, both during and after the employment agreement expires, in strict confidence and not to use or
disclose to any person, corporation or other entity without written consent, any confidential information.
114
We have also entered into indemnification agreements
with each of our directors and executive officers. Under these agreements, we have agreed 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.
Insider Participation Concerning Executive
Compensation
Our chief executive officer, president and chairman,
Mr. Yongxu Liu, has been making all determinations regarding executive officer compensation from the inception of the Company. When our
Compensation Committee is set up, it will be making all determination regarding executive officer compensation (please see below).
Committees of the Board of Directors
We have established three committees under the
board of directors: an audit committee, a compensation committee, and a nominating and corporate governance committee. Our independent
directors serve on each of the committees. We have adopted a charter for each of the three committees. Each committee's members
and functions are described below.
Audit Committee
. Our audit committee consists
of our three independent director appointees, Dan Liu, Wen Li, and John F. Levy. John F. Levy is the chairperson of our audit committee.
We have determined that each of our independent director also satisfy the "independence" requirements of Rule 10A-3 under
the Securities Exchange Act. Our board also has determined that John F. Levy qualifies as an audit committee financial expert within the
meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq listing rules. 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:
●
appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;
●
reviewing with the independent auditors any audit problems or difficulties and management's response;
●
discussing the annual audited financial statements with management and the independent auditors;
●
reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;
●
reviewing and approving all proposed related party transactions;
●
meeting separately and periodically with management and the independent auditors; and
●
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
115
Compensation Committee
. Our compensation
committee consists of our three independent director appointees, Dan Liu, Wen Li, and John F. Levy. Dan Liu is the chairperson of our
compensation committee. 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. The compensation committee is responsible for, among other things:
●
reviewing and approving the total compensation package for our most senior executive officers;
●
approving and overseeing the total compensation package for our executives other than the most senior executive officers;
●
reviewing and recommending to the board with respect to the compensation of our directors;
●
reviewing periodically and approving any long-term incentive compensation or equity plans;
●
selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person's independence from management; and
●
reviewing programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.
Nominating and Corporate Governance Committee.
Our nominating and corporate governance committee consists of our three independent director appointees, Dan Liu, Wen Li, and John
F. Levy. Wen Li is be the chairperson of our nominating and corporate governance committee. The nominating and corporate governance committee
assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board
and its committees. The nominating and corporate governance committee is responsible for, among other things:
●
identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy;
●
reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us;
●
identifying and recommending to our board the directors to serve as members of committees;
●
advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; and
●
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
D.
Employees
See "Item 4. Information on the Company—B.
Business Overview—Employees."
E.
Share Ownership
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 Class A Ordinary Shares and Class
B Ordinary Shares as of the date of this annual report for:
●
each of our directors and executive officers; and
●
each person known to us to own beneficially more than 5% of our Class A Ordinary Shares or Class B Ordinary Shares.
116
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 Class A Ordinary Shares or and Class B Ordinary Shares shown as
beneficially owned by them. Percentage of beneficial ownership of each listed person is based on 40,520,000 Class A Ordinary Shares outstanding,
and 41,880,000 Class B Ordinary Shares outstanding as of the date of this annual report.
Information with respect to beneficial ownership
has been furnished by each director, officer, or beneficial owner of 5% or more of our Class A Ordinary Shares or Class B 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 Class A Ordinary Shares beneficially owned by a person listed below and the
percentage ownership of such person, Class A Ordinary Shares underlying options, warrants, or convertible securities, including Class
B Ordinary Shares, 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. As of the date of the annual report,
we have 13 shareholders of record, none of whom are located in the United States.
Class A Ordinary Shares
Beneficially Owned
Class B Ordinary Shares
Beneficially Owned
Voting
Power*
Number
%
Number
%
%
Directors, Director Appointees, and Executive Officers
(1)
:
Yongxu Liu
(2)
—
—
%
41,880,000
100
%
91.18
%
Guoping Zheng
—
—
—
—
—
Zhiping Yang
—
—
—
—
—
Dan Liu
—
—
—
—
—
Wen Li
—
—
—
—
—
John F. Levy
—
—
—
—
—
All directors, director appointees, and executive officers as a group (6 individuals):
—
—
%
41,880,000
100
%
91.18
%
5% Shareholders:
Shengfeng International Limited
(2)
—
—
%
41,880,000
100
%
91.18
%
Everbright International Development Limited
(3)
8,736,000
21.56
%
—
—
1.90
%
Double Sun Capital Limited
(4)
3,928,000
9.69
%
—
—
0.86
%
Changle International Limited
(5)
3,904,000
9.63
%
—
—
0.85
%
Chia-Yu Chen
3,880,000
9.58
%
—
—
0.84
%
Yuansheng International Limited
(6)
3,784,000
9.34
%
—
—
0.82
%
Mid-Castle Development Limited
(7)
3,648,000
9.00
%
—
—
0.79
%
Prime Link Capital International Limited
(8)
3,088,000
7.62
%
—
—
0.67
%
Sky Top Capital International Limited
(9)
2,880,000
7.11
%
—
—
0.63
%
*
Represents the voting power with respect to all of our Class A Ordinary Shares and Class B Ordinary Shares, voting as a single class. Each holder of Class A Ordinary Shares is entitled to one vote per one Class A Ordinary Share and each holder of Class B Ordinary Shares is entitled to ten votes per one Class B Ordinary Share.
117
(1)
Unless otherwise indicated, the business address of each of the individuals is Shengfeng Building, No. 478 Fuxin East Road, Jin'an District, Fuzhou City, Fujian Province, People's Republic of China, 350001
(2)
The number of Class B Ordinary Shares beneficially owned represents 41,880,000 Class B Ordinary Shares held by Shengfeng International Limited, a British Virgin Islands company, which is 100% owned by Yongxu Liu, our CEO, Chairman and President. The registered address of Shengfeng International Limited is 30 de Castro Street, Wickhams Cay 1, P.O. Box 4519, Road Town, Tortola, British Virgin Islands.
(3)
The number of Class A Ordinary Shares beneficially owned represents 8,736,000 Class A Ordinary Shares held by Everbright International Development Limited, a British Virgin Islands company. Guangsheng Lin, the general manager of Shengfeng Logistics and one of the Shengfeng Logistics Shareholders, who serves as a director of Everbright International Development Limited, has the dispositive and voting power of the shares held by Everbright International Development Limited. The registered address of Everbright International Development Limited is 4th Floor, Water's Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.
(4)
The number of Class A Ordinary Shares beneficially owned represents 3,928,000 Class A Ordinary Shares held by Double Sun Capital Limited, a British Virgin Islands company, which is 100% owned by Yiping Wu. The registered address of Double Sun Capital Limited is 4th Floor, Water's Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.
(5)
The number of Class A Ordinary Shares beneficially owned represents 3,904,000 Class A Ordinary Shares held by Changle International Limited, a British Virgin Islands company, which is 100% owned by Rong Zheng. The registered address of Changle International Limited is 4th Floor, Water's Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.
(6)
The number of Class A Ordinary Shares beneficially owned represents 3,784,000 Class A Ordinary Shares held by Yuansheng International Limited, a British Virgin Islands company, which is 100% owned by Yusheng Yang. The registered address of Yuansheng International Limited is 4th Floor, Water's Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.
(7)
The number of Class A Ordinary Shares beneficially owned represents 3,648,000 Class A Ordinary Shares held by Mid-Castle Development Limited, a British Virgin Islands company, which is 100% owned by Qing Lin. The registered address of Mid-Castle Development Limited is 4th Floor, Water's Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.
(8)
The number of Class A Ordinary Shares beneficially owned represents 3,088,000 Class A Ordinary Shares held by Prime Link Capital International Limited, a British Virgin Islands company, which is 100% owned by Jinyuan Huang. The registered address of Prime Link Capital International Limited is 4th Floor, Water's Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.
(9)
The number of Class A Ordinary Shares beneficially owned represents 2,880,000 Class A Ordinary Shares held by Sky Top Capital International Limited, a British Virgin Islands company, which is 100% owned by Qiang Lin. The registered address of Sky Top Capital International Limited is 4th Floor, Water's Edge Building, Meridian Plaza, Road Town, Tortola, VG1110, British Virgin Islands.
As of the date of this annual report, none of
our outstanding Class A Ordinary Shares or Class B Ordinary Shares are held by record holders in the United States.
We are not aware of any arrangement that may,
at a subsequent date, result in a change of control of our Company.
118
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major Shareholders
See "Item 6. Directors, Senior Management
and Employees—E. Share Ownership."
B.
Related Party Transactions
The VIE Agreements
See "Item 3. Key Information—Our VIE
Agreements."
Material Transactions with Related Parties
The relationship and the nature of related party
transactions are summarized as follow:
The table below sets forth the major related
parties and their relationships with the Company as of December 31, 2022 and 2021, and for the years ended December 31, 2022, 2021
and 2020:
Name of related parties
Relationship with the Company
Fujian Bafang
An equity investee of the Company
Fuzhou Tianyu Shengfeng Industrial Co., Ltd ("Fuzhou Tianyu")
A company controlled by Yongteng Liu, who is the brother of Yongxu Liu, CEO and Chairman of the Company
Fuzhou Tianyu Shengfeng Property Management Co., Ltd
("Fuzhou Tianyu Management")
A company under the control of a shareholder
Fuzhou Tianyu Yuanmei Catering Co., Ltd ("Fuzhou Tianyu Catering")
A company under the control of a shareholder
Beijing Union Logistics Co., Ltd ("Beijing Banglian") (1)
A company under the control of a shareholder
Fujian Desheng Logistics Co., Ltd ("Fujian Desheng")
A company under the control of a shareholder
Dongguan Suxing New Material Co., Ltd ("Suxing") (2)
A company under the control of a non-controlling shareholder
Hainan Tianyi Logistics Distribution Co., Ltd ("Hainan Tianyi") (3)
An equity investee of the Company
Yongteng Liu
CEO's brother
(1)
In January 2022, the Company's
shareholder sold the equity interest in Beijing Banglian.
(2)
On July 14, 2021, Shengfeng Logistics entered into a share transfer agreement with Dongguan Suxing New Material Co., Ltd ("Dongguan Suxing"), a related party, to transfer its 51% equity interest in Fuzhou Shengfeng New Material Technology Co., Ltd. ("New Material Technology") to Dongguan Suxing. After the transaction, Suxing became a non-related party to the Company.
(3)
On September 15, 2021, the Company
signed a share purchase agreement with a third party. According to such agreement, the Company sold its 5% equity interests in Hainan
Tianyi to such third party. After the transaction, Hainan Tianyi became a non-related party to the Company.
119
i)
Significant transactions with related parties were as follows:
Year ended
December 31,
2022
Year ended
December 31,
2021
Year ended
December 31,
2020
Transportation services to Fujian Bafang
$
18
$
-
$
7
Transportation services to Fujian Desheng
-
349
-
Sales of material to Suxing
-
-
49
Total
$
18
$
349
$
56
Year ended
December 31,
2022
Year ended
December 31,
2021
Year ended
December 31,
2020
Transportation services from Beijing Banglian
$
-
$
2,265
$
2,750
Transportation services from Hainan Tianyi
$
-
$
1,207
$
1,109
Transportation services from Fujian Bafang
$
1,196
$
157
$
144
Purchase raw materials from Suxing
$
-
$
577
$
781
Lease services from Fuzhou Tianyu
$
305
$
358
$
296
Lease services from Fuzhou Tianyu Management
$
35
$
-
$
-
ii)
Guarantees
The Company's shareholder,
CEO and Chairman, Yongxu Liu, his spouse, Xiying Yang, and his brother, Yongteng Liu, were the guarantors of the Company's short-term
bank loans.
iii)
Significant balances with related parties were as follows:
As of
December 31,
2022
As of
December 31,
2021
Due from related parties
Fuzhou Tianyu
$
42
$
46
Beijing Banglian
-
4
Total
$
42
$
50
As of
December 31,
2022
As of
December 31,
2021
Due to related parties
Fujian Bafang (a)
$
1,694
$
1,574
Fuzhou Tianyu
84
29
Beijing Banglian
-
246
Fuzhou Tianyu Management
36
24
Hainan Tianyi
-
4
Yongteng Liu
600
-
Total
$
2,414
$
1,877
(a)
On December 10, 2007, the Company entered into an interest-free loan agreement with Fujian Bafang for a principal amount of approximately $1.4 million (RMB 9.6 million). Such loan is due on demand.
C.
Interests of Experts and Counsel
Not applicable.
120
Item 8. FINANCIAL INFORMATION
A.
Consolidated Statements and Other Financial
Information
We have appended consolidated financial statements
filed as part of this annual report. See "Item 18. Financial Statements."
Legal Proceedings
From time to time, we may become a party to various
legal or administrative proceedings arising in the ordinary course of our business, including actions with respect to intellectual property
infringement, violation of third-party licenses or other rights, breach of contract, and labor and employment claims. We are currently
not a party to, and we are not aware of any threat of, any legal or administrative proceedings that, in the opinion of our management,
are likely to have any material and adverse effect on our business, financial condition, cash flow, or results of operations.
Dividend Policy
See "Item 3. Key Information—Dividend
Distributions, Cash Transfer, and Tax Consequences."
B.
Significant Changes
Except as disclosed elsewhere in this annual report,
we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual
report.
Item 9. THE OFFER AND LISTING
A.
Offer and Listing Details.
Our Class A Ordinary Shares have been listed on
the Nasdaq Capital Market since March 31, 2023 under the symbol "SFWL."
B.
Plan of Distribution
Not applicable.
C.
Markets
Our Class A Ordinary Shares have been listed on
the Nasdaq Capital Market since March 31, 2023 under the symbol "SFWL."
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
Item 10. ADDITIONAL INFORMATION
A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Association
We incorporate by reference into this annual report
the description of our amended and restated memorandum and articles of association, Exhibit 3.1, and the description of differences in
corporate laws contained in our registration statement on Form F-1 (File No. 333-267367), as amended, initially filed with the SEC
on September 9, 2022.
C.
Material Contracts
We have not entered into any material contracts
other than in the ordinary course of business and other than those described in "Item 4. Information on the Company" or elsewhere
in this annual report.
121
D.
Exchange Controls
See "Item 4. Information on the Company—B.
Business Overview—Regulations—Regulations Relating to Foreign Exchange."
E.
Taxation
People's Republic of China Enterprise
Taxation (for the purpose of this paragraph, PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau)
The following brief description of Chinese enterprise
income taxation is designed to highlight the enterprise-level taxation on our earnings, which will affect the amount of dividends, if
any, we are ultimately able to pay to our shareholders. See "Item 3. Key Information—Dividend Distributions, Cash Transfer,
and Tax Consequences
.
"
According to the EIT Law, which was promulgated
by the SCNPC on March 16, 2007, became effective on January 1, 2008, and was last amended on December 29, 2018, and the
Implementation
Rules of the EIT Law
, which were promulgated by the State Council on December 6, 2007, and became effective on January 1, 2008, enterprises
are divided into resident enterprises and non-resident enterprises. Resident enterprises pay enterprise income tax on their incomes obtained
in and outside the PRC at the rate of 25%. Non-resident enterprises setting up institutions in the PRC pay enterprise income tax on the
incomes obtained by such institutions in and outside the PRC at the rate of 25%. Non-resident enterprises with no institutions in the
PRC, and non-resident enterprises with income having no substantial connection with their institutions in the PRC, pay enterprise income
tax on their income obtained in the PRC at a reduced rate of 10%.
We are a holding company incorporated in the Cayman
Islands and we gain substantial income by way of dividends paid to us from our PRC subsidiary. The EIT Law and its implementation rules
provide that China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its equity holders that are non-resident
enterprises, will normally be subject to PRC withholding tax at a rate of 10%, unless any such foreign investor's jurisdiction of
incorporation has a tax treaty with China that provides for a preferential tax rate or a tax exemption.
Under the EIT Law, an enterprise established outside
of China with a "de facto management body" within China is considered a "resident enterprise," which means that
it is treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. Although the implementation rules of the
EIT Law define "de facto management body" as a managing body that actually, comprehensively manage and control the production
and operation, staff, accounting, property, and other aspects of an enterprise, the only official guidance for this definition currently
available is set forth in SAT Notice 82, which provides guidance on the determination of the tax residence status of a Chinese-controlled
offshore incorporated enterprise, defined as an enterprise that is incorporated under the laws of a foreign country or territory and that
has a PRC enterprise or enterprise group as its primary controlling shareholder. Although Shengfeng Cayman does not have a PRC enterprise
or enterprise group as our primary controlling shareholder and is therefore not a Chinese-controlled offshore incorporated enterprise
within the meaning of SAT Notice 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth
in SAT Notice 82 to evaluate the tax residence status of Shengfeng Cayman and its subsidiaries organized outside the PRC.
According to SAT Notice 82, a Chinese-controlled
offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having a "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 criteria are met: (i) the
places where senior management and senior management departments that are responsible for daily production, operation and management of
the enterprise perform their duties are mainly located within the territory of China; (ii) financial decisions (such as money borrowing,
lending, financing and financial risk management) and personnel decisions (such as appointment, dismissal and salary and wages) are decided
or need to be decided by organizations or persons located within the territory of China; (iii) main property, accounting books, corporate
seal, the board of directors and files of the minutes of shareholders' meetings of the enterprise are located or preserved within
the territory of China; and (iv) one half (or more) of the directors or senior management staff having the right to vote habitually reside
within the territory of China.
122
We believe that we do not meet some of the conditions
outlined in the immediately preceding paragraph. For example, as a holding company, the key assets and records of Shengfeng Cayman, including
the resolutions and meeting minutes of our board of directors and the resolutions and meeting minutes of our shareholders, are located
and maintained outside the PRC. In addition, we are not aware of any offshore holding companies with a corporate structure similar to
ours that has been deemed a PRC "resident enterprise" by the PRC tax authorities. Accordingly, we believe that Shengfeng Cayman
and its offshore subsidiaries should not be treated as a "resident enterprise" for PRC tax purposes if the criteria for "de
facto management body" as set forth in SAT Notice 82 were deemed applicable to us. However, as the tax residency 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" as applicable to our offshore entities, we will continue to monitor our tax status.
The implementation rules of the EIT Law provide
that, (i) if the enterprise that distributes dividends is domiciled in the PRC or (ii) if gains are realized from transferring equity
interests of enterprises domiciled in the PRC, then such dividends or gains are treated as China-sourced income. It is not clear how "domicile"
may be interpreted under the EIT Law, and it may be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore,
if we are considered as a PRC tax resident enterprise for PRC tax purposes, any dividends we pay to our overseas shareholders which are
non-resident enterprises as well as gains realized by such shareholders from the transfer of our shares may be regarded as China-sourced
income and as a result become subject to PRC withholding tax at a rate of up to 10%. AllBright, our PRC counsel, is unable to provide
a "will" opinion because it believes that it is more likely than not that we and our offshore subsidiaries would be treated
as non-resident enterprises for PRC tax purposes because we do not meet some of the conditions outlined in SAT Notice 82. Therefore, AllBright
believes that it is possible but highly unlikely that the income received by overseas shareholders who are not PRC residents will be regarded
as China-sourced income.
See "Item 3. Key Information—D.Risk
Factors—Risks Relating to Doing Business in the PRC—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC
'resident enterprise' for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences
to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your investment."
Currently, as resident enterprises in the PRC,
Tianyu as well as Shengfeng Logistics and its subsidiaries in PRC are subject to the enterprise income tax at the rate of 25%, except
that once an enterprise meets certain requirements and is identified as a small-scale minimal profit enterprise, the part of its taxable
income not more than RMB1 million is subject to a reduced rate of 5% and the part between RMB1 million and RMB3 million is subject to
a reduced rate of 10%. The EIT is calculated based on the entity's global income as determined under PRC tax laws and accounting
standards. If the PRC tax authorities determine that Shengfeng Cayman is a PRC resident enterprise for enterprise income tax purposes,
we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises. In addition,
non-resident enterprise shareholders may be subject to a 10% PRC withholding tax on gains realized on the sale or other disposition of
our Class A Ordinary Shares or Class B Ordinary Shares, if such income is treated as sourced from within the PRC. It is unclear whether
our non-PRC individual shareholders would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders
in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to dividends or gains realized by non-PRC
individuals, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. However, it
is also unclear whether our non-PRC shareholders would be able to claim the benefits of any tax treaties between their country of tax
residence and the PRC in the event that we are treated as a PRC resident enterprise. There is no guidance from the PRC government to indicate
whether or not any tax treaties between the PRC and other countries would apply in circumstances where a non-PRC company was deemed to
be a PRC tax resident, and thus there is no basis for expecting how tax treaty between the PRC and other countries may impact non-resident
enterprises.
123
Hong Kong Taxation
Entities incorporated in Hong Kong are subject
to profits tax in Hong Kong at the rate of 16.5%.
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 us 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. No stamp
duty is payable in the Cayman Islands on the issue of shares by, or any transfers of shares of, Cayman Islands companies (except those
which hold interests in land in the Cayman Islands). There are no exchange control regulations or currency restrictions in the Cayman
Islands.
Payments of dividends and capital in respect of
our Class A Ordinary Shares or Class B Ordinary Shares will not be subject to taxation in the Cayman Islands and no withholding will be
required on the payment of a dividend or capital to any holder of our Class A Ordinary Shares or Class B Ordinary Shares, as the case
may be, nor will gains derived from the disposal of our Class A Ordinary Shares or Class B Ordinary Shares be subject to Cayman Islands
income or corporation tax.
United States Federal Income Taxation
The following does not address the tax consequences
to any particular investor or to persons in special tax situations such as:
●
banks;
●
financial institutions;
●
insurance companies;
●
regulated investment companies;
●
real estate investment trusts;
●
broker-dealers;
●
persons that elect to mark their securities to market;
●
U.S. expatriates or former long-term residents of the U.S.;
●
governments or agencies or instrumentalities thereof;
●
tax-exempt entities;
124
●
persons liable for alternative minimum tax;
●
persons holding our Class A Ordinary Shares as part of a straddle, hedging, conversion or integrated transaction;
●
persons that actually or constructively own 10% or more of our voting power or value (including by reason of owning our Class A Ordinary Shares);
●
persons who acquired our Class A Ordinary Shares pursuant to the exercise of any employee share option or otherwise as compensation;
●
persons holding our Class A Ordinary Shares through partnerships or other pass-through entities;
●
beneficiaries of a Trust holding our Class A Ordinary Shares; or
●
persons holding our Class A Ordinary Shares through a trust.
The discussion set forth below is addressed only
to U.S. Holders that purchase Class A Ordinary Shares. Prospective purchasers are urged to consult their own tax advisors about the application
of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences
to them of the purchase, ownership and disposition of our Class A Ordinary Shares.
Material Tax Consequences Applicable to
U.S. Holders of Our Class A Ordinary Shares
The following sets forth the material U.S. federal
income tax consequences related to the ownership and disposition of our Class A Ordinary Shares. It is directed to U.S. Holders (as defined
below) of our Class A Ordinary Shares and 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 description does not deal with all possible tax consequences relating to ownership and
disposition of our Class A Ordinary Shares or U.S. tax laws, other than the U.S. federal income tax laws, such as the tax consequences
under non-U.S. tax laws, state, local and other tax laws.
The following brief description applies only to
U.S. Holders (defined below) that hold Class A Ordinary Shares as capital assets and that have the U.S. dollar as their functional currency.
This brief description is based on the federal income tax laws of the United States in effect as of the date of this annual report and
on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report, as well as judicial and administrative
interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply
retroactively and could affect the tax consequences described below.
The brief description below of the U.S. federal
income tax consequences to "U.S. Holders" will apply to you if you are a beneficial owner of Class A Ordinary Shares and you
are, for U.S. federal income tax purposes,
●
an individual who is a citizen or resident of the United States;
●
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;
●
an estate whose income is subject to U.S. federal income taxation regardless of its source; or
●
a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
125
If a partnership (or other entities treated as
a partnership for United States federal income tax purposes) is a beneficial owner of our Class A Ordinary Shares, the tax treatment of
a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners
of a partnership holding our Class A Ordinary Shares are urged to consult their tax advisors regarding an investment in our Class A Ordinary
Shares.
Taxation of Dividends and Other Distributions
on our Class A Ordinary Shares
Subject to the PFIC (defined below) rules discussed
below, the gross amount of distributions made by us to you with respect to the Class A Ordinary Shares (including the amount of any taxes
withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the
extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax
principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction allowed to
corporations in respect of dividends received from other U.S. corporations. During the fiscal year ended December 31, 2022, we did not
declare any dividends.
With respect to non-corporate U.S. Holders, including
individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that
(1) the Class A Ordinary Shares are readily tradable on an established securities market in the United States, or we are eligible for
the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2)
we are not a PFIC (defined below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain
holding period requirements are met. Because there is no income tax treaty between the United States and the Cayman Islands, clause (1)
above can be satisfied only if the Class A Ordinary Shares are readily tradable on an established securities market in the United States.
Under U.S. Internal Revenue Service authority, Class A Ordinary Shares are considered for purpose of clause (1) above to be readily tradable
on an established securities market in the United States if they are listed on certain exchanges, which presently include the NYSE and
the Nasdaq Stock Market. On March 31, 2023, our Class A Ordinary Shares were listed and started to be traded on the Nasdaq Capital Market.
You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our Class A
Ordinary Shares, including the effects of any change in law after the date of this annual report.
Dividends will constitute foreign source income
for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of
the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the
dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign
taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed
by us with respect to our Class A Ordinary Shares will constitute "passive category income" but could, in the case of certain
U.S. Holders, constitute "general category income."
To the extent that the amount of the distribution
exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated
first as a tax-free return of your tax basis in your Class A Ordinary Shares, and to the extent the amount of the distribution exceeds
your tax basis, the excess will be taxed as capital gain. We did not calculate our earnings and profits under U.S. federal income tax
principles and did not declare or pay any dividends for the fiscal year ended December 31, 2022. Therefore, a U.S. Holder should expect
that a distribution, if any will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return
of capital or as capital gain under the rules described above.
126
Taxation of Dispositions of Class A Ordinary
Shares
Subject to the passive foreign investment company
rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to
the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the Class A Ordinary
Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who
has held the Class A Ordinary Shares for more than one year, you will generally be eligible for reduced tax rates. The deductibility
of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source
income or loss for foreign tax credit limitation purposes which will generally limit the availability of foreign tax credits.
Passive Foreign Investment Company ("PFIC")
Consequences
A non-U.S. corporation is considered a PFIC, as
defined in Section 1297(a) of the US Internal Revenue Code, for any taxable year if either:
●
at least 75% of its gross income for such taxable year is passive income; or
●
at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the "asset test").
Passive income generally includes dividends, interest,
rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition
of passive assets. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income
of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In determining the value and composition
of our assets for purposes of the PFIC asset test, (1) the cash we raise in this offering will generally be considered to be held for
the production of passive income and (2) the value of our assets must be determined based on the market value of our Class A Ordinary
Shares from time to time, which could cause the value of our non-passive assets to be less than 50% of the value of all of our assets
(including the cash raised in this offering) on any particular quarterly testing date for purposes of the asset test.
Based on our operations and the composition of our assets, we have
determined that we are not a PFIC under the current PFIC rules for the fiscal year ended December 31, 2022. We must make a separate determination
each year as to whether we are a PFIC, however, and there can be no assurance with respect to our status as a PFIC for our current taxable
year or any future taxable year. Depending on the amount of cash we raised in our offering, together with any other assets held for the
production of passive income, it is possible that, for any subsequent taxable year, more than 50% of our assets may be assets held for
the production of passive income. We will make the determination following the end of any particular tax year. Although the law in this
regard is unclear, we are treating the VIE as being owned by us for United States federal income tax purposes, not only because we control
their management decisions, but also because we are entitled to the economic benefits associated with the VIE, and as a result, we are
treating the VIE as our wholly owned subsidiary for U.S. federal income tax purposes. If we are not treated as owning the VIE for United
States federal income tax purposes, we would likely be treated as a PFIC. In addition, because the value of our assets for purposes of
the asset test will generally be determined based on the market price of our Class A Ordinary Shares and because cash is generally considered
to be an asset held for the production of passive income, our PFIC status will depend in large part on the market price of our Class A
Ordinary Shares and the amount of cash we raise in this offering. Accordingly, fluctuations in the market price of the Class A Ordinary
Shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and
the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. We are
under no obligation to take steps to reduce the risk of our being classified as a PFIC, and as stated above, the determination of the
value of our assets will depend upon material facts (including the market price of our Class A Ordinary Shares from time to time and the
amount of cash we raise in this offering) that may not be within our control. If we are a PFIC for any year during which you hold Class
A Ordinary Shares, we will continue to be treated as a PFIC for all succeeding years during which you hold Class A Ordinary Shares. If
we cease to be a PFIC and you did not previously make a timely "mark-to-market" election as described below, however, you
may avoid some of the adverse effects of the PFIC regime by making a "purging election" (as described below) with respect
to the Class A Ordinary Shares.
127
If we are a PFIC for your taxable year(s) during
which you hold Class A Ordinary Shares, you will be subject to special tax rules with respect to any "excess distribution"
that you receive and any gain you realize from a sale or other disposition (including a pledge) of the Class A Ordinary Shares, unless
you make a "mark-to-market" election as discussed below. Distributions you receive in a taxable year that are greater than
125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for
the Class A Ordinary Shares will be treated as an excess distribution. Under these special tax rules:
●
the excess distribution or gain will be allocated ratably over your holding period for the Class A Ordinary Shares;
●
the amount allocated to your current taxable year, and any amount allocated to any of your taxable year(s) prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and
●
the amount allocated to each of your other taxable year(s) will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.
The tax liability for amounts allocated to years
prior to the year of disposition or "excess distribution" cannot be offset by any net operating losses for such years, and
gains (but not losses) realized on the sale of the Class A Ordinary Shares cannot be treated as capital, even if you hold the Class A
Ordinary Shares as capital assets.
A U.S. Holder of "marketable stock"
(as defined below) in a PFIC may make a mark-to-market election under Section 1296 of the US Internal Revenue Code for such stock to elect
out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed to
hold) Class A Ordinary Shares and for which we are determined to be a PFIC, you will include in your income each year an amount equal
to the excess, if any, of the fair market value of the Class A Ordinary Shares as of the close of such taxable year over your adjusted
basis in such Class A Ordinary Shares, which excess will be treated as ordinary income and not capital gain. You are allowed an ordinary
loss for the excess, if any, of the adjusted basis of the Class A Ordinary Shares over their fair market value as of the close of the
taxable year. Such ordinary loss, however, is allowable only to the extent of any net mark-to-market gains on the Class A Ordinary Shares
included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the
actual sale or other disposition of the Class A Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies
to any loss realized on the actual sale or disposition of the Class A Ordinary Shares, to the extent that the amount of such loss does
not exceed the net mark-to-market gains previously included for such Class A Ordinary Shares. Your basis in the Class A Ordinary Shares
will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to
distributions by corporations which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate
for qualified dividend income discussed above under "—Taxation of Dividends and Other Distributions on our Class A Ordinary
Shares" generally would not apply.
The mark-to-market election is available only
for "marketable stock," which is stock that is traded in other than de minimis quantities on at least 15 days during each
calendar quarter ("regularly traded") on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations),
including the Nasdaq Capital Market. If the Class A Ordinary Shares are regularly traded on Nasdaq and if you are a holder of Class A
Ordinary Shares, the mark-to-market election would be available to you were we to be or become a PFIC.
128
Alternatively, a U.S. Holder of stock in a PFIC
may make a "qualified electing fund" election under Section 1295(b) of the US Internal Revenue Code with respect to such PFIC
to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a
PFIC will generally include in gross income for a taxable year such holder's pro rata share of the corporation's earnings
and profits for the taxable year. The qualified electing fund election, however, is available only if such PFIC provides such U.S. Holder
with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently
intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold Class A Ordinary
Shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 in each such year
and provide certain annual information regarding such Class A Ordinary Shares, including regarding distributions received on the Class
A Ordinary Shares and any gain realized on the disposition of the Class A Ordinary Shares.
If you do not make a timely "mark-to-market"
election (as described above), and if we were a PFIC at any time during the period you hold our Class A Ordinary Shares, then such Class
A Ordinary Shares will continue to be treated as stock of a PFIC with respect to you even if we cease to be a PFIC in a future year, unless
you make a "purging election" for the year we cease to be a PFIC. A "purging election" creates a deemed sale of
such Class A Ordinary Shares at their fair market value on the last day of the last year in which we are treated as a PFIC. The gain recognized
by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described
above. As a result of the purging election, you will have a new basis (equal to the fair market value of the Class A Ordinary Shares on
the last day of the last year in which we are treated as a PFIC) and holding period (which new holding period will begin the day after
such last day) in your Class A Ordinary Shares for tax purposes.
IRC Section 1014(a) provides for a step-up in basis to the fair market
value for our Class A Ordinary Shares when inherited from a decedent that was previously a holder of our Class A Ordinary Shares. However,
if we are determined to be a PFIC and a decedent that was a U.S. Holder did not make either a timely qualified electing fund election
for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) our Class A Ordinary Shares, or a mark-to-market
election and ownership of those Class A Ordinary Shares are inherited, a special provision in IRC Section 1291 provides that the new U.S.
Holder's basis should be reduced by an amount equal to the Section 1014 basis minus the decedent's adjusted basis just before
death. As such if we are determined to be a PFIC at any time prior to a decedent's passing, the PFIC rules will cause any new U.S.
Holder that inherits our Class A Ordinary Shares from a U.S. Holder to not get a step-up in basis under Section 1014 and instead will
receive a carryover basis in those Class A Ordinary Shares.
You are urged to consult your tax advisors regarding
the application of the PFIC rules to your investment in our Class A Ordinary Shares and the elections discussed above.
Information Reporting and Backup Withholding
Dividend payments with respect to our Class A
Ordinary Shares and proceeds from the sale, exchange or redemption of our Class A Ordinary Shares may be subject to information reporting
to the U.S. Internal Revenue Service and possible U.S. backup withholding under Section 3406 of the US Internal Revenue Code with at a
current flat rate of 24%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification
number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding.
U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service
Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup
withholding rules.
129
Backup withholding is not an additional tax. Amounts
withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service
and furnishing any required information. We do not intend to withhold taxes for individual shareholders. Transactions effected through
certain brokers or other intermediaries, however, may be subject to withholding taxes (including backup withholding), and such brokers
or intermediaries may be required by law to withhold such taxes.
Under the Hiring Incentives to Restore Employment
Act of 2010, certain U.S. Holders are required to report information relating to our Class A Ordinary Shares, subject to certain exceptions
(including an exception for Class A Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete
Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they
hold Class A Ordinary Shares. Failure to report such information could result in substantial penalties. You should consult your own tax
advisor regarding your obligation to file a Form 8938.
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 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 within four months after the end of each fiscal year. The SEC maintains
a website at
http://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 of the
Exchange Act prescribing, among other things, the furnishing and content of proxy statements to shareholders, and our executive officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act.
I.
Subsidiary Information
For a listing of our subsidiaries and the VIEs,
see "Item 3. Key Information—Our Corporate Structure—Corporate Structure."
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash. As of December 31, 2022 and 2021, approximately $23.4 million and $18.9 million
were deposited with financial institutions located in the PRC, respectively, where there is a RMB 500,000 deposit insurance limit for
a legal entity's aggregated balance at each bank. While management believes that these financial institutions are of high credit quality,
it also continually monitors their credit worthiness.
130
The Company is also exposed to risk from its accounts
receivable and other receivables. These assets are subjected to credit evaluations. An allowance has been made for estimated unrecoverable
amounts which have been determined by reference to past default experience and the current economic environment.
Concentration of customers and suppliers
Substantially all revenue was derived from customers
located in China. There are no customers from whom revenue individually represent greater than 10% of our total revenue in any of the
periods presented.
For the year ended December
31, 2022, Fujian Jinwang Yuntong Logistics Technology Co., Ltd. contributed approximately 23.5% of total cost of revenue of the Company.
For the year ended December 31, 2021, Anhui Luge Transportation Co., Ltd. contributed approximately 27.8% of total cost of revenue of
the Company. For the year ended December 31, 2020, Hubei Luge Logistics Co., Ltd. and Anhui Luge Transportation Co., Ltd. contributed
approximately 19.8% and 12.4% of total cost of revenue of the Company, respectively.
As of December 31, 2022
and 2021, no customers accounted more than 10% of the account receivables.
As of December 31, 2022, Fujian Jinwang Yuntong
Logistics Technology Co., Ltd., contributed approximately 13.4% of total account payable balances. As of December 31, 2021, Anhui Luge
Transportation Co., Ltd. contributed approximately 14.4% of total account payable balances.
Interest Rate Risk
The Company's exposure to changes in interest
rates relates primarily to the Company's outstanding debt. While the Company is exposed to interest rate fluctuations, the Company's
interest income and expense are most sensitive to fluctuations in China interest rates. Changes in rates affect the interest earned on
the Company's cash as costs associated with interest paid on the Company's bank loans. We have not been exposed to material
risks due to changes in interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure.
Foreign Currency Exchange Rate Risk
Our revenue is denominated in Renminbi. And our
costs are denominated in Renminbi as well. Our management considers that the business is not exposed to any significant foreign exchange
risk and we have not used any derivative financial instruments to hedge exposure to such risk.
In July 2005, the PRC government changed its decades-old
policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over
the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the
U.S. dollar remained within a narrow band. Since June 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly
and unpredictably. The RMB depreciated by 9.24% in the year ended December 31, 2022. The appreciation of the Renminbi against the U.S.
dollar was approximately 2.29% and 6.47% in fiscal year 2021 and 2020, respectively. It is difficult to predict how market forces or PRC
or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
131
To the extent that we need to convert U.S. dollars
into RMB for our operations, appreciation of RMB against the U.S. dollar would reduce the RMB amount we receive from the conversion. Conversely,
if we decide to convert RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares, servicing our outstanding
debt, or for other business purposes, appreciation of the U.S. dollar against the RMB would reduce the U.S. dollar amounts available to
us.
As of December 31, 2022, we had RMB-denominated
cash and restricted cash of approximately $23.3 million. A 10% depreciation of RMB against U.S. dollar based on the foreign exchange rate
on December 31, 2022 would result in a decrease of approximately $2.3 million in cash and restricted cash. A 10% appreciation of RMB against
U.S. dollar based on the foreign exchange rate on December 31, 2022 would result in an increase of approximately $2.3 million in cash
and restricted cash. As of December 31, 2021, we had RMB-denominated cash and restricted cash of approximately $18.9 million. A 10% depreciation
of RMB against U.S. dollar based on the foreign exchange rate on December 31, 2021 would result in a decrease of approximately $1.9 million
in cash and restricted cash. A 10% appreciation of RMB against U.S. dollar based on the foreign exchange rate on December 31, 2021 would
result in an increase of approximately $1.9 million in cash and restricted cash.
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
Not applicable.
132
Part II
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OF PROCEEDS
See "Item 10. Additional Information"
for a description of the rights of securities holders, which remain unchanged.
Use of Proceeds
The following "Use of Proceeds" information
relates to the registration statement on Form F-1, as amended (File Number 333-267367) for our initial public offering, which was
declared effective by the SEC on March 30, 2023. In April 2023, we completed our initial public offering in which we issued and sold
an aggregate of 2,400,000 Class A Ordinary Shares, at a price of $4.00 per share for $9.60 million. Univest Securities, LLC was the representative
of the underwriters of our initial public offering.
We incurred approximately $2.0 million in expenses
in connection with our initial public offering, which included approximately $672,000 in underwriting discounts, approximately $259,600
in expenses paid to or for underwriters, and approximately $1.1 million in other expenses. None of the transaction expenses included payments
to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates.
None of the net proceeds we received from the initial public offering were paid, directly or indirectly, to any of our directors or officers
or their associates, persons owning 10% or more of our equity securities or our affiliates.
The net proceeds raised from the initial public offering were approximately
$8.5 million after deducting underwriting discounts and the offering expenses payable by us.
Item 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation
of our management, including our chief executive officer and chief financial officer, we carried out an evaluation of the effectiveness
of our disclosure controls and procedures, which is defined in Rules 13a-15(e) of the Exchange Act, as of December 31, 2022.
Based on that evaluation, our management has concluded that, due to
the material weaknesses described below, as of December 31, 2022, our disclosure controls and procedures were not effective. Notwithstanding
management's assessment that our internal control over financial reporting was ineffective as of December 31, 2022 due to the material
weakness described below, we believe that the consolidated financial statements included in this annual report on Form 20-F correctly
present our financial position, results of operations and cash flows for the fiscal years covered thereby in all material respects.
133
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 or an attestation
report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. However,
in the course of auditing our consolidated financial statements as of December 31, 2022, we and our independent registered public accounting
firm identified two material weaknesses
in our internal control
over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is
a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected
on a timely basis.
As
of December 31, 2022, we identified the material weaknesses
related
to (1)
lack of sufficient in-house personnel in our accounting department
with sufficient knowledge of the U.S. GAAP and SEC reporting rules,
and
(2) lack
of sufficient controls designed and implemented in IT environment
and IT general control activities, which mainly associated with areas of segregation of duties, program change and cybersecurity.
Our
management is currently in the process of evaluating the steps necessary to remediate the ineffectiveness, such as (i) hiring more qualified
accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function
and to set up a financial and system control framework; (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting
training programs for our accounting and financial reporting personnel; and (iii) Strengthen
ing
the supervision and controls on the IT functions, including the enhancement of logical security and job management.
Attestation Report of the Registered Public
Accounting Firm
This annual report on Form 20-F does not include
an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's
report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC where domestic and foreign
registrants that are non-accelerated filers, which we are, and "emerging growth companies," which we also are, are not required
to provide the auditor attestation report.
Changes in Internal Control over Financial
Reporting
Other than as described above, there were no changes in our internal
controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16. RESERVED
Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Mr. John F. Levy qualifies as an "audit
committee financial expert" as defined in Item 16A of Form 20-F. Mr. John F. Levy satisfies the "independence"
requirements of Section 5605(a)(2) of the NASDAQ Listing Rules as well as the independence requirements of Rule 10A-3
under the Exchange Act.
I
tem 16B. CODE OF ETHICS
Our board of directors has adopted a code of business
conduct and ethics, which is applicable to all of our directors, officers, and employees. Our code of business conduct and ethics is publicly
available on our website.
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified
below in connection with certain professional services rendered and billed by Marcum Asia CPAs LLP, our independent registered public
accounting firm, since November 11, 2022, and Friedman LLP, our independent registered public accounting firm before November 11, 2022,
for the periods indicated.
For the Years Ended December 31,
2022
2021
2020
Audit fees (1)
$
315,000
$
380,000
$
480,000
Audit-Related fees
50,000
46,000
-
Total
$
365,000
$
426,000
$
480,000
(1)
Audit fees include the aggregate fees billed for each of the fiscal years for professional services rendered by our independent registered public accounting firm for the audit of our annual financial statements or for the audits of our financial statements and review of the interim financial statements in connection with our initial public offering in 2023.
The policy of our audit committee is to pre-approve
all audit and non-audit services provided by our independent registered public accounting firm, including audit services, audit-related
services, tax services, and other services as described above.
134
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES
Not applicable.
Item 16E. PURCHASES OF EQUITY SECURITIES BY
THE ISSUER AND AFFILIATED PURCHASERS
None.
Item 16F. CHANGE IN REGISTRANT'S CERTIFYING
ACCOUNTANT
There has been no change in independent accountants
for our Company during the two most recent fiscal years or any subsequent interim period except as previously reported in our registration
statement on Form F-1(File No. 333- 267367), as amended, initially filed with the SEC on September 9, 2022. There have been no disagreements
of the type required to be disclosed by Item 16F(b).
Item 16G. CORPORATE GOVERNANCE
As a Cayman Islands company listed on the Nasdaq
Capital Market, we are subject to the Nasdaq corporate governance listing standards. Nasdaq rules, however, 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.
Nasdaq Listing Rule 5635 generally provides that
shareholder approval is required of U.S. domestic companies listed on Nasdaq prior to issuance (or potential issuance) of securities (i)
equaling 20% or more of the company's common stock or voting power for less than the greater of market or book value (ii) resulting
in a change of control of the company; and (iii) which is being issued pursuant to a stock option or purchase plan to be established or
materially amended or other equity compensation arrangement made or materially amended. Notwithstanding this general requirement, Nasdaq
Listing Rule 5615(a)(3)(A) permits foreign private issuers to follow their home country practice rather than these shareholder approval
requirements. The Cayman Islands do not require shareholder approval prior to any of the foregoing types of issuances. We, therefore,
are not required to obtain such shareholder approval prior to entering into a transaction with the potential to issue securities as described
above. We intend to comply with the requirements of Nasdaq listing rules in determining whether shareholder approval is required on such
matters. We may, however, consider following home country practice in lieu of the requirements under Nasdaq listing rules with respect
to certain corporate governance standards which may afford less protection to investors.
Nasdaq Listing Rule 5605(b)(1) requires listed
companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted
to, and we may follow home country practice in lieu of the above requirements. The corporate governance practice in our home country,
the Cayman Islands, does not require a majority of our board to consist of independent directors. Currently, a majority of our board members
are independent. However, if we change our board composition such that independent directors do not constitute a majority of our board
of directors, our shareholders may be afforded less protection than they would otherwise enjoy under Nasdaq's corporate governance
requirements applicable to U.S. domestic issuers. See "Item 3. Key Information—D. Risk Factors—Risks Relating to Our
Class A Ordinary Shares and the Trading Market—Because we are a foreign private issuer and are exempt from certain Nasdaq corporate
governance standards applicable to U.S. issuers, you will have less protection than you would have if we were a domestic issuer."
Item 16H. MINE SAFETY DISCLOSURE
Not applicable.
Item 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS.
Not applicable.
135
Part III
Item 17. FINANCIAL STATEMENTS
We have elected to provide financial statements
pursuant to Item 18.
Item 18. FINANCIAL STATEMENTS
The consolidated financial statements of Shengfeng Cayman, and its
operating entities are included at the end of this annual report.
Item 19. EXHIBITS
EXHIBIT INDEX
Exhibit No.
Description
1.1
Amended and Restated Memorandum of Association (incorporated by reference to Exhibit 3.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission September 9, 2022)
2.1
Specimen Certificate for Class A Ordinary Shares (incorporated by reference to Exhibit 4.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
2.2
Form of Underwriter's Warrants (incorporated by reference to Exhibit 1.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
2.3*
Description of Securities
4.1
Form of Employment Agreement by and between executive officers and the Registrant (incorporated by reference to Exhibit 10.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.2
English Translation of the Technical Consultation and Service Agreement between Tianyu and Shengfeng Logistics dated January 7, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.3
English Translation of the form of Powers of Attorney granted by shareholders of Shengfeng Logistics, as currently in effect, and a schedule of all executed Powers of Attorney adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.4
English Translation of the form of Equity Pledge Agreement by and among Tianyu, Shengfeng Logistics, and shareholders of Shengfeng Logistics dated January 7, 2021, as currently in effect, and a schedule of all executed Equity Pledge Agreement adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.5
English Translation of the form of Call Option Agreement by and among Tianyu, Shengfeng Logistics, and shareholders of Shengfeng Logistics dated January 7, 2021, as currently in effect, and a schedule of all executed Call Option Agreement adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.6
English Translation of the form of Spousal Consent granted by the spouse of each individual shareholder of Shengfeng Logistics, as currently in effect, and a schedule of all executed Spousal Consents adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.7
English Translation of the form of Voting Rights Proxy Agreement by and among Tianyu, Shengfeng Logistics, and shareholders of Shengfeng Logistics dated January 7, 2021, as currently in effect, and a schedule of all executed Voting Rights Proxy Agreement adopting the same form (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.8
English Translation of the form of Freight Transportation Agreement between the Registrant and its Clients (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.9
English Translation of the form of Warehouse Service Contract between the Registrant and its Cloud Storage Service Clients (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.10
English Translation of the form of Freight Transportation Contract between the Registrant and its Transportation Providers (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
136
4.11
English Translation of the form of House (Warehouse) / Site Lease Contract (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.12
English Translation of the Road Freight Transportation Cooperation Agreement by and between Shengfeng Logistics and Hubei Luge Logistics Co., Ltd. dated June 30, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.13
English Translation of the Road Freight Transportation Platform Cooperation Agreement by and between Shengfeng Logistics and Hefei Weitian Yuntong Information Technology Co., Ltd. dated January 1, 2022
4.14
English Translation of the Short-term Loan Facility Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated May 31, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.15
English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated June 27, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.16
English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated July 9, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.17
English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated August 5 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.18
English Translation of the Maximum Mortgage Agreement by and between Suzhou Shengfeng Logistics Co., Ltd. and Bank of China Fuzhou Jin'an Branch dated May 31, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.19
English Translation of the Maximum Guarantee Agreement by and between Yongxu Liu and Bank of China Fuzhou Jin'an Branch dated May 31, 2019 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.20
English Translation of the Short-term Loan Facility Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated June 22, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.21
English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated July 3, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.22
English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated July 15, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.23
English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated August 5, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.24
English Translation of the Maximum Mortgage Agreement by and between Suzhou Shengfeng Logistics Co., Ltd. and Bank of China Fuzhou Jin'an Branch dated June 22, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
137
4.24
English Translation of the Maximum Guarantee Agreement by and between Yongxu Liu and Bank of China Fuzhou Jin'an Branch dated June 22, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.25
English Translation of the Lease Contract of Shengfeng Building by and between Shengfeng Logistics and Fuzhou Tianyu Shengfeng Industrial Co., Ltd. dated October 16, 2020 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.26
English Translation of the Short-term Loan Facility Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated June 28, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.27
English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated July 3, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.28
English Translation of the Working Capital Loan Agreement by and between Shengfeng Logistics and Bank of China Fuzhou Jin'an Branch dated July 16, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.29
English Translation of the Maximum Mortgage Agreement by and between Suzhou Shengfeng Logistics Co., Ltd. and Bank of China Fuzhou Jin'an Branch dated July 5, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
4.30
English Translation of the Maximum Guarantee Agreement by and between Yongxu Liu and Bank of China Fuzhou Jin'an Branch dated July 3, 2021 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
8.1
List of subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
11.1
Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 of our Registration Statement on Form F-1 (File No. 333-267367) initially filed with the Securities and Exchange Commission on September 9, 2022)
12.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1**
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2**
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*
The following financial statements from the Company's Annual Report on Form 20-F for the year ended December 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) Consolidated Statements of Changes in Shareholders' Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed with this annual report on Form 20-F
**
Furnished with this annual report on Form 20-F
138
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.
Shengfeng Development Limited
By:
/s/
Yongxu Liu
Yongxu Liu
Chief Executive Officer, President, Director, and Chairman
(Principal Executive Officer)
Date: May 1, 2023
139
SHENGFENG DEVELOPMENT LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
CONTENTS
PAGE(S)
CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PCAOB ID
5395
)
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PCAOB ID
711
)
F-3
AUDITED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021
F-4
AUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2022, 2021
AND 2020
F-5
AUDITED CONSOLIDAED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
F-6
AUDITED CONSOLIDATED STATEMETNS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022, 2021 AND 2020
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-8 – F-47
F-
1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Shareholders of
Shengfeng Development Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance
sheet of Shengfeng Development Limited (the "Company") as of December 31, 2022, the related consolidated statement of income
and comprehensive loss, shareholder' equity and cash flows for the year in the period ended December 31, 2022, and the related notes
(collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations
and its cash flows for the year in the period ended December 31, 2022, in conformity with accounting principles generally accepted in
the United States of America.
Basis for Opinion
These consolidated 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
audit. 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 audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit 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 audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.
/s/
Marcum Asia CPAs LLP
We have served as the Company's auditor since
2020 (such date takes into account the acquisition of certain assets of Friedman LLP by Marcum Asia CPAs LLP effective September 1, 2022).
New York, New York
May 1, 2023
NEW YORK OFFICE • 7 Penn Plaza • Suite 830
• New York, New York • 10001
Phone 646.442.4845 • Fax 646.349.5200 • www.marcumasia.com
F-
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Shareholders of
Shengfeng Development Limited
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated
balance sheets of Shengfeng Development Limited (the "Company") as of December 31, 2021 and 2020, and the related consolidated
statements of income and comprehensive income, changes in shareholders' equity and cash flows for each of the years in the two-year
period ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements").
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended
December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated 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 and the auditing standards generally accepted in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 consolidated 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
consolidated 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 consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.
/s/
Friedman LLP
We have served as the Company's auditor
since 2020 through 2022
New York, New York
July 25, 2022, except for Notes 1, 11, 17 and
18 which are dated September 9, 2022; Notes 5 and 6 which are dated October 31, 2022.
F-
3
SHENGFENG
DEVELOPMENT LIMITED
CONSOLIDATED
BALANCE SHEETS
(All amounts in thousands
of USD, except for share and per share data, unless otherwise noted)
December 31,
December 31,
2022
2021
Assets
Current Assets:
Cash
$
21,285
$
18,643
Restricted cash
2,083
275
Notes receivable
4,885
4,175
Accounts receivable, net
89,110
80,621
Prepayments and other current assets, net
18,292
17,934
Due from related parties
42
50
Total Current Assets
135,697
121,698
Property and equipment, net
40,265
47,281
Intangible assets, net
6,711
7,527
Operating lease right-of-use assets, net
27,880
29,910
Long-term investments
2,040
2,142
Deposit for investment
14,358
15,685
Deferred tax assets
3,587
5,224
Deferred issuance costs
81
-
Other non-current assets
14,640
14,742
Total Assets
$
245,259
$
244,209
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable
$
2,046
$
-
Accounts payable
57,048
54,091
Short-term bank loans
47,655
45,956
Due to related parties
2,414
1,877
Salary and welfare payables
3,241
4,559
Accrued expenses and other current liabilities
6,551
7,854
Operating lease liabilities, current
9,634
8,126
Tax payables
2,207
2,889
Total Current Liabilities
130,796
125,352
Operating lease liabilities, non-current
17,507
21,485
Other non-current liabilities
1,870
1,474
Total Liabilities
150,173
148,311
Commitments and Contingencies
Shareholders' Equity
Class A Ordinary share, $
0.0001
par value,
400,000,000
shares authorized;
38,120,000
shares issued and outstanding as of December 31, 2022 and 2021*
4
4
Class B Ordinary share, $
0.0001
par value,
100,000,000
shares authorized;
41,880,000
shares issued and outstanding as of December 31, 2022 and 2021*
4
4
Additional paid-in capital
75,575
75,575
Statutory reserves
3,974
3,430
Retained earnings
17,275
10,032
Accumulated other comprehensive income (loss)
(
5,609
)
2,548
Total Shengfeng Development Limited's Shareholders' Equity
91,223
91,593
Non-controlling Interests
3,863
4,305
Total Shareholders' Equity
95,086
95,898
Total Liabilities and Shareholders' Equity
$
245,259
$
244,209
*
Shares and per share data are
presented on a retroactive basis to reflect the reorganization.
The accompanying notes are an integral part of
these consolidated financial statements.
F-
4
SHENGFENG DEVELOPMENT
LIMITED
CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(All amounts in thousands
of USD, except for share and per share data, unless otherwise noted)
Years ended December 31,
2022
2021
2020
Revenues
Transportation
$
346,039
$
327,848
$
273,685
Warehouse storage and storage management service
20,322
16,885
12,364
Others
3,964
1,966
1,415
Total revenues
370,325
346,699
287,464
Cost of revenues
(
328,793
)
(
305,354
)
(
251,489
)
Gross profit
41,532
41,345
35,975
Operating expenses
Selling and marketing
(
7,427
)
(
7,720
)
(
6,139
)
General and administrative
(
24,259
)
(
25,038
)
(
23,632
)
Total operating expenses
(
31,686
)
(
32,758
)
(
29,771
)
Income from operations
9,846
8,587
6,204
Other income (expense)
Interest income
1,274
1,330
1,329
Interest expense
(
2,227
)
(
2,315
)
(
1,990
)
Other income, net
532
559
2,070
Income before income taxes
9,425
8,161
7,613
Provision for income taxes
(
1,599
)
(
1,517
)
(
1,570
)
Net income
7,826
6,644
6,043
Less: Income (loss) attributable to non-controlling interests
39
(
254
)
(
48
)
Net income attributable to Shengfeng Development Limited's shareholders
$
7,787
$
6,898
$
6,091
Comprehensive income (loss)
Net income
7,826
6,644
6,043
Foreign currency translation adjustment
(
8,384
)
2,085
5,395
Total comprehensive income (loss)
(
558
)
8,729
11,438
Less: comprehensive loss attributable to non-controlling interests
(
188
)
(
241
)
(
15
)
Total comprehensive income (loss) attributable to Shengfeng Development Limited
$
(
370
)
$
8,970
$
11,453
Weighted average shares outstanding used in calculating basic and diluted loss per share:
Class A and Class B ordinary shares - Basic and diluted*
80,000,000
80,000,000
80,000,000
Earnings per share
Class A and Class B ordinary shares - Basic and diluted*
$
0.10
$
0.09
$
0.08
*
Shares and per share data are
presented on a retroactive basis to reflect the reorganization.
The accompanying notes are an integral part of
these consolidated financial statements.
F-
5
SHENGFENG DEVELOPMENT LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
(All amounts in thousands
of USD, except for share and per share data, unless otherwise noted)
Class
    A Ordinary
Shares
($0.0001 par value)
Class
    B Ordinary
Shares
($0.0001 par value)
Additional
paid-in
Statutory
Accumulated
other
comprehensive
income
Accumulated
Retained
Non-
controlling
Total
shareholders'
Shares*
Amount
Shares*
Amount
capital
reserves
(loss)
earnings
interests
equity
Balance as of December
    31, 2019
38,120,000
$
4
41,880,000
$
4
$
75,575
$
2,855
$
(
4,886
)
$
(
2,384
)
$
1,539
$
72,707
Capital contribution
    from non-controlling shareholders
-
-
-
-
-
-
-
-
277
277
Net income
-
-
-
-
-
-
6,091
(
48
)
6,043
Statutory reserves
-
-
-
-
-
300
-
(
298
)
(
2
)
-
Dividend to non-controlling
    shareholders
-
-
-
-
-
-
-
-
(
43
)
(
43
)
Foreign
    currency translation
-
-
-
-
-
-
5,362
-
33
5,395
Balance as of December 31, 2020
38,120,000
$
4
41,880,000
$
4
$
75,575
$
3,155
$
476
$
3,409
$
1,756
$
84,379
Disposal of equity
    investment
-
-
-
-
-
-
-
-
(
628
)
(
628
)
Capital contribution
    from non-controlling shareholders
-
-
-
-
-
-
-
-
3,418
3,418
Net income
-
-
-
-
-
-
-
6,898
(
254
)
6,644
Statutory reserves
-
-
-
-
-
275
-
(
275
)
-
-
Foreign
    currency translation
-
-
-
-
-
2,072
-
13
2,085
Balance as of December 31, 2021
38,120,000
$
4
41,880,000
$
4
$
75,575
$
3,430
$
2,548
$
10,032
$
4,305
$
95,898
Net income
-
-
-
-
-
-
-
7,787
39
7,826
Currency translation
    adjustments
-
-
-
-
-
-
(
8,157
)
-
(
227
)
(
8,384
)
Dividend to non-controlling
    shareholders
-
-
-
-
-
-
-
-
(
254
)
(
254
)
Appropriations
    to statutory reserves
-
-
-
-
-
544
-
(
544
)
-
-
Balance as
    of December 31, 2022
38,120,000
$
4
41,880,000
$
4
$
75,575
$
3,974
$
(
5,609
)
$
17,275
$
3,863
$
95,086
*
Shares and per share data are
presented on a retroactive basis to reflect the reorganization.
The accompanying notes are an integral part of
these consolidated financial statements.
F-
6
SHENGFENG DEVELOPMENT LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands of USD, except
for share and per share data, unless otherwise noted)
Years Ended December 31,
2022
2021
2020
Cash flows from operating activities:
Net income
$
7,826
$
6,644
$
6,043
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment
6,955
5,925
4,728
Amortization of right-of-use assets and interest of lease liabilities
10,813
9,548
8,587
Amortization of intangible assets
526
542
493
Provision for doubtful accounts
1,184
447
572
Share of income in equity method investee
(
82
)
(
70
)
(
55
)
Loss on disposal of property and equipment
89
145
180
Loss from disposal of subsidiaries
-
247
-
Deferred income taxes
1,238
1,482
1,302
Changes in operating assets and liabilities:
Notes receivable
(
1,043
)
9,375
(
1,633
)
Accounts receivable
(
16,978
)
(
3,154
)
(
18,717
)
Inventories
-
777
(
808
)
Prepayments and other current assets
(
1,992
)
(
2,256
)
(
4,966
)
Other non-current assets
-
(
3,801
)
(
6,004
)
Notes payable
2,119
(
2,364
)
1,533
Accounts payable
7,897
2,467
13,979
Salary and welfare payable
(
965
)
419
1,257
Accrued expenses and other current liabilities
551
110
1,836
Operating lease liabilities
(
11,294
)
(
9,437
)
(
8,511
)
Tax payables
(
453
)
(
458
)
2,291
Other non-current liabilities
539
4
225
Net cash provided by operating activities
6,930
16,592
2,332
Cash flows from investing activities:
Purchase of intangible assets
(
340
)
(
284
)
(
19
)
Purchase of property and equipment
(
6,908
)
(
25,393
)
(
7,920
)
Proceeds from disposal of property and equipment
533
1,328
118
Proceeds from disposal of subsidiary
-
480
-
Net cash used in investing activities
(
6,715
)
(
23,869
)
(
7,821
)
Cash flows from financing activities:
Proceeds from short-term bank loans
61,269
62,645
62,306
Repayments of short-term bank loans
(
55,485
)
(
67,568
)
(
50,017
)
Due from related parties
600
30
226
Due to related parties
-
(
652
)
395
Capital contribution from non-controlling shareholders
-
3,418
277
Dividend to non-controlling shareholders
(
254
)
-
(
43
)
Payment of deferred issuance costs
(
81
)
-
-
Net cash provided by (used in) financing activities
6,049
(
2,127
)
13,144
Effects of exchange rate changes on cash and restricted cash
(
1,814
)
538
1,714
Net increase (decrease) in cash and restricted cash
4,450
(
8,866
)
9,369
Cash and restricted cash, beginning of year
18,918
27,784
18,415
Cash and restricted cash, end of year
$
23,368
$
18,918
$
27,784
Supplemental cash flow information:
Cash paid for income tax
$
187
$
247
$
268
Cash paid for interest
$
2,227
$
2,160
$
1,990
Non-cash transaction in investing and financing activities:
Liabilities incurred (settled) for purchase of property and equipment
$
(
1,214
)
$
2,599
$
1,969
Operating Lease right-of-use assets obtained in exchange for operating lease liabilities
$
9,674
$
12,247
$
7,526
Reconciliation to amount on consolidated balance sheets:
Cash
$
21,285
$
18,643
$
27,317
Restricted cash
2,083
275
467
Total cash and restricted cash
$
23,368
$
18,918
$
27,784
The accompanying notes are an integral part of
these consolidated financial statements.
F-
7
SHENGFENG DEVELOPMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands of USD, except for
share and per share data, unless otherwise noted)
1.
ORGANIZATION AND NATURE OF OPERATIONS
Shengfeng Development Limited ("Shengfeng"
or the "Company"), is a holding company incorporated under the laws of the Cayman Islands on July 16, 2020, as an exempted
company with limited liability. The Company has no substantive operations other than holding all of the outstanding share capital of Shengfeng
Holding Limited ("Shengfeng HK") established under the laws of Hong Kong on August 18, 2020.
Shengfeng HK is also a holding company holding
all of the outstanding equity of Fujian Tianyu Shengfeng Logistics Co., Ltd. ("Tianyu" or "Shengfeng WFOE" or
"WFOE"), which was established on December 16, 2020 under the laws of the People's Republic of China ("PRC"
or "China").
The Company, through its variable interest entity
("VIE"), Shengfeng Logistics Group Co., Ltd. ("Shengfeng VIE" or "VIE"), and its subsidiaries, operates
as a transportation and warehouse storage management services provider in the PRC. Shengfeng VIE was incorporated on December 7, 2001
under the laws of the PRC. Paid-in capital of Shengfeng VIE was approximately $
27.17
million (approximately RMB
189.6
million) as of December
31, 2022.
On December 18, 2020, the Company completed a
reorganization of entities under common control of its then existing shareholders, who collectively owned all of the equity interests
of the Company prior to the reorganization. The Company, and Shengfeng HK were established as the holding companies of Shengfeng WFOE.
Shengfeng WFOE is the primary beneficiary of Shengfeng VIE and its subsidiaries, and all of these entities included in the Company are
under common control which results in the consolidation of Shengfeng VIE and its subsidiaries which have been accounted for as a reorganization
of entities under common control at carrying value. The consolidated financial statements are prepared on the basis as if the reorganization
became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of the Company.
The accompanying consolidated financial statements reflect the activities
of the Company and each of the following entities, including its WFOE  and VIE:
Name of subsidiaries
Place of
incorporation
Date of
incorporation or acquisition
Percentage
of direct or
indirect
Principal activities
Shengfeng Holding Limited
("Shengfeng HK")
Hong Kong
August 18, 2020
100
%
Investment holding of Tianyu
Fujian Tianyu Shengfeng Logistics Co., Ltd. ("Tianyu")
Fujian, the PRC
December 16, 2020
100
%
Investment holding of Shengfeng VIE
Shengfeng Logistics Group Co., Ltd. ("Shengfeng VIE" or "
Shengfeng Logistics
")
Fujian, the PRC
December 7, 2001
100
%
Transportation and warehouse storage management service
Fuqing Shengfeng Logistics Co., Ltd.
Fujian, the PRC
April 15, 2011
100
%
Transportation and warehouse storage management service
Xiamen Shengfeng Logistics Co., Ltd.
Fujian, the PRC
December 22, 2011
100
%
Transportation and warehouse storage management service
Guangdong Shengfeng Logistics Co., Ltd.
Guangdong, the PRC
December 30, 2011
100
%
Transportation and warehouse storage management service
Hainan Shengfeng Supply Chain Management Co., Ltd.
Hainan, the PRC
August 18, 2020
100
%
Transportation and warehouse storage management service
Beijing Tianyushengfeng e-commerce Technology Co.,
    Ltd.
Beijing, the PRC
January 9, 2004
100
%
Transportation and warehouse storage management service
Beijing Shengfeng Supply Chain Management Co., Ltd.
Beijing, the PRC
April 13, 2016
100
%
Transportation and warehouse storage management service
Shengfeng Logistics (Guizhou) Co., Ltd.
Guizhou, the PRC
August 15, 2017
100
%
Transportation and warehouse storage management service
Shengfeng Logistics (Tianjin) Co., Ltd.
Tianjin, the PRC
March 8, 2016
100
%
Transportation and warehouse storage management service
Shengfeng Logistics (Shandong) Co., Ltd.
Shandong, the PRC
March 15, 2016
100
%
Transportation and warehouse storage management service
Shengfeng Logistics Hebei Co., Ltd.
Hebei, the PRC
February 17, 2016
100
%
Transportation and warehouse storage management service
Shengfeng Logistics (Henan) Co., Ltd.
Henan, the PRC
March 28, 2016
100
%
Transportation and warehouse storage management service
Shengfeng Logistics (Liaoning) Co., Ltd.
Liaoning, the PRC
March 2, 2016
100
%
Transportation and warehouse storage management service
Fuzhou Shengfeng New Material Technology Co., Ltd.
(a)
Fujian, the PRC
August 13, 2019
0
%
Packaging material manufacturing
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Name of subsidiaries
Place of
incorporation
Date of
incorporation or acquisition
Percentage
of direct or
indirect
Principal activities
Shengfeng Logistics (Yunnan) Co., Ltd.
Yunnan, the PRC
January 25, 2016
100
%
Transportation and warehouse storage management service
Shengfeng Logistics (Guangxi) Co., Ltd.
Guangxi, the PRC
February 1, 2016
100
%
Transportation and warehouse storage management service
Hubei Shengfeng Logistics Co., Ltd.
Hubei, the PRC
December 15, 2010
100
%
Transportation and warehouse storage management service
Shengfeng Logistics Group (Shanghai) Supply Chain Management Co., Ltd.
Shanghai, the PRC
August 26, 2015
100
%
Transportation and warehouse storage management service
Shanghai Shengxu Logistics Co., Ltd.
Shanghai, the PRC
June 4, 2003
100
%
Transportation and warehouse storage management service
Hangzhou Shengfeng Logistics Co., Ltd.
Zhejiang, the PRC
June 10, 2010
100
%
Transportation and warehouse storage management service
Nanjing Shengfeng Logistics Co., Ltd.
Jiangsu, the PRC
August 30, 2011
100
%
Transportation and warehouse storage management service
Suzhou Shengfeng Logistics Co., Ltd.
Jiangsu, the PRC
January 14, 2005
90
%
Transportation and warehouse storage management service
Suzhou Shengfeng Supply Chain Management Co., Ltd.
(b)
Jiangsu, the PRC
August 9, 2019
100
%
Transportation and warehouse storage management service
Shengfeng Supply Chain Management Co., Ltd.
Fujian, the PRC
June 19, 2014
100
%
Transportation and warehouse storage management service
Fuzhou Shengfeng Transportation Co., Ltd.
Fujian, the PRC
April 18, 2019
100
%
Transportation and warehouse storage management service
Diaobingshan Hengde Logistics Co., Ltd.
(c)
Liaoning, the PRC
April 23, 2018
0
%
Transportation and warehouse storage management service
Sichuan Shengfeng Logistics Co., Ltd.
Sichuan, the PRC
June 27, 2019
100
%
Transportation and warehouse storage management service
Fujian Shengfeng Logistics Co., Ltd.
Fujian, the PRC
April 2, 2020
100
%
Transportation and warehouse storage management service
Fujian Dafengche Information Technology Co. Ltd.
Fujian, the PRC
August 26, 2020
100
%
Software engineering
Ningde Shengfeng Logistics Co. Ltd.
(d)
Fujian, the PRC
November 12, 2018
51
%
Transportation and warehouse storage management service
Fujian Fengche Logistics Co., Ltd.
Fujian, the PRC
October 28, 2020
100
%
Transportation service
Fujian Hangfeng Logistics Technology Co., Ltd.
(e)
Fujian, the PRC
October 13, 2020
0
%
Online service
Shengfeng Logistics (Zhejiang) Co., Ltd.
Zhejiang, the PRC
February 1, 2021
100
%
Transportation and warehouse storage management service
Chengdu Shengfeng Supply Chain Management Co., Ltd.
Chengdu, the PRC
October 12, 2021
100
%
Supply chain service
Shengfeng Logistics Group (Ningde) Supply Chain Management Co., Ltd.
(f)
Fujian, the PRC
September 23, 2022
100
%
Supply chain service
Yichun Shengfeng Logistics Co., Ltd.
Jiangxi, the PRC
December 1, 2022
100
%
Transportation and warehouse storage management service
(a)
On July 14, 2021, Shengfeng Logistics entered
into a share transfer agreement with Dongguan Suxing New Material Co., Ltd ("Dongguan Suxing"), a related party, to transfer
its
51
% equity interest in Fuzhou Shengfeng New Material Technology Co., Ltd. ("New Material Technology") to Dongguan Suxing
for a consideration of $
468,973
(RMB
3,060,000
). The aforementioned transaction was completed during the year ended December 31, 2021.
The Company has continued to operate the transportation business through the VIE's other subsidiaries. Since New Material Technology's
operating revenue was less than
1
% of the Company's consolidated revenue, the transfer did not constitute a strategic shift that
would have a major effect on the Company's operations and financial results. The results of operations for New Material Technology
were not reported as discontinued operations in the consolidated financial statements.
(b)
On July 8, 2021, Suzhou Shengfeng Supply
Chain Management Co, Ltd. became a wholly owned subsidiary of Shengfeng Logistics.
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9
(c)
On April 20, 2021, Shengfeng Logistics entered into a share transfer agreement with Mr. Sun Mingyang, an unrelated third party, among others, to transfer its
51
% equity interest in Diaobingshan Hengde Logistics Co., Ltd. to Mr. Sun Mingyang for a consideration of approximately $
0.3
million. The aforementioned transaction was completed during the year ended December 31, 2021. The Company has continued to operate the transportation business through the VIE's other subsidiaries. Since Diaobingshan Hengde Logistics Co., Ltd.'s operating revenue was less than
1
% of the Company's consolidated revenue, the transfer did not constitute a strategic shift that would have a major effect on the Company's operations and financial results. The results of operations for Diaobingshan Hengde Logistics Co., Ltd. were not reported as discontinued operations in the consolidated financial statements.
(d)
On January 5, 2022, Shengfeng Logistics entered into a share transfer agreement with Fuzhou Puhui Technology Co., Ltd. ("Fuzhou Puhui"), an unrelated third party, to transfer its
49
% equity interest in Ningde Shengfeng Logistics Co., Ltd. ("Ningde Shengfeng") to Fuzhou Puhui. According to the share transfer agreement, instead of paying any cash consideration to Shengfeng Logistics, Fuzhou Puhui was required to make a capital contribution to fulfill the required registered capital (approximately $
14.4
million or RMB
100
million) based on its
49
% ownership interest (approximately $
7.0
million or RMB
49
million). The aforementioned transaction has been completed. After the transaction, the Company owned a
51
% equity interest in Ningde Shengfeng.
(e)
On March 16, 2022, Fujian Hangfeng Logistics Technology Co., Ltd. was deregistered, as it has not commenced business operations and the Company has cancelled the future plans for such entity.
(f)
On September 23, 2022, Shengfeng Logistics Group (Ningde) Supply Chain Management Co., Ltd. was set up in Fujian, China. This entity is fully owned by Shengfeng Logistics Group Co., Ltd. and will provide supply chain service in the future.
Contractual
Agreements
The Company conducts
its operations through a series of agreements with the VIE and its subsidiaries as stated above. The VIE and its subsidiaries are utilized
solely to facilitate the Company's participation in transportation and warehouse storage management services in the PRC where foreign
ownership is restricted. As such, Shengfeng VIE is controlled through contractual arrangements in lieu of direct equity ownership by the
Company or any of its subsidiaries. Such contractual arrangements were made effective by a series of six agreements ("Contractual
Arrangements", or VIE Agreements, which were signed on January 7, 2021).
As a result of the direct
ownership in Tianyu and the Contractual Arrangements, the Company is regarded as the primary beneficiary of the VIE and its subsidiaries.
Therefore, the VIE and its subsidiaries were treated as the consolidated entities under U.S. GAAP.
The significant terms of the Contractual Arrangements
are as follows:
Equity Pledge Agreements
Each equity holder of the VIE Company has pledged
all of his/her shares in the VIE Company and all other rights relevant to the shares to WFOE, as a collateral security for his/her and/or
the VIE Company's obligations to pay off all debt to WFOE, including consulting and services fees payable to WFOE. In the event
of default of any payment obligation, WFOE will be entitled to certain rights, including transferring the pledged shares to itself and
disposing the pledged shares through a sale or auction.
The Equity Pledge Agreement is effective until
the full payment of the service fees under the Technical Consultation and Service Agreement and upon termination of Shengfeng Logistics'
obligations under the Technical Consultation and Service Agreement, or upon the transfer of shares of the Equity Shareholders.
The purposes of the Equity Pledge Agreement are
to (1) guarantee the performance of Shengfeng Logistics' obligations under the Technical Consultation and Service Agreement, (2)
make sure the Equity Shareholders do not transfer or assign the pledged shares, or create or allow any encumbrance that would prejudice
Tianyu's interests without Tianyu's prior written consent, and (3) provide Tianyu control over Shengfeng Logistics under certain
circumstances. In the event Shengfeng Logistics breaches its contractual obligations under the Technical Consultation and Service Agreement,
Tianyu will be entitled to dispose of the pledged shares in accordance with relevant PRC laws.
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10
As of the date of this annual report, the share
pledges under the Equity Pledge Agreement have been registered with the competent PRC regulatory authority.
Exclusive Technical Consultation and Service
Agreements
The VIE Company has entered into an exclusive
technical consultation and service agreement with WFOE, pursuant to which, WFOE is engaged to provide certain technical services to the
VIE, depending on the licenses obtained and held by the VIE. This technical consultation and service agreement will remain effective for
20
years and it can be extended by WFOE unilaterally. WFOE is entitled to collect service fees for the services it provides to the VIE,
and the service fees are adjusted annually through written agreements. Technical service fees are composed of the basic annual fee, which
is equal to
50
% of the after-tax income of the VIE Company, and a floating fee, which shall not exceed the after-tax income after deducting
paid basic annual fees. Due to its control over the VIE Company, WFOE has the right to determine the service fees to be charged to the
VIE Company by considering, among others, the technical complexity of the services, the actual costs that may be incurred for providing
the services and the VIE Company's revenue.
The Technical Consultation and Service Agreement
became effective on January 7, 2021 and will remain effective for
20
years. Such agreement can be extended if Tianyu provides its notice
of extension to Shengfeng Logistics unilaterally prior to the expiration date of this agreement. Shengfeng Logistics shall use its best
efforts to renew its business license and extend its operation term until and unless otherwise instructed by Tianyu.
The Technical Consultation and Service Agreement
does not prohibit related party transactions. Upon the establishment of the audit committee at the consummation of this offering, the
Company's audit committee will be required to review and approve in advance any related party transactions, including transactions
involving Tianyu or Shengfeng Logistics.
Exclusive Call Option Agreements
The equity shareholders of the VIE (the "Equity
Shareholders") have granted WFOE the exclusive and irrevocable right to purchase or to designate one or more person(s) at their
discretion to purchase part or all of the equity interests in the VIE from the Equity Shareholders for a purchase price at any time, subject
to the lowest price permitted by PRC laws and regulations. The VIE and its Equity Shareholders have agreed that without prior written
consent of WFOE, the respective Equity Shareholders cannot sell, transfer, pledge or dispose their equity interests, and the VIE cannot
sell, transfer, pledge or dispose, including but not limited to, the equity interests, significant assets, significant revenue and significant
business. Also as agreed, the VIE cannot declare any dividend or change capitalization structure of the VIE and cannot enter into any
loan or investment agreements without prior written consent of WFOE. Furthermore, the Equity Shareholders of the VIE have agreed that
any proceeds from, including but not limited to, the sales of the Equity Shareholders' equity interests in the VIE should be gratuitously
paid to WFOE or one or more person(s) at their discretion. The Call Option Agreement will remain effective until all equity options in
VIE held by such Equity Shareholders are transferred or assigned to WFOE or their designated representatives.
The Call Option Agreement remains effective until
all the equity of Shengfeng Logistics is legally transferred under the name of Tianyu and/or other entity or individual designated by
it.
Voting Rights Proxy Agreement
Pursuant to the irrevocable
power of attorney, each of the Equity Shareholders of the VIE appointed WFOE as his or her attorney-in-fact to exercise such shareholder's
rights under PRC law and the relevant articles of association, including but not limited to, attending shareholders meetings, voting on
their behalf on all matters requiring shareholders' approval, including but not limited to, sale, transfer, pledge, or disposition
of all or part of the Equity Shareholders' equity interests, and designating and appointing the legal representative, directors,
supervisors, chief executive officer and other senior management members of the VIE. Each power of attorney will remain in force until
such Equity Shareholder ceases to be a shareholder of the VIE. Each shareholder has waived all his or her rights in connection with his
or her equity interests, and confirmed that such rights have been authorized to WFOE under each power of attorney.
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11
The Voting Rights Proxy
Agreement became effective on January 7, 2021 and will remain effective for
20
years. Such agreement can be extended if Tianyu provides
its notice of extension unilaterally prior to the expiration date of this agreement. All other parties shall agree with such extension
without reserve.
Power of attorney
Each of the Equity Shareholders
has signed a power of attorney (the "Power of Attorney"), pursuant to which, each of the Equity Shareholders has authorized
WFOE to act as his or her exclusive agent and attorney with respect to all rights of such individual as a shareholder of the VIE, including
but not limited to: (a) attending shareholders' meetings; (b) exercising all the shareholder's rights that shareholders are
entitled to under PRC laws and the Articles of Association of VIE, including but not limited to, sale, transfer, pledge and disposition
of the equity interests of the VIE; and (c) designating and appointing the legal representative, chairperson, directors, supervisors,
chief executive officer and other senior management members of the VIE. The Power of Attorney has the same term as the Voting Rights Proxy
Agreement.
The Powers of Attorney
is irrevocable and continuously valid from the date of execution of the Powers of Attorney, so long as the Equity Shareholders are shareholders
of Shengfeng Logistics.
Spouse consent letter
Each of the respective
spouse of the individual Equity Shareholders has executed an additional spousal consent letter which contains terms as described below.
Pursuant to the spousal consent letters, each of the respective spouse of the individual Equity Shareholders, unconditionally and irrevocably
agreed that the equity interests in the VIE held by and registered in the name of his/her spouse will be disposed of pursuant to the equity
pledge agreement, the exclusive call option agreement and the shareholders' voting rights proxy agreement. The spouse agreed not
to assert any rights over the equity interests in the VIE held by his/her spouse.
Based on the foregoing
Contractual Arrangements, which grant Shengfeng WFOE the effective control of Shengfeng VIE and enable Shengfeng WFOE to receive all of
their expected residual returns, the Company accounts for Shengfeng VIE as a VIE. Accordingly, the Company consolidates the accounts of
Shengfeng VIE for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission
("SEC"), and Accounting Standards Codification ("ASC") 810-10, Consolidation.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying audited consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S.
GAAP") for information pursuant to the rules and regulations of the SEC.
Principles of Consolidation
The consolidated financial statements include
the financial statements of the Company, its subsidiaries, VIE and VIE's subsidiaries over which the Company exercises control and,
where applicable, entities for which the Company has a controlling financial interest or is the primary beneficiary. All significant transactions
and balances between the Company, its subsidiaries, VIE and VIE's subsidiaries have been eliminated upon consolidation.
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.
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A VIE is an entity in which the Company, or its
subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with, ownership of the entity,
and therefore the Company or its subsidiary is the primary beneficiary of the entity.
Non-controlling interest represents the portion
of the net assets of subsidiaries attributable to interests that are not owned or controlled by the Company. The non-controlling interest
is presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Non-controlling
interest's operating results are presented on the face of the consolidated statements of income and comprehensive income as an allocation
of the total income for the year between non-controlling shareholders and the shareholders of the Company.
All significant transactions and balances between
the Company, its subsidiaries, VIE and VIE's subsidiaries have been eliminated upon consolidation.
Use of Estimate and Assumptions
The preparation of the Company's consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting periods presented. Estimates are adjusted to reflect actual experience when necessary. Significant
accounting estimates reflected in the Company's consolidated financial statements include allowance for doubtful accounts, provision
for prepayments and other assets, discount rate used in operating lease right-of-use assets and valuation allowance for deferred tax asset.
Actual results could differ from these estimates.
Variable Interest Entities
The Company applies the guidance codified in Accounting
Standard Codification 810, Consolidations ("ASC 810") on accounting for the VIE and its respective subsidiaries, which requires
certain variable interest entities to be consolidated by the primary beneficiary of the entity in which it has a controlling financial
interest. A VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient
to permit the entity to finance its activities without additional financial support; (b) as a group, the holders of the equity investment
at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual
returns, or (c) an equity investor has voting rights that are disproportionate to its economic interest and substantially all of the entity's
activities are on behalf of the investor. The accompanying consolidated financial statements include the financial statements of the Company,
its subsidiaries and the VIE.
The Company is considered the primary beneficiary
of a VIE or its subsidiaries if the Company had variable interests, that will absorb the entity's expected losses, receive the entity's
expected residual returns, or both.
The Company's total assets and liabilities
presented in the accompanying consolidated financial statements represent substantially all of the total assets and liabilities of the
VIE because the other entities in the consolidation are non-operating holding entities with nominal assets and liabilities. The following
financial statement amounts and balances of the VIE were included in the accompanying audited consolidated financial statements for the
years ended December 31, 2022, 2021 and 2020, respectively:
As
of
December 31,
2022
2021
Current assets
$
135,650
$
121,698
Non-current assets
109,481
122,511
Total assets
$
245,131
$
244,209
Current liabilities
$
130,196
$
125,352
Non-current liabilities
19,377
22,959
Total liabilities
$
149,573
$
148,311
Net assets
$
95,558
$
95,898
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13
Years
Ended December 31,
2022
2021
2020
Total revenues
$
370,325
$
346,699
$
287,464
Cost of revenues
$
(
328,793
)
$
(
305,354
)
$
(
251,489
)
Income from operations
$
10,318
$
8,587
$
6,204
Net income
$
8,298
$
6,644
$
6,043
Risks and Uncertainties
After the initial outbreak of COVID-19, from time
to time, some instances of COVID-19 infections have emerged in various regions of China, including the infections caused by the Omicron
variants in early 2022. For example, 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. From April to May, 2022, our Shanghai office was shut down and
all the businesses in Shanghai were closed, which negatively affected our operational and financial results. Our shanghai office resumed
full operation in June 2022. Since December 2022, many of the restrictive measures previously adopted by the PRC governments at various
levels to control the spread of the COVID-19 virus have been revoked or replaced with more flexible measures.
The COVID-19 pandemic has broadly affected China's logistic market
and the macroeconomy. Our results of operations and financial performance may be adversely affected, to the extent that COVID-19 exerts
long-term negative impact on the Chinese economy. The pandemic caused temporary disruptions in the supply chains for companies in China
and elsewhere, including us and our customers and suppliers. As a result, we have experienced lower efficiency, increased aging of our
trade receivable, longer collection period and more bad debts. which could adversely affect our business operation. However, by leveraging
our advantages in the logistics fields and our networks. Our results of operation for the year ended December 31, 2022 have not been materially
negatively affected by the COVID-19.
The extent to which COVID-19 further impacts our
results of operations will depend on the future developments of the pandemic, including new information concerning the global severity
of the pandemic and actions to be taken to contain the pandemic, which are highly uncertain and unpredictable.
Foreign currencies translation and transaction
The reporting currency of the Company is the U.S.
dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities
are translated at the unified exchange rate as quoted by the People's Bank of China at the end of the period. The statement of income
accounts is translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments
resulting from this process are included in accumulated other comprehensive income (loss). Transaction gains and losses that arise from
exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of
operations as incurred.
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Translation adjustments included in accumulated
other comprehensive income (loss) amounted to $(
5,609
) and $
2,548
as of December 31, 2022 and 2021, respectively. The balance sheet amounts,
with the exception of shareholders' equity, at December 31, 2022 and 2021 were translated at RMB
6.9646
and RMB
6.3757
, respectively.
The shareholders' equity accounts were stated at their historical rates. The average translation rates applied to the statement
of income accounts for the years ended December 31, 2022, 2021 and 2020 were RMB
6.7261
, RMB
6.4515
and RMB
6.8976
to $
1.00
respectively.
Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows
will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.
Cash
Cash represents demand deposits placed with banks
or other financial institutions, which are unrestricted as to withdrawal or use, and which have original maturities of
three months
or
less and are readily convertible to known amounts of cash. The Company maintains most of its bank accounts in the PRC. Cash balances in
bank accounts in PRC are not insured. As of December 31, 2022 and 2021, the Company has approximately $
21.3
million and $
18.6
million,
respectively, of cash in banks, all held in the banks located in the mainland of China. Most of cash balance as of December 31, 2022
and 2021 are denominated in RMB.
Restricted cash
Restricted cash represents cash that cannot be
withdrawn without the permission of third parties. The Company's restricted cash is substantially cash balance
in
designated bank accounts as security for payment processing and lawsuit. Restriction on the use of such cash and the interest earned thereon
is imposed by the banks and remains effective throughout the term of the security period. Upon maturities of the security period, the
bank's deposits are available for general use by the Company.
Fair value of financial instruments
ASC 825-10 requires certain disclosures regarding
the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes
the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of
unobservable inputs. The three levels of inputs used to measure fair value are as follows:
●
Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
●
Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data.
●
Level 3 — inputs to the valuation methodology are unobservable.
Unless otherwise disclosed, the fair value of
the Company's financial instruments, including cash, restricted cash, accounts receivable, prepayments and other current assets,
due from related parties, accounts payable, due to a related party, short-term bank loans, salary and welfare payables, accrued expenses
and other current liabilities, current operating lease liabilities and taxes payable, approximates their recorded values due to their
short-term maturities. The carrying value of long-term lease liabilities approximated its fair value as of December 31, 2022 and 2021
as the interest rates applied reflect the current market yield for comparable financial instruments.
Notes receivable
Notes receivable
represents trade accounts receivable due from various customers where the customers' banks have guaranteed the payments. The notes
are non-interest bearing and normally paid within three to twelve months. The Company has the ability to submit request for payment to
the customer's bank earlier than the scheduled payment date but will incur an interest charge and a processing fee. As of December
31, 2022 and 2021, no notes were pledged
for the Company's notes payable
.
F-
15
Accounts receivable, net
Accounts receivable represents the Company's
right to consideration in exchange for goods and services that the Company has transferred to the customer before payment is due. Accounts
receivable is stated at the historical carrying amount, net of an estimated allowance for uncollectible accounts. The Company reviews
on a periodic basis for doubtful accounts for the outstanding trade receivable balances based on historical collection trends, aging of
receivables and other information available. Additionally, the Company evaluates individual customer's financial condition, credit
history, and the current economic conditions to make specific bad debt provisions when it is considered necessary, based on (i) the Company's
specific assessment of the collectability of all significant accounts; and (ii) any specific knowledge we have acquired that might indicate
that an account is uncollectible. The facts and circumstances of each account may require the Company to use substantial judgment in assessing
its collectability. The allowance is based on management's best estimates of specific losses on individual exposures, as well as
a provision on historical trends of collections. Account balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote. The Company's management continues to evaluate the reasonableness
of the valuation allowance policy and update it if necessary. The allowance for doubtful accounts was approximately $
3.1
million and $
2.4
million as of December 31, 2022 and 2021, respectively.
Prepayments and other assets, net
Prepayment and other assets primarily consist of VAT recoverable, advances
to vendors for purchasing goods, long-lived assets or services that have not been received or provided, advances to employees, security
deposits made to customers and advances to employees. Prepayment and other assets are classified as either current or non-current based
on the terms of the respective agreements. These advances are unsecured and are reviewed periodically to determine whether their carrying
value has become impaired. The Company considers the assets to be impaired if the collectability of the advance becomes doubtful. The
Company uses the aging method to estimate the allowance for uncollectible balances. The allowance is also based on management's
best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections and utilizations.
Actual amounts received or utilized may differ from management's estimate of credit worthiness and the economic environment. The
provisions for prepayments and other assets were approximately $
0.5
million and $
0.4
million as of December 31, 2022 and 2021, respectively.
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives,
taking into account any estimated residual value.
Useful Life
Building
10
-
40
years
Office equipment
5
-
10
years
Machinery and tools
5
years
Vehicles
5
-
7
years
Leasehold improvements
Lesser of the lease term or the estimated useful lives of the assets
The Company constructs certain of its property
and equipment. In addition to costs under the construction contracts, external costs that are directly related to the construction and
acquisition of such property and equipment are capitalized. Depreciation is recorded at the time assets are ready for their intended use.
Such properties are classified to the appropriate categories of property and equipment when completed and ready for intended use. Depreciation
of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
The cost and related accumulated depreciation
and amortization of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated
statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions,
renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods
of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
F-
16
Intangible assets, net
Intangible assets consist primarily of land use
rights and licensed software acquired, which are stated at cost less accumulated amortization and impairment, if any. Intangible assets
are amortized using the straight-line method over the estimated useful lives, which are generally
5
to
50
years or based on the contract
terms. The estimated useful lives of amortized intangible assets are reassessed if circumstances occur that indicate the original estimated
useful lives have changed.
The estimated useful lives are as follows:
Useful life
Land use right
32
-
50
years
Licensed software
5
years
Impairment of long-lived assets
The Company evaluates its long-lived assets, including
property and equipment and intangibles with finite lives, for impairment whenever events or changes in circumstances, such as a significant
adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not
be fully recoverable. When these events occur, the Company evaluates the recoverability of long-lived assets by comparing the carrying
amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition.
If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment
loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting
the cash flows expected to be generated by the assets, when the market prices are not readily available. The adjusted carrying amount
of the assets become new cost basis and are depreciated over the assets' remaining useful lives. Long-lived assets are grouped with
other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other
assets and liabilities. Given no events or changes in circumstances indicating the carrying amount of long-lived assets may not be recovered
through the related future net cash flows, the Company did not recognize any impairment loss on long-lived assets for the years ended
December 31, 2022, 2021 and 2020.
Long-term investments
Long-term investments are primarily consisted
of equity investments in privately held entities accounted for using the measurement alternative and equity investments accounted for
using the equity method. On January 1, 2019, the Company adopted ASU 2016-01 Financial Instruments-Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial Liabilities. According to the guidance, the Company started to record equity investments
at fair value, with gains and losses recorded through net earnings. And the Company elected to measure certain equity investments without
readily determinable fair value at cost, less impairments, plus or minus observable price changes and assess for impairment quarterly.
Equity investments accounted for using the
equity method
The Company accounts for its equity investment
over which it has significant influence but does not own a majority equity interest or otherwise control, using the equity method. The
Company adjusts the carrying amount of the investment and recognizes investment income or loss for its share of the earnings or loss of
the investee after the date of investment. The Company assesses its equity investment for other-than-temporary impairment by considering
factors including, but not limited to, current economic and market conditions, operating performance of the entity, including current
earnings trends and undiscounted cash flows, and other entity-specific information. The fair value determination, particularly for investments
in a privately held entity, requires judgment to determine appropriate estimates and assumptions. Changes in these estimates and assumptions
could affect the calculation of the fair value of the investment and determination of whether any identified impairment is other-than-temporary.
F-
17
Deferred issuance costs
Pursuant to ASC 340-10-S99-1, offering costs directly
attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction
of additional paid-in capital. These costs include legal fees related to the registration drafting and counsel, consulting fees related
to the registration preparation, SEC filing and print related costs, exchange listing costs, and road show related costs.
Notes payable
Notes payable represents trade accounts payable
due to various suppliers where the Company's banks have guaranteed the payment. The notes are non-interest bearing and normally
paid within three to twelve months. The Company shall keep sufficient cash in designated bank accounts or notes receivable pledged to
the bank as security for payment processing.
Revenue recognition
The Company adopted ASC Topic 606, Revenue from
Contracts with Customers, effective as of January 1, 2019. Accordingly, the audited consolidated financial statements for the years ended
December 31, 2022, 2021 and 2020 are presented under ASC 606. The core principle of the guidance is that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. Revenue is the transaction price the Company expects to be entitled to in exchange
for the promised services in a contract in the ordinary course of the Company's activities and is recorded net of value-added tax
("VAT"). To achieve that core principle, the Company applies the following steps:
Step 1: Identify the contract (s) with
a customer
Step 2: Identify the performance obligations
in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price
to the performance obligations in the contract
Step 5: Recognize
revenue when (or as) the entity satisfies a performance obligation
The Company generates revenues from providing
transportation services and warehouse storage and management services. No practical expedients were used when adoption ASC 606. Revenue
recognition policies for each type of revenue stream are as follow:
Transportation services
The Company derives its transportation service
revenue by providing logistic services based on customers' order. The Transportation service is considered a performance obligation
as the customer can only obtain benefits when the goods are delivered to the destination. The transaction price is predetermined according
to the distance of the transportation as well as the volume of the goods. Generally, the credit term is within two months. There is no
other obligation in our contracts, such as return, refund or warranties. Revenue is recognized at the point in time when delivery of goods
is made and customer has accepted delivery.
F-
18
Warehouse storage and storage management services
The Company derives revenue from the warehouse storage and storage
management services provided to third-party companies, including handling services, security and other services. The promised services
in each warehouse storage and storage management services contract are accounted as a single performance obligation, as the promised services
in a contract are not distinct and are considered as a significant integrated service. The consideration is predetermined in the contract
according to the unit price, space and term as well as the services used with no other obligations such as return, refund or warranties.
No variable considerations exist such as discounts, rebates, refunds, credits, price concession, incentive performance bonuses or penalties.
Pursuant to the service agreement, the Company provides the clients with warehouse storage and management services during the service
period. Service fees for which are paid by such customers on a monthly basis. The revenue is recognized on a straight-line basis over
the period of the warehouse storage and management service term, as customers simultaneously receive and consume the benefits of these
services throughout the service period.
Principal and Agent Considerations
In the Company's transportation business,
the Company utilizes independent contractors and third-party carriers in the performances of some transportation services as and when
needed. GAAP requires us to evaluate, using a control model, whether the Company itself promises to provide services to the customers
(as a principal) or to arrange for services to be provided by another party (as an agent). Based on the Company's evaluation using
a control model, the Company determined that in all of its major business activities, it serves as a principal rather than an agent within
their revenue arrangements. Revenue and the associated purchased transportation costs are both reported on a gross basis within the consolidated
statements of income and comprehensive income.
Contract costs
Contract costs include contract acquisition costs
and contract fulfillment costs which are all recorded within prepayments, deposits, and other assets in the consolidated balance sheets
and unaudited condensed consolidated balance sheets.
Contract acquisition costs consist of incremental
costs incurred by the Company to originate contracts with customers. Contract acquisition costs, which generally include costs that are
only incurred as a result of obtaining a contract, are capitalized when the incremental costs are expected to be recovered over the contract
period. All other costs incurred regardless of obtaining a contract are expensed as incurred. Contract acquisition costs are amortized
over the period the costs are expected to contribute directly or indirectly to future cash flows, which is generally over the contract
term, on a basis consistent with the transfer of goods or services to the customer to which the costs relate. Contract fulfillments costs
consist of costs incurred by the Company to fulfill a contract with a customer and are capitalized when the costs generate or enhance
resources that will be used in satisfying future performance obligations of the contract and the costs are expected to be recovered. Capitalized
contract fulfillment costs generally include contracted services, direct labor, materials, and allocable overhead directly related to
resources required to fulfill the contract. Contract fulfillment costs are recognized in cost of revenue during the period that the related
costs are expected to contribute directly or indirectly to future cash flows, which is generally over the contract term, on a basis consistent
with the transfer of goods or services to the customer to which the costs are related. There were no contract acquisition costs and fulfillment
costs as of December 31, 2022 and 2021.
Contract assets
A contract asset is the right to consideration
in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer
before the customer pays consideration or before a payment is due, a contract asset is recognized for the earned consideration that is
conditional. Contract assets are subject to impairment assessment.
Contract liabilities
A contract liability is recognized when a payment
is received or a payment is due (whichever is earlier) from a customer before the Company transfers the related services. Contract liabilities
are recognized as revenue when the Company performs under the contract. Revenue recognized that was included in contract liabilities at
the beginning of the period was approximately $
0.7
million, $
2.5
million and $
0.7
million for the years ended December 31, 2022, 2021
and 2020, respectively. As of December 31, 2022 and 2021, contract liabilities amounted to approximately $
1.1
million and $
1.0
million,
respectively, were included at "accrued expenses and other current liabilities."
F-
19
Disaggregated information of revenues by services:
Years Ended December 31,
2022
2021
2020
Revenues:
Transportation
$
346,039
$
327,848
$
273,685
Warehouse storage and storage management service
20,322
16,885
12,364
Others
3,964
1,966
1,415
Total revenues
$
370,325
$
346,699
$
287,464
As of December 31, 2022 and 2021, the Company
had outstanding contracts for providing transportation and warehouse management services amounting to approximately $
1.0
million and $
1.5
million, all of which is expected to be completed within 12 months from December 31, 2022 and 2021, respectively.
The Company's operations are primarily based
in the PRC, where the Company derived a substantial portion of revenues. Disaggregated information of revenues by geographic locations
are as follows:
Years
Ended December 31
2022
2021
2020
Fujian
$
218,523
$
197,647
$
154,155
Guangdong
17,848
22,447
28,622
Beijing
36,958
36,365
24,362
Shandong
14,159
12,069
12,858
Liaoning
7,815
7,698
10,507
Jiangsu
6,556
7,926
9,039
Zhejiang
15,782
11,466
8,681
Others
52,884
51,081
39,240
Total
$
370,325
$
346,699
$
287,464
Government Subsidies
The Company's PRC based subsidiaries received government subsidies
from certain local governments. The Company's government subsidies consisted of specific subsidies and other subsidies. Specific
subsidies are subsidies that the local government has provided for a specific purpose, such as truck station subsidies. Other subsidies
are the subsidies that the local government has not specified its purpose for and are not tied to future trends or performance of the
Company; receipt of such subsidy income is not contingent upon any further actions or performance of the Company and the amounts do not
have to be refunded under any circumstances. The Company recorded specific subsidies as accrued expenses and other current liabilities
when received. For specific subsidies, they are recognized as other income on a straight-line method within the useful life of relevant
assets. Other subsidies are recognized as other income which is included in the consolidated statements of income upon receipt as further
performance by the Company is not required. The government subsidies were $
0.8
million, $
0.6
million and $
2.2
million for the years ended
December 31, 2022, 2021 and 2020.
Advertising expenses
Advertising expenditures are expensed as incurred
and such expenses were included as part of selling and marketing expenses. For the years ended December 31, 2022, 2021 and 2020, the advertising
expenses amounted to approximately $
0.05
million, $
0.08
million and $
0.06
million, respectively.
F-
20
Employee defined contribution plan
Full-time employees of the Company in the PRC
participate in a government-mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care,
unemployment insurance, employee housing fund and other welfare benefits are provided to them. Chinese labor regulations require that
the Company make contributions to the government for these benefits based on government prescribed percentage of the employee's
salaries. The Company has no legal obligation for the benefits beyond the contributions. The total amount was expensed as incurred. For
the years ended December 31, 2022, 2021 and 2020, employee welfare contribution expenses amounted to approximately $
1.3
million, $
2.4
million and $
2.9
million, respectively.
Leases
The Company has elected the package of practical
expedients permitted which allows the Company not to reassess the following at adoption date: (i) whether any expired or existing contracts
are or contains a lease, (ii) the lease classification for any expired or existing leases, and (iii) initial direct costs for any expired
or existing leases (i.e. whether those costs qualify for capitalization under ASU 2016-02). The Company also elected the short-term lease
exemption for certain classes of underlying assets including office space, warehouses and equipment, with a lease term of
12
months or
less.
The Company determines whether an arrangement
is or contain a lease at inception. A lease for which substantially all the benefits and risks incidental to ownership remain with the
lessor is classified by the lessee as an operating lease. All leases of the Company are currently classified as operating leases. Operating
leases are included in operating lease right-of-use ("ROU") assets, operating lease liability, current, and operating lease
liability, non-current in the Company's consolidated balance sheets. Please refer to Note 12 for the disclosures regarding the Company's
method of adoption of ASC 842 and the impacts of adoption on its financial position, results of operations and cash flows.
ROU assets represent the Company'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.
The operating lease ROU assets and lease liabilities are recognized at lease commencement date based on the present value of lease payments
over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing
rate based on the information available at lease commencement date in determining the present value of lease payments. The operating lease
ROU assets also includes any lease payments made and excludes lease incentives. The Company's lease terms may include options to
extend or terminate the lease. Renewal options are considered within the ROU assets and lease liabilities when it is reasonably certain
that the Company will exercise that option. Lease expenses for lease payments are recognized on a straight-line basis over the lease term.
For operating leases with a term of
one year
or
less, the Company has elected not to recognize a lease liability or ROU asset on its consolidated balance sheet. Instead, it recognizes
the lease payments as expenses on a straight-line basis over the lease term. Short-term lease costs are immaterial to its consolidated
statements of operations and cash flows. The Company has operating lease agreements with insignificant non-lease components and have elected
the practical expedient to combine and account for lease and non-lease components as a single lease component.
The Company reviews the impairment of its ROU
assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived
assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment
of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax
cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested
asset group and include the associated operating lease payments in the undiscounted future pre-tax cash flows.
Upon the adoption of the new lease standard on
January 1, 2019, the Company recognized respectively, ROU assets and operating lease liabilities of approximately $
28
million, in the
consolidated balance sheets. There was no impact to retained earnings at adoption.
F-
21
Value added tax ("VAT")
Revenue represents the invoiced value of goods
and service, net of VAT. The VAT is based on gross sales price and VAT rates range up to
13
%, depending on the type of products sold or
services provided. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output
VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes payable. All of the VAT returns filed by the Company's
subsidiaries in PRC remain subject to examination by the tax authorities for
five years
from the date of filing.
Income taxes
The Company follows the liability method of accounting
for income taxes in accordance with ASC 740 ("ASC 740"), Income Taxes. The Company accounts for current income taxes in accordance
with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases
of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
An uncertain tax position is recognized as a benefit
only if it is "more likely than not" that the tax position would be sustained in a tax examination. The amount recognized
is the largest amount of tax benefit that is greater than
50
% likely of being realized on examination. For tax positions not meeting the
"more likely than not" test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income
tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes have been
incurred during the years ended December 31, 2022, 2021 and 2020. All of the tax returns of the Company's subsidiaries in PRC remain
subject to examination by the tax authorities for
five years
from the date of filing.
Statutory reserves
The Company's PRC subsidiaries and the VIE
are required to allocate at least
10
% of their after-tax profit to the general reserve in accordance with the PRC accounting standards
and regulations. The allocation to the general reserve will cease if such reserve has reached to
50
% of the registered capital of respective
company. Appropriations to discretionary surplus reserve are at the discretion of the board of directors of the VIE. These reserves can
only be used for specific purposes and are not transferable to the Company in form of loans, advances, or cash dividends. There is no
such regulation of providing statutory reserve in Hong Kong.
Comprehensive income (loss)
Comprehensive income (loss) consists of two components,
net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses
that under GAAP are recorded as an element of equity but are excluded from net income. Other comprehensive income (loss) consists of a
foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies.
Earnings per share
The Company computes earnings per share ("EPS")
in accordance with ASC 260, "Earnings per Share." ASC 260 requires companies to present basic and diluted EPS. Basic EPS is
measured as net income divided by the weighted average common share outstanding for the period. Diluted EPS presents the dilutive effect
on a per-share basis of the potential Ordinary Shares (e.g., convertible securities, options and warrants) as if they had been converted
at the beginning of the periods presented, or issuance date, if later. Potential Ordinary Shares that have an anti-dilutive effect (i.e.,
those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
The rights, including the liquidation and dividend
rights, of the holders of the Company's Class A and Class B Ordinary Shares are identical, except with respect to voting and conversion
rights. Each Class A Ordinary Share is entitled to one vote; and each Class B Ordinary Share is entitled to ten votes and is convertible
into
one
Class A Ordinary Share at any time by the holder thereof. Class A Ordinary Shares are not convertible into Class B Ordinary Shares
under any circumstances. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate
basis. For the years ended December 31, 2022, 2021 and 2020, the net earnings per share amounts are the same for Class A and Class B Ordinary
Shares because the holders of each class are entitled to equal per share dividends or distributions in liquidation.
F-
22
Risks and Concentration
a)
Interest rate risk
Interest rate risk is
the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Company's interest rate risk arises primarily from short-term borrowings. Borrowings issued at variable rates and fixed rates
expose the Company to cash flow interest rate risk and fair value interest rate risk respectively.
b)
Concentration of credit risk
Financial instruments
that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of December 31, 2022 and
2021, approximately $
23.4
million and $
18.9
million were deposited with financial institutions located in the PRC, respectively, where
there is a RMB
500, 000
deposit insurance limit for a legal entity's aggregated balance at each bank. While management believes that these
financial institutions are of high credit quality, it also continually monitors their credit worthiness.
The Company is also exposed
to risk from its accounts receivable and other receivables. These assets are subjected to credit evaluations. An allowance has been made
for estimated unrecoverable amounts which have been determined by reference to past default experience and the current economic environment.
A majority of the Company's
expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries' assets and liabilities
are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required
by law to be transacted only by authorized financial institutions at the exchange rates set by the People's Bank of China ("PBOC").
Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory
bodies which require certain supporting documentation in order to process the remittance.
The Company's functional
currency is the RMB, and its consolidated financial statements are presented in U.S. dollars. The RMB depreciated by
9.24
% in the year
ended December 31, 2022. The RMB appreciated by
2.29
% in the year ended December 31, 2021 from December 31, 2020 to December 31, 2021.
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 its financial results reported in the
U.S. dollar terms without giving effect to any underlying changes in its business or results of operations. Currently, the Company's
assets, liabilities, revenues and costs are denominated in RMB.
To the extent that the
Company needs to convert U.S. dollars into RMB for capital expenditures and working capital and other business purposes, appreciation
of RMB against U.S. dollar would have an adverse effect on the RMB amount the Company would receive from the conversion. Conversely, if
the Company decides to convert RMB into U.S. dollar for the purpose of making payments for dividends, strategic acquisition or investments
or other business purposes, appreciation of U.S. dollar against RMB would have a negative effect on the U.S. dollar amount available to
the Company.
F-
23
c)
Concentration of customers and suppliers
Substantially all revenue
was derived from customers located in China. There are no customers from whom revenue individually represent greater than
10
% of the total
revenue of the Company in any of the periods presented.
For the year ended December
31, 2022, Fujian Jinwang Yuntong Logistics Technology Co., Ltd. contributed approximately
23.5
% of total cost of revenue of the Company.
For the year ended December 31, 2021, Anhui Luge Transportation Co., Ltd. contributed approximately
27.8
% of total cost of revenue of
the Company. For the year ended December 31, 2020, Hubei Luge Logistics Co., Ltd. and Anhui Luge Transportation Co., Ltd. contributed
approximately
19.8
% and
12.4
% of total cost of revenue of the Company, respectively.
As of December 31, 2022
and 2021, no customers accounted more than
10
% of the account receivables.
As of December 31, 2022,
Fujian Jinwang Yuntong Logistics Technology Co., Ltd., contributed approximately
13.4
% of total account payable balances. As of December
31, 2021, Anhui Luge Transportation Co., Ltd. contributed approximately
14.4
% of total account payable balances.
d)
VIE risk
Under the Contractual
Agreements with the consolidated VIE, the Company has the power to direct activities of the consolidated VIE and VIE's subsidiaries
through the Company's relevant PRC subsidiaries, and can have assets transferred freely out of the consolidated VIE and VIE's
subsidiaries without restrictions. Therefore, the Company considers that there is no asset of the consolidated VIE that can only be used
to settle obligations of the respective consolidated VIE, except for the registered capital of the consolidated VIE amounting to approximately
$
27.2
million as of December 31, 2022 and 2021. Since the consolidated VIE and VIE's subsidiaries are incorporated as limited liability
companies under the PRC Law, creditors of the consolidated VIE and VIE's subsidiaries do not have recourse to the general credit
of the Company.
The Company believes
that the Company's relevant PRC subsidiaries' Contractual Arrangements with the consolidated VIE and the Equity Shareholders
are in compliance with PRC laws and regulations, as applicable, and are legally binding and enforceable. However, uncertainties in the
PRC legal system could limit the Company's ability to enforce these Contractual Arrangements.
In addition, if the current
structure or any of the Contractual Arrangements were found to be in violation of any existing or future PRC law, the Company may be subject
to penalties, which may include, but not limited to, cancellation or revocation of the Company's business and operating licenses
and being required to restructure the Company's operations or terminate the Company's operating activities. The imposition
of any of these or other penalties may result in a material and adverse effect on the Company's ability to conduct its operations.
In such case, the Company may not be able to operate or control the VIE, which may result in deconsolidation of the VIE.
F-
24
Contingencies
From time to time, the Company is a party to various
legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable
and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company's
management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have
a material adverse impact on the Company's consolidated financial position, results of operations and cash flows.
Related parties
Parties, which can be a corporation or individual,
are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject
to common control or common significant influence, such as a family member or relative, shareholder, or a related corporation.
Segment reporting
The Company's chief operating decision-maker
("CODM") has been identified as its Chief Executive Officer, who reviews the consolidated results when making decisions about
allocating resources and assessing the performance of the Company as a whole and hence, the Company has only
one
reportable segment. The
Company does not distinguish between markets or segments for the purpose of internal reporting. The Company's long-lived assets
are all located in the PRC and substantially all of the Company's revenues are derived from the PRC. Therefore, no geographical
segments are presented.
Recent Accounting Pronouncements
The Company considers the applicability and impact
of all accounting standards updates ("ASUs"). Management periodically reviews new accounting standards that are issued. Under
the Jumpstart Our Business Startups Act of 2012, as amended (the "JOBS Act"), the Company meets the definition of an emerging
growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays
the adoption of these accounting standards until they would apply to private companies.
In June 2016, the FASB amended guidance related
to the impairment of financial instruments as part of ASU2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments, which will be effective January 1, 2020. The guidance replaces the incurred loss impairment
methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss.
In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which
clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising
from operating leases should be accounted for in accordance with Topic 842. On May 15, 2019, the FASB issued ASU 2019-05, which provides
transition relief for entities adopting the Board's credit losses standard, ASU 2016-13. Specifically, ASU 2019-05 amends ASU 2016-13
to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for financial instruments that (1) were previously
recorded at amortized cost and (2) are within the scope of the credit losses guidance in ASC 326-20, (3) are eligible for the fair value
option under ASC 825-10, and (4) are not held-to-maturity debt securities. For entities that have adopted ASU 2016-13, the amendments
in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early
adopt the ASU in any interim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date
will be the same as the effective date of ASU 2016-13. In November 2019, the FASB issued ASU 2019-11, "Codification Improvements
to Topic 326, Financial Instruments – Credit Losses." ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13,
"Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The ASU
2019-11 amendment provides clarity and improves the codification to ASU 2016-03. The pronouncement would be effective concurrently with
the adoption of ASU 2016-03. The pronouncement is effective for fiscal years beginning after December 15, 2019 and interim periods within
those fiscal years. In February 2020, the FASB issued ASU No. 2020-02, which provides clarifying guidance and minor updates to ASU No.
2016-13 – Financial Instruments – Credit Loss (Topic 326) ("ASU 2016-13") and related to ASU No. 2016-02 - Leases
(Topic 842). ASU 2020-02 amends the effective date of ASU 2016-13, such that ASU 2016-13 and its amendments will be effective for the
Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact
this ASU will have on its consolidated financial statements and related disclosures.
F-
25
In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. The guidance in this ASU eliminates certain exceptions for
recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU
also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to
members of a consolidated group. For public entities, the amendments in this Update are effective for fiscal years, beginning after December
15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods
within fiscal years beginning after December 15, 2022. Early adoption of the amendment is permitted. The Company adopt this guidance effective
January 1, 2022. The adoption of the new guidance did not have a significant impact on its consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10,
Codification Improvements – Disclosures ("ASU 2020-10") to align with the SEC's regulations. This ASU improves
consistency by amending the codification to include all disclosure guidance in the appropriate disclosure sections and clarifies application
of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting
terminology. The Company adopted ASU 2020-10 effective January 1, 2022. The adoption of the new guidance did not have a significant impact
on its consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04,
Earnings
Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives
and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)
. The ASU addresses issuer's accounting for certain modifications
or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning
after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance
effective January 1, 2022. The adoption of the new guidance did not have a significant impact on its consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08,
, "'Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers"
("ASU 2021-08"). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities
in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and
measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not
acquired in a business combination. The amendments are effective for the Company beginning after December 15, 2023 and are applied prospectively
to business combinations that occur after the effective date. The Company does not expect the adoption of ASU 2021-04 will have a material
effect on the consolidated financial statements.
In November 2021, the FASB issued Accounting Standards
Update No 2021-10, Government Assistance (Topic 832) — Disclosures by Business Entities about Government Assistance
("ASU 2021-10"). ASU 2021-10 requires additional disclosures regarding the nature of government assistance, the related accounting
policy used to account for assistance, the affected line items and applicable amounts within the consolidated financial position and results
of operations, and significant terms and conditions related to the assistance. Government assistance within the scope of ASC 832 includes
assistance that is administered by domestic, foreign, local, state, national governments, as well as departments, independent agencies
and intergovernmental organizations. The updated guidance increases transparency of government assistance including, 1) the type of assistance,
2) the entity's accounting for assistance, and 3) the effect of assistance on the entity's financial statements. The new standard
is effective for fiscal years beginning after December 15, 2021. The Company adopted ASU 2021-10 effective January 1, 2022. The adoption
of this guidance did not have a material impact on the Company's consolidated financial statements.
F-
26
Except for the above-mentioned pronouncements,
there are no new recent issued accounting standards that will have a material impact on the consolidated financial position, statements
of operations and cash flows.
3.
Accounts receivable, net
Accounts receivable,
net consisted of the following:
As of
December 31,
2022
As of
December 31,
2021
Accounts receivable
$
92,225
$
83,019
Less: Allowance for doubtful accounts
(
3,115
)
(
2,398
)
Total
$
89,110
$
80,621
Movement of allowance
of doubtful accounts
Year
Ended
December 31,
2022
Year
Ended
December 31,
2021
Year
Ended
December 31,
2020
Beginning balance
$
2,398
$
2,537
$
2,162
Provision for doubtful accounts
1,130
428
399
Written-off
(
178
)
(
624
)
(
185
)
Exchange rate effect
(
235
)
57
161
Ending balance
$
3,115
$
2,398
$
2,537
4.
Prepayments and other assets,
net
The prepayments and other
assets, net consisted of the following:
As of
December 31, 2022
As of
December 31, 2021
Deposits (a)
$
9,149
$
8,414
Prepayments for goods and services
4,004
2,470
VAT recoverable (b)
3,843
5,081
Prepayments for long-lived assets (c)
15,789
15,998
Advances to employees
63
228
Others
538
924
Prepayments and other assets
33,386
33,115
Less: Provisions for prepayments and other assets
(
454
)
(
439
)
Prepayments and other assets, net
32,932
32,676
Less: Prepayments and other current assets, net
(
18,292
)
(
17,934
)
Other non-current assets
$
14,640
$
14,742
(a)
Deposits represent the refundable deposits to the lessors for the leased warehouses and office space.
(b)
VAT recoverable represents the balances that the Company can utilize to deduct its value-added tax liabilities within the next 12 months.
(c)
Prepayments for long-lived assets represent mainly prepayments for constructions of logistic stations.
F-
27
Movement
of provisions for prepayments and other assets
Year Ended
December 31,
2022
Year Ended
December 31,
2021
Year Ended
December 31,
2020
Beginning balance
$
439
$
591
$
382
Provisions for prepayments and other assets
54
-
173
Written-off
-
(
164
)
-
Exchange rate effect
(
39
)
12
36
Ending balance
$
454
$
439
$
591
5.
Property and equipment,
net
Property and equipment,
net consisted of the following:
As of
December 31,
2022
As of
December 31,
2021
Buildings
$
24,150
$
26,411
Office equipment
3,230
3,401
Machinery and tools
1,879
1,886
Vehicles
37,841
43,330
Leasehold improvements
4,964
6,310
Constructions in progress
2,215
752
Subtotal
74,279
82,090
Less: accumulated depreciation and amortization
(
34,014
)
(
34,809
)
Property and equipment, net
$
40,265
$
47,281
As of December 31, 2022
and 2021, buildings with net book value amounted to approximately $
18.1
million and $
20.2
million, respectively, were pledged for obtaining
various of loans (See Note 10 Short-term bank loans).
Depreciation and amortization expenses for the years ended December 31,
2022, 2021 and 2020, amounted to approximately $
7.0
million, $
5.9
million and $
4.7
million, respectively. For the years ended December
31, 2022,  2021 and 2020, depreciation and amortization included in the cost of revenue were approximately $
6.1
million, $
4.9
million
and $
4.2
million, respectively. For the years ended December 31, 2022, 2021 and 2020, depreciation and amortization included in selling,
general and administrative expenses were approximately $
0.9
million, $
1.0
million and $
0.5
million, respectively.
F-
28
6.
Intangible assets, net
The Company's intangible
assets with definite useful lives primarily consisted of land use rights and licensed software. The following table summarizes the components
of acquired intangible asset balances.
As of
December 31,
2022
As of
December 31,
2021
Land use rights
$
8,011
$
8,751
Licensed software
2,133
1,973
Subtotal
10,144
10,724
Less: accumulated amortization
(
3,433
)
(
3,197
)
Intangible assets, net
$
6,711
$
7,527
As of December 31, 2022 and 2021, land use rights  with net book
value amounted to approximately $
2.6
million and $
2.9
million, respectively, were pledged for obtaining various of loans (See Note 10
Short-term bank loans).
Amortization expenses
for the years ended December 31, 2022, 2021 and 2020, amounted to approximately $
0.5
million, $
0.5
million and $
0.5
million,
respectively.
The future amortization
for the intangible assets is expected to be as follows:
Twelve months ending December 31,
Estimated
amortization
expense
2023
$
547
2024
547
2025
327
2026
321
2027
289
Thereafter
4,680
Total
$
6,711
7.
Long-term investments
The Company's long-term
investments consisted of the following:
As of
December 31,
2022
As of
December 31,
2021
Equity investments accounted for using the equity method
$
2,040
$
2,142
F-
29
For the years ended December
31, 2022, 2021 and 2020, the Company has the following equity investments which were accounted for using the equity method:
Movement of equity
method investment
Year
Ended
December 31,
2022
Year
Ended
December 31,
2021
Year
Ended
December 31,
2020
Beginning balance
$
2,142
$
2,024
$
1,839
Share of income in equity method investee
82
70
55
Exchange rate effect
(
184
)
48
130
Ending balance
$
2,040
$
2,142
$
2,024
In 2007, the Company
acquired
40
% of the equity interests of Fujian Bafang Shengfeng Logistics Co., Ltd ("Fujian Bafang") with a cash consideration
of approximately $
1.7
million (RMB
12
million). As the Company is able to exercise significant influence over Fujian Bafang after
such acquisition, the Company therefore accounted for this investment under the equity method of accounting.
No impairment loss was
recognized for the long-term investments for the years ended December 31, 2022, 2021 and 2020.
8.
Deposit for investment
On August 16, 2019, the
Company signed a Share Purchase Agreement ("2019 SPA") with Huasheng Group Limited (the "Huasheng"), an unrelated
third party to the Company. Pursuant to the SPA, Huasheng agreed to sell and the Company agreed to buy
100
% of the equity interests of
Fujian Yingfu Integrated circuit Co., Ltd. ("Yingfu" or the "Target Company"), which is a wholly owned subsidiary
of Huasheng. The total consideration is approximately $
28.7
million (RMB
200
million). The Company paid approximately $
14.3
million (RMB
100
million) to Huasheng in 2019 and $
8.6
million (RMB
60
million) in the March to May, 2020 as the deposit for the investment according
to the SPA. Huasheng is requested to pay
8
% of the deposit received as interest to the Company if the transaction is not consummated by
June 30, 2020.
The 2019 SPA was terminated
later based on mutual agreement of all parties and a new share purchase agreement ("2020 SPA") has been entered into on December
18, 2020. Pursuant to the 2020 SPA, the Company will buy a newly established subsidiary of Yingfu with a land use right for the same consideration.
The deposit for the 2020 SPA is approximately $
14.3
million (RMB
100
million). As a result, approximately $
8.6
million (RMB
60
million)
from the initial payment made has been returned to the Company in December 2020. Additionally, pursuant to the 2020 SPA, any party who
unilaterally terminates the agreement shall pay the other party a breakage fee in the amount of approximately $
3.1
million (RMB
20
million)
and Huasheng agreed to make interest payment of approximately $
1.2
million (approximately RMB
8.36
million) to the Company before December
31, 2020 based on the term stated in SPA 2019 and is requested to pay
8
% of the deposit received as interest to the Company if the transaction
is not consummated by December 15, 2021. The interest payment was received in full by the Company on December 29, 2020.
Due to the delay of the
government's approval on this transaction involved with the land use right, the 2020 SPA agreement expired in December 2021. A new
agreement ("2021 SPA") has been entered into to replace the 2020 SPA on December 31, 2021. There were no other changes for
the consideration nor the deposit. Moreover, Huasheng agreed to make an interest payment of RMB
8
million (approximately $
1.2
million)
before January 30, 2022 based on the term stated in SPA 2020 and is requested to pay
8
% of the deposit received payable to the Company
if the transaction is not consummated by December 15, 2022. The Company received the interest of approximately $
1.2
million (RMB
8.0
million)
on January 19, 2022.
On December 23, 2022,
a new agreement ("2022 SPA") has been entered into to replace the 2021 SPA, which expired on the same date. There are no other
changes for the consideration nor the deposit, expect that Yingfu agreed to make an interest payment of RMB
8
million (approximately $
1.2
million) before March 15, 2023 based on the term stated in SPA 2021 and is requested to pay
6
% of the deposit received as interest to
the Company if the transaction is not consummated by December 15, 2023. The Company received the interest of approximately $
1.2
million
(RMB
8.0
million) on February 15, 2023.
Interest income has been
recorded by the Company for the years ended December 31, 2022, 2021 and 2020. This transaction is still pending for the government's
approval as of the issuance date of this report. Huasheng has performed its obligations according to the 2021 SPA and there is no evidence
of impairment noted by the Company as of December 31, 2022 and 2021. As of December 31, 2022 and 2021, the deposit for investment was
approximately $
14.4
million and $
15.7
million (RMB
100
million, difference due to exchange rates), respectively. Upon the completion of
this investment, the Company plans to expand its transportation business and build up more logistic stations.
F-
30
9.
Related party transactions
The table below sets
forth the major related parties and their relationships with the Company as of December 31, 2022 and 2021, and for the years ended
December 31, 2022, 2021 and 2020:
Name of related parties
Relationship with the Company
Fujian Bafang
An equity investee of the Company
Fuzhou Tianyu Shengfeng Industrial Co., Ltd ("Fuzhou Tianyu")
A company controlled by Yongteng Liu, who is the brother of Yongxu Liu, CEO and Chairman of the Company
Fuzhou Tianyu Shengfeng Property Management Co., Ltd ("Fuzhou Tianyu Management")
A company under the control of a shareholder
Fuzhou Tianyu Yuanmei Catering Co., Ltd ("Fuzhou Tianyu Catering")
A company under the control of a shareholder
Beijing Union Logistics Co., Ltd ("Beijing Banglian") (1)
A company under the control of a shareholder
Fujian Desheng Logistics Co., Ltd ("Fujian Desheng")
A company under the control of a shareholder
Dongguan Suxing New Material Co., Ltd ("Suxing") (2)
A company under the control of a non-controlling shareholder
Hainan Tianyi Logistics Distribution Co., Ltd ("Hainan Tianyi") (3)
An equity investee of the Company
Yongteng Liu
CEO's brother
(1)
In January 2022, the Company's shareholder sold the equity interest in Beijing Banglian.
(2)
On July 14, 2021, Shengfeng Logistics entered into a share transfer agreement with Dongguan Suxing New Material Co., Ltd ("Dongguan Suxing"), a related party, to transfer its
51
% equity interest in Fuzhou Shengfeng New Material Technology Co., Ltd. ("New Material Technology") to Dongguan Suxing (Note 1). After the transaction, Suxing became a non-related party to the Company.
(3)
On September 15, 2021, the Company signed a share purchase agreement with a third party. According to such agreement, the Company sold its
5
% equity interests in Hainan Tianyi to such third party. After the transaction, Hainan Tianyi became a non-related party to the Company.
i)
Significant transactions
with related parties were as follows:
Year
ended
December 31,
2022
Year
ended
December 31,
2021
Year
ended
December 31,
2020
Transportation services to Fujian Bafang
$
18
$
-
$
7
Transportation services to Fujian Desheng
-
349
-
Sales of material to Suxing
-
-
49
Total
$
18
$
349
$
56
F-
31
Year
ended
December 31,
2022
Year
ended
December 31,
2021
Year
ended
December 31,
2020
Transportation services from Beijing Banglian
$
-
$
2,265
$
2,750
Transportation services from Hainan Tianyi
$
-
$
1,207
$
1,109
Transportation services from Fujian Bafang
$
1,196
$
157
$
144
Purchase raw materials from Suxing
$
-
$
577
$
781
Lease services from Fuzhou Tianyu
$
305
$
358
$
296
Lease services from Fuzhou Tianyu Management
$
35
$
-
$
-
ii)
Guarantees
The Company's shareholder,
CEO and Chairman, Yongxu Liu, his spouse, Xiying Yang, and his brother, Yongteng Liu, were the guarantors of the Company's short-term
bank loans (See Note 10).
iii)
Significant balances with
related parties were as follows:
As
of
December 31,
2022
As
of
December 31,
2021
Due from related parties
Fuzhou Tianyu
$
42
$
46
Beijing Banglian
-
4
Total
$
42
$
50
As
of
December 31,
2022
As
of
December 31,
2021
Due to related parties
Fujian Bafang (a)
$
1,694
$
1,574
Fuzhou Tianyu
84
29
Beijing Banglian
-
246
Fuzhou Tianyu Management
36
24
Hainan Tianyi
-
4
Yongteng Liu
600
-
Total
$
2,414
$
1,877
(a)
On December 10, 2007, the Company
entered into an interest-free loan agreement with Fujian Bafang for a principal amount of approximately $
1.4
million (RMB
9.6
million).
Such loan is due on demand.
F-
32
10.
Short-term bank loans
The following table presents
short-term bank loans from commercial banks as of December 31, 2022 and 2021:
As
of
December 31,
2022
As
of
December 31,
2021
China Minsheng Bank Fuzhou Branch
$
10,769
$
11,765
Bank of China Fuzhou Jin'an Branch
11,487
10,509
China Merchant Bank Fuzhou Branch
10,769
9,411
Xiamen International Bank Co., Ltd. Fuzhou Branch of
7,179
7,842
Haixia Bank of Fujian Fuzhou Jin'an Branch
1,436
784
Fujian Fuzhou Rural Commercial Bank Co., Ltd. Yuefeng Branch
1,436
1,568
Shanghai Pudong Development Bank Co., Ltd. Fuzhou Branch
1,436
1,568
Industrial Bank Fuzhou Huqian Sub Branch
861
941
Industrial Bank Fuzhou Branch
1,421
1,568
China Everbright Bank Co., Ltd Fuzhou Tongpan Branch
861
-
Total
$
47,655
$
45,956
As of December 31,
2022 and 2021, the total short-term bank borrowings balance of the Company was approximately $
47.7
million and $
46.0
million, respectively.
The short-term bank loans outstanding as of December 31, 2022 and 2021 carried a weighted average interest rate of approximately
4.48
% and
4.70
% per annum, respectively.
China Minsheng
Bank Fuzhou Branch
On September 10, 2021
and September 22, 2021, respectively, the Company entered into short-term loan facility agreements with China Minsheng Bank Fuzhou Branch,
pursuant to which a facility of up to approximately $
5.8
million (RMB
37
million) and a facility of up to approximately $
5.96
million (RMB
38
million) were made available to the Company,
at a fixed interest rate of
4.35
% per annum
.
These short-term loans were collateralized by the real estate amounted to approximately $
8.4
million and the land use rights for
the property located at Dapu village, Honglu street, Fuqing City, Fuzhou City, Fujian Province, PRC, amounted to approximately $
1.0
million,
owned by the Company and guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and his brother, Yongteng Liu.
The $
5.8
million (RMB
37
million) loan matures on
September 10, 2022
and the $
5.96
million (RMB
38
) loan matures on
September 22, 2022
. The Company made early
repayment for the loans of approximately $
5.8
million (RMB
37
million) on July 7, 2022, $
2.82
million (RMB
18
million) on July 14, 2022
and $
3.14
million (RMB
20
million) on July 18, 2022.
After the repayment,
the Company obtained additional loans of approximately $
5.3
million (RMB
37
million) on July 7, 2022, $
2.6
million (RMB
18
million) on July
14, 2022 and $
2.9
million (RMB
20
million) on July 18, 2022 at a fixed interest rate of
4
% per annum.
As of December 31, 2022,
loan balance under the RMB
75
million credit line was $
10.8
million (RMB
75
million).
The aforementioned loans
were repaid on maturity on February 7, February 14 and February 18, 2023. After repayment of the loans of RMB
75
million, the Company obtained
the note payable amounted $
8.6
million (RMB
60
million) issued by the same bank on February 17, 2023 and February 20, 2023 to pay to its
suppliers.
F-
33
Bank of China Fuzhou
Jin'an Branch
On June 28, 2021, the
Company entered into a short-term facility agreement with Bank of China Fuzhou Jin'an Branch pursuant to which a total facility
of up to approximately $
12.3
million (RMB
80
million) was made available to the Company
at a fixed
interest rate of
4.35
% per annum
. Loans from this facility are collateralized by the real estate and the land use rights,
amounted to approximately $
9.8
million in total, for the property located at No. 50, Sun Road, Wangting Town, Xiangcheng District, Suzhou,
Jiangsu Province owned by the Company and guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company. Pursuant to the
loan facility agreement, the Company shall meet two financial covenants that: (i) its current ratio shall be no less than 1; and (ii)
the financing exposure balance shall be no more than approximately $
61.3
million (RMB
400,000,000
) or
25
% of the annual revenue. If the
Company fails to meet either of the financial covenants, the total loan facility available will be reduced to approximately $
7.7
million
(RMB
50
million). On July 14, July 21 and August 10, 2021, the Company drew down approximately $
2.6
million (RMB
17
million), $
3.1
million
(RMB
20
million) and $
4.6
million (RMB
30
million) loans from this facility, respectively. On March 21, 2022, the Company obtained approximately
$
1.9
million (RMB
13
million) under this credit line.
The Company made early
repayment for the loans of approximately $
2.6
million (RMB
17
million) on May 18, 2022, $
3.0
million (RMB
20
million) on June 15, 2022 and
$
4.6
million (RMB
30
million) on June 7, 2022. After the repayment, the Company obtained additional loans of approximately $
2.4
million
(RMB
17
million) on May 26, 2022, $
4.3
million (RMB
30
million) on June 13, 2022, and $
2.9
million (RMB
20
million) on June 23, 2022, under
the same loan facility agreement entered in June 2021.
As of December 31, 2022,
loan balance under the $
11.5
million (RMB
80
million) credit line was $
11.5
million (RMB
80
million).
The aforementioned loan's mature dates are March 20, 2023, May
25, 2023, June 12, 2023 and June 22, 2023, respectively. On October 21, 2022, the Company signed supplementary contracts with Bank of
China Fuzhou Jin'an Branch to change the interest rate of the loan obtained in May and June 2022, from
4
% per annum to
2.5
% per
annum benefited from the special refinancing policy for transportation and logistics industry created by the People's Bank of China
and the Ministry of Transport, and the new interest rate is effective from the date of the contracts. The Company was in compliance with
the financial covenant as of December 31, 2022 and 2021. On March 21, 2023 and April 24, 2023, the Company repaid approximately $
1.9
million
(RMB
13
million) and $
0.1
million (RMB
1
million) to the bank, respectively.
On March 15, 2023, the
Company entered into a short-term facility agreement with Bank of China Fuzhou Jin'an Branch pursuant to which a total facility
of up to approximately $
11.5
million (RMB
80
million) was made available to the Company. Loans from this facility are collateralized by
the real estate and the land use rights, amounted to approximately $
8.6
million in total, for the property located at No. 50, Sun Road,
Wangting Town, Xiangcheng District, Suzhou, Jiangsu Province owned by the Company and guaranteed by Yongxu Liu, a shareholder, the CEO
and Chairman of the Company.
Pursuant to the loan facility agreement, the Company shall meet two financial covenants that: (i) its current
ratio shall be no less than 0.85; and (ii) the financing exposure balance shall be no more than approximately $57.4 million (RMB400,000,000)
or 25% of the annual revenue. The unpaid loan balance under the prior loan agreements were transferred to this new loan facility agreement
according to the terms stated in the new agreement. On April 7, 2023, the Company drew down approximately $1.9 million (RMB13 million)
under this line at a fixed interest rate of 2.5% per annum.
China Merchant
Bank Fuzhou Branch
During the year ended
December 31, 2020, the Company entered into a short-term loan facility agreement with China Merchant Bank Fuzhou Branch pursuant to which
a total facility of up to approximately $
9.2
million (RMB
60
million) was made available to the Company. On September 25, October 12, 22,
26 and November 28, 2020, the Company drew down approximately $
2.1
million (RMB
14
million), $
2.7
million (RMB
17.5
million), $
1.4
million
(RMB
9
million), $
1.4
million (RMB
9.3
million) and $
0.03
million (RMB
0.2
million) of loans, at a fixed interest rate of
4.5
% per annum.
These short-term loans were collateralized by the real estate amounted to approximately $
2.0
million, and the land use rights for
the property located at No. 50, Sun Road, Wangting Town, Xiangcheng District, Suzhou, Jiangsu Province, amounted to approximately $
1.0
million, owned by the Company and guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and one of the VIE's
subsidiaries. On August 3, August 26, 2021, the Company repaid approximately $
4.6
million (RMB
30
million) and $
3.1
(RMB
20
million) to
the bank, respectively. After the repayments were made, the Company drew down approximately $
4.6
million (RMB
30
million) on August 3,
2021, $
3.1
(RMB
20
million) on August 26, 2021 and $
1.6
million (RMB
10
million) on September 7, 2021 under the same loan facility credit
line for a period of six months.
F-
34
On December 24, 2021,
the Company entered into a new short-term loan facility agreement with China Merchant Bank Fuzhou Branch to replace the short-term loan
facility agreement signed with China Merchant Bank Fuzhou Branch during fiscal year 2020. Pursuant to such new short-term loan facility
agreement, a total facility of up to an aggregate principal amount of approximately $
11.6
million (RMB
75
million) was made available to
the Company. The loan facility term is from
December 24, 2021 to December 23, 2022
. The short-term loans that may be drawn under this
loan facility are collateralized by the real estate valued at approximately $
1.8
million, and the land use rights for the property
located at No. 50, Sun Road, Wangting Town, Xiangcheng District, Suzhou, Jiangsu Province, valued at approximately $
0.9
million, owned
by the Company, and are guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and one of the VIE's subsidiaries.
The unpaid loan balance under the prior loan agreement was transferred to this new loan facility agreement according to the terms stated
in the new agreement.
On January 14 and 21,
2022, approximately $
2.3
million (RMB
15
million) and $
2.3
million (RMB
15
million) were repaid by the Company, which loans were originally
obtained in August 2021. On January 14 and 21, 2022, the Company drew down approximately $
2.4
million (RMB
17
million) and $
2.2
million
(RMB
15
million) of loans under this new loan facility with an interest rate of
4.50
% per annum. On December 15, 2022 and December 16,
2022, the Company repaid approximately $
2.4
million (RMB
17
million) and $
2.2
million (RMB
15
million) to the bank, respectively. After
the repayments were made, the Company drew down approximately $
2.3
million (RMB
16
million) and $
3.0
million (RMB
21
million) of loans under
this new loan facility with an interest rate of
4.30
% per annum.
On January 28, February
28 and March 17, 2022, approximately $
2.3
million (RMB
15
million), $
0.8
million (RMB
5
million) and $
1.5
million (RMB
10
million) were repaid
by the Company, respectively, which were loans were originally obtained in August and September, 2021. On February 22, March 8 and April
12, 2022, the Company drew down approximately $
1.4
million (RMB
10
million), $
0.7
million (RMB
5
million) and $
1.4
million (RMB
10
million)
of loans, respectively, under this new loan facility with an interest rate of
4.50
% per annum. On December 19, 2022,
the Company repaid
approximately $1.4 million (RMB10 million), $0.7 million (RMB5 million) and $1.4 million (RMB10 million) to the bank.
After the repayments
were made, the Company drew down approximately $
3.6
million (RMB
25
million) on September 19, 2022 under this new loan facility with an
interest rate of
4.30
% per annum. On December 22, 2022, the Company drew down approximately $
1.4
million (RMB
10
million) of loans under
this new loan facility with an interest rate of
4.30
% per annum.
On January 14, 2022,
Fujian Shengfeng Logistics Co., Ltd. drew down approximately $
1.5
million (RMB
10
million) of loan with an interest rate of
4.50
% per annum.
On December 21, 2022, the Company repaid approximately $
1.5
million (RMB
10
million) to the bank.
On January 14, 2022,
Fuqing Shengfeng Logistics Co., Ltd. drew down approximately $
0.5
million (RMB
3
million) of loans under this loan facility with an interest
rate of
4.50
% per annum. On December 21, 2022, the Company repaid approximately $
0.5
million (RMB
3
million) to the bank. After the repayments
were made, On December 21, 2022, Fuqing Shengfeng Logistics Co., Ltd. drew down approximately $
0.4
million (RMB
3
million) of loans under
this loan facility with an interest rate of
4.30
% per annum.
As of December 31, 2022,
loan balance under the RMB
75
million credit line was approximately $
10.8
million (RMB
75
million).
Xiamen International
Bank Co., Ltd. Fuzhou Branch
During the year ended
December 31, 2019, the Company entered into a short-term loan facility agreement with Xiamen International Bank Co., Ltd. Fuzhou Branch
pursuant to which a total facility of up to approximately $
4.3
million (RMB
30
million) was made available to the Company as a revolving
loan facility for a two-year period
(From August 13, 2019 to August 13, 2021)
. On September 26, 2019, the Company made the first draw
down of the loan at a fixed interest rate of
6.2
% per annum. The loan amount was required to be repaid every quarter; the Company can
withdraw and repay again for the next quarter until the end of the loan period. This short-term loan was guaranteed by Yongxu Liu, a shareholder,
the CEO and Chairman of the Company. On August 13, 2021, the Company repaid approximately $
4.3
million (RMB
30
million) to the bank for
the final draw down.
F-
35
During the year ended
December 31, 2020, the Company entered into a short-term loan facility agreement with Xiamen International Bank Co., Ltd. Fuzhou Branch
pursuant to which a total facility of up to approximately $
3.1
million (RMB
20
million) was made available to the Company as a revolving
loan facility for a two-year period. On April 8, 2020, the Company drew down approximately $
3.1
million (RMB
20
million) of loan at a fixed
interest rate of
5.6
% per annum. The loan amount was required to be repaid every quarter; the Company can withdraw and repay again for
the next quarter until the end of the loan period. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman
of the Company. On April 8, 2022, the Company repaid approximately $
3.1
million (RMB
20
million) to the bank for the final draw down.
On August 11, 2021, the
Company entered into a short-term loan facility agreement with Xiamen International Bank Co., Ltd. Fuzhou Branch pursuant to which a total
facility of up to approximately $
4.3
million (RMB
30
million) was made available to the Company as a revolving loan facility for a three-year
period (From August 13, 2021 to August 13, 2024). This is the extension of the revolving loan facility agreement signed back to August
2019. On August 19, 2021, the Company drew down approximately $
4.3
million (RMB
30
million) of loan at a fixed interest rate of
5.6
% per
annum. The principal amount outstanding is required to be repaid every quarter; the Company can withdraw and repay again for the next
quarter until the end of the loan period. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the
Company. As of December 31, 2022, loan balance under the $
4.3
million (RMB
30
million) credit line was approximately $
4.3
million (RMB
30
million).
On April 8, 2022, the Company entered into a short-term loan facility
agreement with Xiamen International Bank Co., Ltd. Fuzhou Branch, pursuant to which a total facility of up to approximately $
3.1
million
(RMB
20
million) was made available to the Company as a revolving loan facility for a two-year period from April 8, 2022 to April 8, 2024.
On April 15, 2022, the Company drew down approximately $
2.9
million (RMB
20
million) of the loan at a fixed interest rate of
5.5
% per annum.
The loan amount was required to be repaid every six months; the Company can withdraw and repay again for the next quarter until the end
of the loan period. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company. On April 15,
2023, the Company repaid approximately $
2.9
million (RMB
20
million) to the bank. On April 17,2023, the Company drew down approximately
$
2.9
million (RMB
20
million) of the loan at a fixed interest rate of
5.5
% per annum for a maturity to April 8, 2024.
As of December 31, 2022,
loan balance under the RMB
20
million credit line was approximately $
2.9
million (RMB
20
million).
Haixia Bank of
Fujian Fuzhou Jin'an Branch
On April 7, 2020, the Company entered into a short-term loan agreement
with Haixia Bank of Fujian Fuzhou Jin'an Branch for a principal amount of $
1.5
million (RMB
10
million) at a fixed interest rate
of
5.0
% per annum. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company. This borrowing
has been repaid in full on April 28, 2021. On April 2, 2021, the Company entered into a new loan agreement with Fujian Fuzhou Jin'an
Branch for a principal amount of approximately $
1.5
million (RMB
10
million) at a fixed interest rate of
5.5
% per annum. The terms of said
new loan agreement are substantially similar with the original short-term loan agreement. The said new loan will mature in one year. On
December 14, 2021, the Company made early repayment of approximately $
0.75
million (RMB
5
million) to the bank. Subsequently on March 28,
2022, the Company made repayment for the rest of the loan. On June 16, 2022, the Company entered into a new short-term loan agreement
with Haixia Bank of Fujian Fuzhou Jin'an Branch for a principal amount of approximately $
1.4
million (RMB
10
million) at a fixed
interest rate of
5
% per annum. The short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company and
the VIE Shengfeng Logistic Group Co., Ltd. In addition, the short-term loan was further collateralized by 26 motor vehicles under one
of the VIE's subsidiaries Fujian Shengfeng Logistic Co., Ltd. On March 27, 2023, the collateral was changed to 6 motor vehicles
under Fujian Shengfeng Logistic Co., Ltd. The Company received the loan proceeds on July 13, 2022.
Fujian Fuzhou Rural
Commercial Bank Co., Ltd. Yuefeng Branch
On November 10, 2020,
the Company entered into a short-term loan agreement with Fujian Fuzhou Rural Commercial Bank Co., Ltd. Yuefeng Branch for a principal
amount of $
1.5
million (RMB
10
million) at a fixed interest rate of
3.35
% per annum. This short-term loan was guaranteed by Yongxu Liu,
a shareholder, the CEO and Chairman of the Company, and Fujian Yunlian Shengfeng Industrial Co. Ltd. On November 3, 2021, the Company
made a repayment of the loan in full. After the repayment, the Company entered into a new short-term loan agreement with Fujian Fuzhou
Rural Commercial Bank Co., Ltd. Yuefeng Branch on the same day for the same amount of the original loan, with the same terms as the previous
agreement, except the fixed interest rate increased to
5.50
% per annum. The aforementioned loan has been repaid on November 1, 2022 in
full. After the repayment, the Company entered into a new short-term loan agreement with Fujian Fuzhou Rural Commercial Bank Co., Ltd.
Yuefeng Branch on November 9, 2022 and drew down the loan on November 9, 2022 for the same amount of the original loan, with the same
terms as the previous agreement and the new loan will be mature on November 8, 2023.
F-
36
Shanghai Pudong
Development Bank Co., Ltd. Fuzhou Branch
On September 17, 2021,
the Company entered into a short-term loan agreement with Shanghai Pudong Development Bank Co., Ltd. Fuzhou Branch for a principal amount
of approximately $
1.5
million (RMB
10
million) at a fixed interest rate of
4.65
% per annum. This short-term loan was guaranteed by Yongxu
Liu, a shareholder, the CEO and Chairman of the Company, and Fuqing Shengfeng Logistics Co., Ltd. The loan has been early repaid on August
18, 2022. On August 19, 2022, the Company entered into a new short-term loan agreement with Shanghai Pudong Development Bank Co., Ltd.
Fuzhou Branch for the same amount of the original loan, with the same terms as the previous agreement.
On February 19, 2023,
the Company made repayment in full. On February 20, 2023, the Company entered into a new short-term loan agreement with Shanghai Pudong
Development Bank Co., Ltd. Fuzhou Branch for the same amount of the original loan, with the same terms as the previous agreement and received
the proceeds on the same date.
Industrial Bank
Fuzhou Huqian SubBranch
On March 9, 2021, one
of the VIE's subsidiaries, Fuqing Shengfeng Logistics Co., Ltd., entered into a short-term loan facility agreement with Industrial
Bank Fuzhou Huqian Sub-Branch pursuant to which a total facility of up to approximately $
1.5
million (RMB
10
million) was made available
to Fuqing Shengfeng Logistics Co., Ltd. On March 26, 2021, Fuqing Shengfeng Logistics Co., Ltd. drew down approximately $
0.9
million (RMB
6
million) of the loan at a fixed interest rate of
3.35
% per annum. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the
CEO and Chairman of the Company, and Shengfeng Logistics, the VIE. On January 20, 2022, Fuqing Shengfeng Logistics Co., Ltd. made repayment
in full.
On January 21, 2022,
the Company drew down approximately $
0.9
million (RMB
6
million) of the loan at a fixed interest rate of
3.8
% per annum. This short-term
loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and Shengfeng Logistics, the VIE. The new loan
will be mature on January 21, 2023.
As of December 31, 2022,
loan balance under the $
1.5
million (RMB
10
million) credit line was approximately $
0.9
million (RMB
6.0
million).
On January 28, 2023,
Fuqing Shengfeng Logistics Co., Ltd. made repayment in full. Subsequently on February 3, 2023, one of the VIE's subsidiaries, Fuqing
Shengfeng Logistics Co., Ltd., entered into a short-term loan facility agreement with Industrial Bank Fuzhou Huqian sub-branch pursuant
to which a total facility of up to approximately $
0.9
million (RMB
6
million) was made available to Fuqing Shengfeng Logistics Co., Ltd.
to January 18, 2024. On February 7, 2023, Fuqing Shengfeng Logistics Co., Ltd. drew down approximately $
0.9
million (RMB
6
million) of
the loan at a fixed interest rate of
3.7
% per annum. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman
of the Company, and Shengfeng Logistics, the VIE.
Industrial Bank
Co., Ltd. Fuzhou Branch
On March 10, 2021, the
Company entered into a loan agreement Industrial Bank Co., Ltd. Fuzhou Branch for a principal amount of approximately $
1.5
million (RMB
10
million) at a fixed interest rate of
4.35
% per annum. Approximately $
1.4
million (RMB
9
million) and $
0.2
million (RMB
1
million) were received
on March 10, 2021 and March 12, 2021, respectively. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman
of the Company. The loan was scheduled to mature in one year from its date of origination. The loan was subsequently repaid in full on
March 17, 2022.
On March 4, 2022, the
Company entered into a short-term loan credit line agreement with Industrial Bank Co., Ltd. Fuzhou Branch for a principal amount of approximately
$
1.4
million (RMB
10
million) at a fixed interest rate of
4.35
% per annum for the period from March 4, 2022 to November 11, 2022, and the
Company can withdraw from this credit line during the period. This short-term loan credit line was guaranteed by Yongxu Liu, a shareholder,
the CEO and Chairman of the Company. Approximately $
1.3
million (RMB
9
million) and $
0.1
million (RMB
1
million) were received on March
17, 2022 and March 21, 2022, respectively. The loan was subsequently repaid in full on November 8, 2022. On November 9, 2022, the Company
drew down approximately $
1.4
million (RMB
9.9
million) of loan at a fixed interest rate of
4.2
% per annum, which will be matured on November
9, 2023.
F-
37
As of December 31, 2022,
loan balance under the $
1.5
million (RMB
10
million) credit line was $
1.4
million (RMB
9.9
million).
China Everbright
Bank Co., Ltd Fuzhou Tongpan Branch
On June 1, 2021, one
of the VIE's subsidiaries, Fuqing Shengfeng Logistics Co., Ltd., entered into a short-term loan agreement with China Everbright
Bank Co., Ltd. Fuzhou Tongpan Branch for a term of one year in the principal amount of approximately $
0.9
million (RMB
6
million) at a
fixed interest rate of
4.6
% per annum. This short-term loan was guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company.
On December 29, 2021, the Company made repayment in full.
On January 19, 2022, Fuqing Shengfeng Logistics
Co., Ltd. entered into a short-term loan agreement with China Everbright Bank Co., Ltd. Fuzhou Tongpan Branch for a term of one year in
the principal amount of approximately $
0.9
million (RMB
6
million) at a fixed interest rate of
4.6
% per annum. This short-term loan was
guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and Shengfeng Logistics, the VIE. The loan proceeds in the
amount of $
0.9
million (RMB
6
million) were received by the Company on January 19, 2022.
As of December 31, 2022, loan balance under the
$
0.9
million (RMB
6
million) credit line was $
0.9
million (RMB
6
million).
On January 9, 2023, the Company repaid approximately
$
0.9
million (RMB
6
million) to the bank.
On January 9, 2023, Fuqing Shengfeng Logistics
Co., Ltd. entered into a short-term loan agreement with Fuzhou Tongpan Branch of China Everbright Bank Co., Ltd. in the principal amount
of approximately $
0.9
million (RMB
6
million) at a fixed interest rate of
4.1
% per annum due on July 11, 2023. This short-term loan was
guaranteed by Yongxu Liu, a shareholder, the CEO and Chairman of the Company, and Shengfeng Logistics, the VIE. The loan proceeds in the
amount of approximately $
0.9
million (RMB
6
million) were received by the Company on January 9, 2023.
Bank of Communications
Co., Ltd. Zhanjiang Branch
On June 9, 2021, the
shareholders of Shengfeng Logistics Group Co., Ltd. approved and adopted a resolution to submit an application for a short-term factoring
financing (with the account receivable from SDIC Guangdong Bioenergy Co., Ltd.) of approximately $
0.02
million (RMB
153,449
) from Bank
of Communications Co., Ltd., Zhanjiang Branch. The proceeds of this financing were subsequently received on July 5, 2021. The Company
collected the full amount of the outstanding receivables from SDIC Guangdong Bioenergy Co., Ltd. on October 14, 2021. The financing was
settled on October 14, 2021.
Guangxi Beibu Gulf
Bank Nanning Branch
On January 17, 2023, one of the VIE's subsidiaries,
Shengfeng Logistics Guangxi Co., Ltd. entered into a short-term loan agreement with Guangxi Beibu Gulf Bank Nanning branch in the principal
amount of approximately $
0.7
(RMB
5
million) at a fixed interest rate of
4.16
% per annum due on July 14, 2023. This short- term loan was
collateralized by a note receivable which amounted to approximately $
0.8
(RMB
5.3
million).
For the years ended December 31, 2022 and 2021,
the interest expenses for the above short-term bank loans were approximately $
2.1
million, $
2.3
million and $
2.0
million, respectively.
As of December 31, 2022, the Company had an aggregate
credit line of approximately $
43
.1million (RMB
300
million) and approximately $
42.5
million (RMB
295.9
million) was used.
F-
38
11.
Accrued expenses and other
liabilities
Accrued expenses and
other current liabilities consisted of the following:
As
of
December 31,
2022
As
of
December 31,
2021
Rental and freight logistics deposits received
$
3,498
$
3,319
Payables for long-term assets
1,360
2,384
Government subsidies
1,467
1,259
Contract liabilities
1,142
1,012
Cash collected on behalf of the customers (a)
181
262
Service payables
12
122
Contingent liability
258
434
Others
503
536
Total
$
8,421
$
9,328
Less: accrued expenses and other current liabilities
(
6,551
)
(
7,854
)
Other non-current liabilities
$
1,870
$
1,474
(a)
The Company collects the goods
considerations from the recipients after they deliver the goods to the determined locations on behalf of the customers, and will pay
to the customers on a regular basis.
12.
Leases
Operating leases as
lessee
As of December 31,
2022 and 2021, the Company has operating leases recorded on its consolidated balance sheets for certain office spaces and warehouses that
expire on various dates through 2031. The Company does not plan to cancel the existing lease agreements for its existing facilities prior
to their respective expiration dates. When determining the lease term, the Company considers options to extend or terminate the lease
when it is reasonably certain that it will exercise or not exercise that option. The Company's lease arrangements may contain both
lease and non-lease components. The Company has separately accounted for lease and non-lease components based on their nature. Payments
under the Company's lease arrangement are fixed.
The following tables
shows ROU assets and lease liabilities, and the associated financial statement line items:
As
of
December 31,
2022
As
of
December 31,
2021
Assets
Operating lease right-of-use assets, net
$
27,880
$
29,910
Liabilities
Operating lease liabilities, current
$
9,634
$
8,126
Operating lease liabilities, non-current
$
17,507
$
21,485
Weighted average remaining lease term (in years)
5.1
5.6
Weighted average discount rate (%)
5.78
5.80
F-
39
Information related to
operating lease activities during the years ended December 31, 2022 and 2021 are as follows:
Year ended
December 31,
2022
Year ended
December 31,
2021
Year
ended
December 31,
2020
Operating lease right-of-use assets obtained in exchange for lease liabilities
$
9,674
$
12,247
$
7,526
Operating lease expense
Amortization of right-of-use assets
9,157
7,963
7,248
Interest of lease liabilities
1,656
1,585
1,339
Total
$
10,813
$
9,548
$
8,587
Maturities of lease liabilities
were as follows:
Lease
Liabilities
Twelve months ending December 31,
2023
$
9,924
2024
7,017
2025
4,433
2026
3,055
2027
2,071
Thereafter
4,706
Total lease payments
31,206
Less: imputed interest
(
4,065
)
Total
$
27,141
13.
Taxes
(a)
Corporate Income Taxes ("CIT")
Cayman Islands
Under the current tax
laws of Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose
a withholding tax on payments of dividends to shareholders.
Hong Kong
Under the current Hong
Kong Inland Revenue Ordinance, the Company's subsidiaries incorporated in Hong Kong are subject to
16.5
% on its taxable income generated
from operations in Hong Kong. Additionally, payments of dividends by the subsidiaries incorporated in Hong Kong to the Company are not
subject to any Hong Kong withholding tax. The Company did not make any provision for Hong Kong profit tax as there were no assessable
profits derived from or earned in Hong Kong since inception.
F-
40
PRC
The Company's PRC
subsidiaries, VIE and VIE's subsidiaries are governed by the income tax laws of the PRC and the income tax provision in respect
to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation,
interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the "EIT Laws"), domestic
enterprises and Foreign Investment Enterprises (the "FIE") are usually subject to a unified
25
% enterprise income tax rate
while preferential tax rates, tax holidays and even tax exemption may be granted on case-by-case basis. The total impact of preferential
tax rates amounted to approximately $
0.3
million, $
0.2
million and $
0.2
million for the years ended December 31, 2022,2021 and 2020, respectively
and the impact to EPS is not significant for the years ended December 31, 2022, 2021 and 2020.
Beijing Shengfeng Supply Chain Management Co., Ltd. and Guangdong Shengfeng
Logistics Co., Ltd. were qualified as High and New Technology Enterprise ("HNTE") and are eligible to enjoy a preferential
tax rate of
15
% from 2020 to 2022 to the extent they have taxable income under the Enterprise Income Tax ("EIT") Law, as long
as they maintain the HNTE qualification and duly conducts relevant EIT filing procedures with the relevant tax authority. The Company
expects to renew the HNTE by May 2023. Beijing Tianyushengfeng e-commerce Technology Co. Ltd. has been qualified as HNTE and is eligible
to enjoy a preferential tax rate of
15
% from 2021 to 2023 to the extent it has taxable income under the Enterprise Income Tax Law. Shengfeng
Supply Chain Management Co. Ltd. is eligible to enjoy a preferential tax rate of
15
% from 2020 to 2022 and further extended to 2025 to
the extent it has taxable income under the Enterprise Income Tax ("EIT") Law due to the local preferential tax policy.
Several VIE's subsidiaries,
including Chengdu Shengfeng Supply Chain Management Co., Ltd., Shengfeng Logistics (Liaoning) Co., Ltd., Sichuan Shengfeng Logistics Co.,
Ltd., Shengfeng Logistics (Guangxi) Co., Ltd., etc., are qualified as small and micro enterprises, thus the preferential effective tax
rates of
2.5
%-5% are applied to these entities.
i)
The components of income
before income taxes are as follows:
Year ended
December 31,
2022
Year ended
December 31,
2021
Year
ended
December 31,
2020
Non-PRC
$
(
472
)
$
-
$
-
PRC
9,897
8,161
7,613
Total
$
9,425
$
8,161
$
7,613
ii)
The components of the income
tax provision are as follows:
Year ended
December 31,
2022
Year ended
December 31,
2021
Year
ended
December 31,
2020
Current
$
361
$
21
$
268
Deferred
1,238
1,496
1,302
Total
$
1,599
$
1,517
$
1,570
F-
41
iii)
The following table reconciles PRC statutory rates to the Company's effective tax rate:
The following table reconciles the China statutory
rates to the Company's effective tax rate for the years ended December 31, 2022, 2021 and 2020:
Year ended
December 31,
2022
Year ended
December 31,
2021
Year
ended
December 31,
2020
PRC statutory income tax rate
25.0
%
25.0
%
25.0
%
Effect of preferential tax rates (1)
(
2.8
)%
(
3.8
)%
(
2.8
)%
Eligible additional deduction
(
3.3
)%
(
3.2
)%
(
2.7
)%
Impact of different tax rates in other jurisdictions
1.3
%
-
%
-
%
Non-taxable and exemptions
(
3.3
)%
-
%
-
%
Permanent differences (2)
0.1
%
0.6
%
1.1
%
Effective income tax rate
17.0
%
18.6
%
20.6
%
(1)
Preferential tax rates  for
small and micro enterprises and high-tech entities.
(2)
Permanent differences mainly
consisted of non-deductible meal and entertainment fees in PRC tax returns.
iv)
The following table summarizes deferred tax assets and liabilities resulting from differences between financial accounting basis and tax basis of assets and liabilities:
As of
December 31,
2022
As of
December 31,
2021
Deferred tax assets:
Net operating losses carryforward
$
2,300
$
4,104
Allowance for doubtful accounts
874
699
Deferred income (a)
279
315
Intangible assets (b)
134
106
Subtotal
3,587
5,224
Less: valuation allowance
-
-
Deferred tax assets
$
3,587
$
5,224
(a)
Deferred income represents the assets related government subsidies, which will amortize on a straight-line basis within the useful life of related assets. The tax basis is recognized when the Company received the subsidies.
(b)
Intangible asset represents the amortization temporary difference of licensed software. Management uses
10
years useful life as the tax basis, which is different from the
5
years useful life in accounting basis.
The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences
become deductible. Management considers the cumulative earnings and projected future taxable income in making this assessment. Recovery
of substantially all of the Company's deferred tax assets is dependent upon the generation of future income, exclusive of reversing
taxable temporary differences. Based upon the level of historical taxable income and projections for future taxable income over the periods
in which the deferred tax assets are recoverable, valuation allowances of
nil
were provided for the Company's certain subsidiaries
with continuous losses as of December 31, 2022 and 2021. As of December 31, 2022 and 2021, there were approximately $
9.5
million and $
16.8
million net operating losses carryforwards in certain subsidiaries, respectively. The net operating tax loss carryforwards will expire
from 2023 to 2027.
Uncertain tax positions
The Company evaluates
each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures
the unrecognized benefits associated with the tax positions. As of December 31, 2022 and 2021, the Company did not have any significant
unrecognized uncertain tax positions. The Company did not incur interests and penalties tax for the years ended December 31, 2022, 2021
and 2020.
F-
42
(b)
Tax payable
Tax payable consisted
of the following:
As of
December 31,
2022
As of
December 31,
2021
Value-added tax payable
$
1,828
$
2,523
Income tax payable
185
18
Other taxes payable
194
348
Total
$
2,207
$
2,889
14.
Shareholders' equity
Ordinary shares
The Company was established
as a holding company under the laws of Cayman Islands on July 16, 2020. The original authorized number of ordinary shares is
50,000
shares
with par value of US$
1.00
per share. On December 18, 2020, the Company amended the Memorandum of Association to increase the authorized
share capital to
400,000,000
Class A Ordinary Shares and
100,000,000
Class B Ordinary Shares and reduced the par value to US$
0.0001
per
share. As of December 31, 2022 and 2021,
38,120,000
Class A Ordinary shares and
41,880,000
Class B Ordinary shares were issued and outstanding.
The shares are presented on a retroactive basis to reflect the recapitalization.
Additional paid-in
capital
As of December 31, 2022
and 2021, additional paid-in capital in the consolidated balance sheets represented the combined contributed capital of the Company's
subsidiaries. On December 31, 2022, Suzhou Shengfeng, one of VIE subsidiaries declared a dividend of approximately $
2.5
million based
on the subsidiary's performance up to October 31, 2022, of which approximately $
0.3
million was paid to the non-controlling shareholders;
For the year ended December 31, 2021, one of the non-controlling shareholders made capital contributions totaling approximately $
3.4
million
to the Company.
Statutory reserves
The Company is required
to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based
on after-tax net income determined in accordance with generally accepted accounting principles of the PRC ("PRC GAAP"). Appropriations
to the statutory surplus reserve are required to be at least
10
% of the after-tax net income determined in accordance with PRC GAAP until
the reserve is equal to
50
% of the entity's registered capital. Appropriations to the discretionary surplus reserve are made at
the discretion of the Board of Directors. The statutory reserve as determined pursuant to PRC statutory laws totaled approximately $
4.0
million and $
3.4
million as of December 31, 2022 and 2021, respectively.
Restricted assets
The Company's ability
to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiary. Relevant PRC statutory laws
and regulations permit payments of dividends by Shengfeng WFOE, Shengfeng VIE and its subsidiaries (collectively "Shengfeng PRC
entities") only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ
from those reflected in the statutory financial statements of Shengfeng PRC entities.
F-
43
Shengfeng PRC entities
are required to set aside at least
10
% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such
reserve funds reach
50
% of its registered capital. In addition, Shengfeng PRC entities may allocate a portion of its after-tax profits
based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. Shengfeng PRC entities
may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The
statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned
company out of China is subject to examination by the banks designated by State Administration of Foreign Exchange.
As a result of the foregoing
restrictions, Shengfeng PRC entities are restricted in their ability to transfer their assets to the Company. Foreign exchange and other
regulation in the PRC may further restrict Shengfeng PRC entities from transferring funds to the Company in the form of dividends, loans
and advances. As of December 31, 2022 and 2021, amounts restricted are the paid-in-capital and statutory reserve of Shengfeng PRC entities,
which amounted to approximately $
79.6
million and $
79.0
million, respectively.
15.
Commitments and contingencies
(a)
Lease commitments
The Company's commitment
for minimum lease payments under the remaining operating leases as of December 31, 2022 is $
3.5
million.
(b)
Contingencies
The Company is subject
to legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with
certainty, but the Company does not anticipate that the final outcome arising out of any such matters will have a material adverse effect
on our consolidated financial position, cash flows or results of operations on an individual basis or in the aggregate. As of December
31, 2022, the Company had various legal proceedings or disputes related to the customers, suppliers, labor contracts and traffic accidents,
which were still pending court decisions. Approximately $
1.0
million (RMB
7.1
million) was frozen in bank due to the pending lawsuits,
which was included in restricted cash as of December 31, 2022. As of the date of this audit report, the above-mentioned amount is still
frozen in bank and the other legal proceedings or disputes have no material impact to the Company's business or financial performances.
F-
44
(c)
Variable interest entity structure
It is the opinion of
management that (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the Contractual
Arrangements are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect; and (iii) the business
operations of Tianyu and the VIE are in compliance with existing PRC laws and regulations in all material respects.
However, there are substantial
uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot
be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of the Company's management.
If the current corporate structure of the Company or the Contractual Arrangements is found to be in violation of any existing or future
PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with
changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company's current
corporate structure or the Contractual Arrangements is remote based on current facts and circumstances.
16.
Subsequent events
On April 4, 2023, the Company completed its IPO of
2,400,000
Class
A ordinary shares at a public offering price of $
4.00
per share. The Company received aggregate gross proceeds of $
9.6
million from the
offering, before deducting underwriting discounts and other related expenses. Net proceeds amounted to approximately $
8.5
million after
deducting underwriting discounts and other related expenses. The Class A ordinary shares began trading on the Nasdaq Capital Market on
March 31, 2023 under the ticker symbol "SFWL." In connection with the IPO, the Company issued to the Representative and its
affiliates warrants, exercisable for a period of one year after the effective date of the registration statement, entitling the holders
of the warrants to purchase an aggregate of up to
144,000
Ordinary Shares at a per share price of $
4.46
.
17.
Unaudited Condensed financial information of the parent company
The Company's PRC
subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company. Payment of dividends by entities
organized in the PRC are subject to limitations, procedures and formalities. Regulations in the PRC currently permit payments of dividends
only out of accumulated profits as determined in accordance with accounting standards and regulations in the PRC. The Company's
PRC subsidiaries are also required to set aside at least
10
% of its after-tax profit based on PRC accounting standards each year to its
statutory reserves account until the accumulative amount of such reserves reaches
50
% of its respective registered capital. The aforementioned
reserves can only be used for specific purposes and are not distributable as cash dividends.
In addition, the Company's
operations and revenues are conducted and generated in the PRC, all of the Company's revenue being earned and currency received
is denominated in RMB. RMB is subject to the foreign exchange control regulation in China, and, as a result, the Company may be unable
to distribute any dividends outside of China due to PRC foreign exchange control regulations that restrict the Company's ability
to convert RMB into USD.
Regulation S-X requires
that the condensed financial information of registrant shall be filed when the restricted net assets of consolidated subsidiaries exceed
25
percent of consolidated net assets as of the end of the most recently completed fiscal year. For purposes of the above test, restricted
net assets of consolidated subsidiaries shall mean that amount of the registrant's proportionate share of net assets of consolidated
subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent
company by subsidiaries in the form of loans, advances or cash dividends without the consent of a third party. The condensed parent company
financial statements have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X as the restricted net assets of the
Company's PRC subsidiary exceed
25
% of the consolidated net assets of the Company.
Certain information and
footnote disclosures normally included in financial statements prepared in conformity with generally accepted accounting principles have
been condensed or omitted. The Company's investment in subsidiary is stated at cost plus equity in undistributed earnings of subsidiaries.
F-
45
CONDENSED
BALANCE SHEETS
(Unaudited)
December 31,
December 31,
2022
2021
ASSETS
Current assets
Cash
$
47
$
-
Total Current Assets
47
-
Deferred issuance costs
81
-
Investment in subsidiaries and VIEs (restricted)
91,695
91,593
Non-current assets
91,776
91,593
Total Assets
$
91,823
$
91,593
Liabilities and Equity
Current liabilities
Due to a related party
600
-
Total Current Liabilities
600
-
Total liabilities
600
-
Commitments and Contingencies
Shareholders' Equity
Class A Ordinary share, $
0.0001
par value,
400,000,000
shares authorized;
38,120,000
shares issued and outstanding as of December 31, 2022 and 2021
4
4
Class B Ordinary share, $
0.0001
par value,
100,000,000
shares authorized;
41,880,000
shares issued and outstanding as of December 31, 2022 and 2021
4
4
Additional paid-in capital
79,549
75,575
Retained earnings
17,275
10,032
Accumulated other comprehensive income (loss)
(
5,609
)
2,548
Total Shareholders' Equity
91,223
91,593
Total Liabilities and Shareholders' Equity
$
91,823
$
91,593
F-
46
CONDENSED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Years Ended December 31,
2022
2021
2020
Equity in earnings of subsidiaries
$
8,259
$
6,898
$
6,091
General and administrative expenses
(
472
)
-
-
NET INCOME
7,787
6,898
6,091
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment
(
8,157
)
2,072
5,362
COMPREHENSIVE INCOME (LOSS)
$
(
370
)
$
8,970
$
11,453
CONDENSED STATEMENTS OF CASH FLOW
(Unaudited)
Years
Ended December 31,
2022
2021
2020
Cash flows from operating activities
Net income
$
7,787
$
6,898
$
6,091
Adjustments to reconcile net income to net cash used in operating activities:
Equity income of subsidiaries and VIEs
(
8,259
)
(
6,898
)
(
6,091
)
Net cash used in operating activities
(
472
)
-
-
Cash flows from investing activities
-
-
-
Cash flows from financing activities
Due to related party
600
-
-
Deferred issuance costs
(
81
)
-
-
Net cash provided by operating activities
519
-
-
Net increase in cash and restricted cash
47
-
-
Cash and restricted cash, beginning of year
$
-
$
-
$
-
Cash and restricted cash, end of year
$
47
$
-
$
-
F-
47