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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Washington, D.C. 20549</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"><b>FORM <ix:nonNumeric contextRef="c0" name="dei:DocumentType">20-F</ix:nonNumeric></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric>&#160;<b>REGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934</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"><b>OR</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"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric>&#160;<b>ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</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"><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 31</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:DocumentFiscalYearFocus">2022</ix:nonNumeric></ix:nonNumeric></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"><b>OR</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"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span>&#160;<b>TRANSITIONAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>OR</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"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric>&#160;<b>TRANSITIONAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</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">Date of event requiring this shell company report&#160;<b>_________</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"><b>For the transition period from _________ to
__________</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"><b>Commission file number <ix:nonNumeric contextRef="c0" name="dei:EntityFileNumber">001-38307</ix:nonNumeric></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"><ix:nonNumeric contextRef="c0" name="dei:EntityRegistrantName"><b>RETO ECO-SOLUTIONS, INC.</b></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact Name of registrant as specified in its charter)</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"><b>Not Applicable</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Translation of Registrant&#8217;s name into English)</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"><ix:nonNumeric contextRef="c0" format="ixt-sec:edgarprovcountryen" name="dei:EntityIncorporationStateCountryCode"><b>British Virgin Islands</b></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Jurisdiction of incorporation or organization)</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"><b><ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine1">c/o Beijing REIT Technology Development Co.,
Ltd</ix:nonNumeric>.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine2">X-702, Tower A, 60 Anli Road</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine3">Chaoyang District</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressCityOrTown"><b>Beijing</b></ix:nonNumeric>, <b>People&#8217;s Republic of <ix:nonNumeric contextRef="c0" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">China</ix:nonNumeric>
<ix:nonNumeric contextRef="c0" name="dei:EntityAddressPostalZipCode">100101</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address of principal executive offices)</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"><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelName"><b>Hengfang Li</b></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine1">c/o Beijing REIT Technology Development Co.,
Ltd</ix:nonNumeric>.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine2">X-702, Tower A, 60 Anli Road</ix:nonNumeric>, <ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine3">Chaoyang District</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c1" name="dei:EntityAddressCityOrTown"><b>Beijing</b></ix:nonNumeric>, <b>People&#8217;s Republic of <ix:nonNumeric contextRef="c1" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">China</ix:nonNumeric>
<ix:nonNumeric contextRef="c1" name="dei:EntityAddressPostalZipCode">100101</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c1" name="dei:CityAreaCode">(+86)</ix:nonNumeric> <ix:nonNumeric contextRef="c1" name="dei:LocalPhoneNumber">10-64827328</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelEmailAddress"><b>Email: ir@retoeco.com</b></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)</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">Securities registered or to be registered pursuant
to Section&#160;12(b) of the Act:</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%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1.5pt solid; width: 32%; text-align: center"><span style="font-size: 10pt"><b>Title of each class</b></span></td> <td style="width: 2%">&#160;</td> <td style="border-bottom: black 1.5pt solid; width: 32%; text-align: center"><span style="font-size: 10pt"><b>Trading Symbol(s)</b></span></td> <td style="width: 2%">&#160;</td> <td style="border-bottom: black 1.5pt solid; width: 32%; text-align: center"><span style="font-size: 10pt"><b>Name of each exchange on which registered</b></span></td></tr> <tr style="vertical-align: top; background-color: rgb(204,238,255)"> <td style="text-align: center"><ix:nonNumeric contextRef="c0" name="dei:Security12bTitle"><span style="font-size: 10pt"><b>Common shares, $0.001 par value per share</b></span></ix:nonNumeric></td> <td>&#160;</td> <td style="text-align: center"><ix:nonNumeric contextRef="c0" name="dei:TradingSymbol"><span style="font-size: 10pt"><b>RETO</b></span></ix:nonNumeric></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt"><b>The <ix:nonNumeric contextRef="c0" format="ixt-sec:exchnameen" name="dei:SecurityExchangeName">Nasdaq</ix:nonNumeric> Stock Market LLC</b></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Securities registered or to be registered pursuant to Section 12(g)
of the Act:</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; border-bottom: black 1.5pt solid"><b>None</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Title of Class)</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">Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act:</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>None</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Title of Class)</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="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>
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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; text-indent: 0.5in">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:&#160;as
of December 31, 2022, <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">43,398,885</ix:nonFraction> common shares were issued and outstanding.</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; text-indent: 0.5in">Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.&#160;Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>&#160;&#160;<ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric>
<span style="font-family: Times New Roman, Times, Serif">&#9746;</span></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; text-indent: 0.5in">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.&#160;Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>&#160;&#160;<ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span></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; text-indent: 0.5in">Note - Checking the
box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.</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; text-indent: 0.5in">Indicate by check mark whether
the registrant (1)&#160;has filed all reports required to be filed by Section&#160;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)&#160;has been
subject to such filing requirements for the past 90 days.&#160;<ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span>&#160;&#160;No
<span style="font-family: Times New Roman, Times, Serif">&#9744;</span></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; text-indent: 0.5in">Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(&#167;232.405&#160;of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).&#160;<ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span>&#160;&#160;No <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></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; text-indent: 0.5in">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; accelerated filer,&#8221; and &#8220;emerging growth company&#8221; in Rule 12b-2 of the Exchange
Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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: 25%"><span style="font-size: 10pt">Large accelerated filer <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="width: 25%"><span style="font-size: 10pt">Accelerated filer <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td style="width: 25%"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory">Non-accelerated filer</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span></span></td> <td style="width: 25%"><span style="font-size: 10pt">Emerging growth company <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityEmergingGrowthCompany"><span style="font-family: Times New Roman, Times, Serif">&#9744;</span></ix:nonNumeric></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; text-indent: 0.5in">If an emerging growth company
that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised financial accounting standards &#8224;&#160;provided pursuant to Section
13(a) of the Exchange Act. <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></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; text-indent: 0.5in">&#8224;The term &#8220;new
or revised financial accounting standard&#8221; refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.</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; text-indent: 0.5in">Indicate by check mark whether
the registrant has filed a report on and attestation to its management&#8217;s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span>&#160;Yes&#160;&#160;<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:IcfrAuditorAttestationFlag"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric>&#160;No</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; text-indent: 0.5in">Indicate by check mark which
basis of accounting the registrant has used to prepare the financial statements included in this filing:</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"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. &#9744;</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant&#8217;s executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b). &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-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: 25%"><span style="font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:DocumentAccountingStandard">U.S. GAAP</ix:nonNumeric> <span style="font-family: Times New Roman, Times, Serif">&#9746;</span></span></td> <td style="width: 50%"><span style="font-size: 10pt">International Financial Reporting Standards as issued</span></td> <td style="width: 25%"><span style="font-size: 10pt">Other <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td></tr> <tr style="vertical-align: top"> <td>&#160;</td> <td><span style="font-size: 10pt">By the International Accounting Standards Board <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></span></td> <td>&#160;</td></tr> </table><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; text-indent: 0.5in">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.</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: right">Item 17 <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
Item 18 <span style="font-family: Times New Roman, Times, Serif">&#9744;</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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).</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: right; text-indent: 24pt">Yes <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>&#160;&#160;No
<ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany"><span style="font-family: Times New Roman, Times, Serif">&#9746;</span></ix:nonNumeric></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; text-indent: 0.5in">(APPLICABLE ONLY TO ISSUERS
INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)</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; text-indent: 0.5in">Indicate by check mark whether
the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a court. <span style="font-family: Times New Roman, Times, Serif">&#9744;</span>
Yes&#160;&#160;<span style="font-family: Times New Roman, Times, Serif">&#9744;</span> No</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>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></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-top: 0pt; margin-bottom: 0pt; 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">&#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 colspan="2"><a href="#a_001"><span style="font-size: 10pt"><b>CERTAIN TERMS AND CONVENTIONS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>ii</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td colspan="2"><a href="#a_002"><span style="font-size: 10pt"><b>FORWARD LOOKING STATEMENTS</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>iv</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_003"><span style="font-size: 10pt"><b>PART I</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>1</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td style="width: 10%">&#160;</td>
    <td style="width: 79%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 10%; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 1.</b></span></td>
    <td><a href="#a_004"><span style="font-size: 10pt"><b>Identity of Directors, Senior Management and Advisers</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>1</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 2.</b></span></td>
    <td><a href="#a_005"><span style="font-size: 10pt"><b>Offer Statistics and Expected Timetable</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>1</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 3.</b></span></td>
    <td><a href="#a_006"><span style="font-size: 10pt"><b>Key Information</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>1</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 4.</b></span></td>
    <td><a href="#a_007"><span style="font-size: 10pt"><b>Information on the Company</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>48</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 4A.</b></span></td>
    <td><a href="#a_008"><span style="font-size: 10pt"><b>Unresolved Staff Comments</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>73</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 5.</b></span></td>
    <td><a href="#a_009"><span style="font-size: 10pt"><b>Operating and Financial Review and Prospects</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>73</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 6.</b></span></td>
    <td><a href="#a_010"><span style="font-size: 10pt"><b>Directors, Senior Management and Employees</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><b>89</b></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 7.</b></span></td>
    <td><a href="#a_011"><span style="font-size: 10pt"><b>Major Shareholders and Related Party Transactions</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>101</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 8.</b></span></td>
    <td><a href="#a_012"><span style="font-size: 10pt"><b>Financial Information</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>103</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 9.</b></span></td>
    <td><a href="#a_013"><span style="font-size: 10pt"><b>The Offer and Listing</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>105</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 10.</b></span></td>
    <td><a href="#a_014"><span style="font-size: 10pt"><b>Additional Information</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>105</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 11.</b></span></td>
    <td><a href="#a_015"><span style="font-size: 10pt"><b>Quantitative and Qualitative Disclosures About Market Risk</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>118</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 12.</b></span></td>
    <td><a href="#a_016"><span style="font-size: 10pt"><b>Description of Securities Other Than Equity Securities</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>119</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_017"><span style="font-size: 10pt"><b>PART II</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>120</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 13.</b></span></td>
    <td><a href="#a_018"><span style="font-size: 10pt"><b>Defaults, Dividends Arrearages and Delinquencies</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>120</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 14.</b></span></td>
    <td><a href="#a_019"><span style="font-size: 10pt"><b>Material Modifications to the Rights of Security Holders and Use of Proceeds</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>120</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 15.</b></span></td>
    <td><a href="#a_020"><span style="font-size: 10pt"><b>Controls and Procedures</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>120</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 16.</b></span></td>
    <td><a href="#a_021"><span style="font-size: 10pt"><b>[Reserved]</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>121</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 16A.</b></span></td>
    <td><a href="#a_022"><span style="font-size: 10pt"><b>Audit Committee Financial Expert</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>121</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 16B.</b></span></td>
    <td><a href="#a_023"><span style="font-size: 10pt"><b>Code of Ethics</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>121</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 16C.</b></span></td>
    <td><a href="#a_024"><span style="font-size: 10pt"><b>Principal Accountant Fees and Services</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>121</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 16D.</b></span></td>
    <td><a href="#a_025"><span style="font-size: 10pt"><b>Exemptions form the Listing Standards for Audit Committees</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>122</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 16E.</b></span></td>
    <td><a href="#a_026"><span style="font-size: 10pt"><b>Purchases of Equity Securities by the Issuer and Affiliated Purchasers</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>122</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 16F.</b></span></td>
    <td><a href="#a_027"><span style="font-size: 10pt"><b>Change in Registrant&#8217;s Certifying Accountant</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>122</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 16G.</b></span></td>
    <td><a href="#a_028"><span style="font-size: 10pt"><b>Corporate Governance</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>123</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 16H.</b></span></td>
    <td><a href="#a_029"><span style="font-size: 10pt"><b>Mine Safety Disclosure</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>123</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 16I.</b></span></td>
    <td><a href="#a_030"><span style="font-size: 10pt"><b>Disclosure Regarding Foreign Jurisdictions that Prevent Inspections</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>123</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_031"><span style="font-size: 10pt"><b>PART III</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>124</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 17.</b></span></td>
    <td><a href="#a_032"><span style="font-size: 10pt"><b>Financial Statements</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>124</b></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td><span style="font-size: 10pt"><b>Item 18.</b></span></td>
    <td><a href="#a_033"><span style="font-size: 10pt"><b>Financial Statements</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>124</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt"><b>Item 19.</b></span></td>
    <td><a href="#a_034"><span style="font-size: 10pt"><b>Exhibits</b></span></a></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-size: 10pt"><b>124</b></span></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"></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="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->i<!-- 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"><b>&#160;</b></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"><b>CERTAIN TERMS AND CONVENTIONS</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-indent: 0.5in">Except where the context otherwise requires and
for purposes of this annual report on Form 20-F only:</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%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><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">&#8220;Beijing REIT&#8221; refers to Beijing REIT Technology Development Co., Ltd., a PRC limited liability company;</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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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; 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: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><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 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; 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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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; 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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></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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  <tr style="vertical-align: top">
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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"></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; text-indent: 0.5in">For the sake of clarity, this
annual report follows the English naming convention of first name followed by last name, regardless of whether an individual&#8217;s name
is Chinese or English. For example, the name of our chief executive officer will be presented as &#8220;Hengfang Li&#8221;, even though,
in Chinese, his name would be presented as &#8220;Li Hengfang&#8221;.</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; text-indent: 0.5in">Our reporting and functional
currency is the Renminbi. Solely for the convenience of the reader, this annual report contains translations of some RMB amounts into
U.S. dollars, at specified rates. Except as otherwise stated in this annual report, all translations from RMB to U.S. dollars are made
at RMB6.8972 to US$1.00, the rate published by the Federal Reserve Board on December 31, 2022. No representation is made that the RMB
amounts referred to in this annual report could have been or could be converted into U.S. dollars at such rate.</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">Our fiscal year end is December
31. References to a particular &#8220;fiscal year&#8221; are to our fiscal year ended December 31 of that calendar year.</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">We own or have rights to trademarks
or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In
addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products.
This annual report may also contain trademarks, service marks and trade names of other companies, which are the property of their respective
owners. Our use or display of third parties&#8217; trademarks, service marks, trade names or products in this annual report is not intended
to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, some of the copyrights,
trade names and trademarks referred to in this annual report or the documents incorporated by reference herein are listed without their
&#169;, &#174; and &#8482; symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade
names and trademarks. All other trademarks are the property of their respective owners.</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">&#160;</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"><b>FORWARD-LOOKING STATEMENTS</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: justify; text-indent: 0.5in">This annual report contains
forward-looking statements. All statements contained in this annual report other than statements of historical fact, including statements
regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations,
are forward-looking statements. The words &#8220;believe,&#8221; &#8220;may,&#8221; &#8220;will,&#8221; &#8220;estimate,&#8221; &#8220;continue,&#8221;
&#8220;anticipate,&#8221; &#8220;intend,&#8221; &#8220;expect,&#8221; and similar expressions are intended to identify forward-looking
statements. We have based these forward-looking statements largely on our current expectations and projections about future events and
trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business
operations and objectives, and financial needs. These forward-looking statements include statements relating to:</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">
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    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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 style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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 style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">inflation and fluctuations in foreign currency exchange rates;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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 style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">the ability to maintain a reserve for warranty or defective products and installation claims;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">our on-going ability to obtain all mandatory and voluntary government and other industry certifications, approvals, and/or licenses to conduct our business;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">our ability to maintain effective supply chain of raw materials and our products;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">slowdown or contraction in industries in China in which we operate;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">our ability to maintain or increase our market share in the competitive markets in which we do business;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">our ability to diversify our product and service offerings and capture new market opportunities;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">our estimates of expenses, capital requirements and needs for additional financing and our ability to fund our current and future operations;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">the costs we may incur in the future from complying with current and future laws and regulations and the impact of any changes in the regulations on our operations; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#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">the loss of key members of our senior management.</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; text-indent: 0.5in">These forward-looking statements
are subject to a number of risks, uncertainties and assumptions, including those described in the &#8220;Risk Factors,&#8221; &#8220;Operating
and Financial Review and Prospects,&#8221; and elsewhere in this annual report. Moreover, we operate in a very competitive and rapidly
changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess
the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions,
the future events and trends discussed in this annual report may not occur and actual results could differ materially and adversely from
those anticipated or implied in the forward-looking statements.</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">You should not rely upon forward-looking
statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved
or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance, or achievements. We are under no duty to update any of these forward-looking statements after
the date of this annual report or to conform these statements to actual results or revised expectations.</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"></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"><b>&#160;</b></p><div>

</div><div><a id="a_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART I</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="a_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 1. Identity of Directors, Senior Management and Advisers</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-indent: 0.5in">Not applicable.</p><div>

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

</div><div><a id="a_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 2. Offer Statistics and Expected Timetable</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-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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 3. Key Information</b></p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">ReTo Eco-Solutions, Inc. (&#8220;ReTo&#8221;,
collectively with its consolidated subsidiaries, the &#8220;Company,&#8221; &#8220;we,&#8221; &#8220;us&#8221;, &#8220;our&#8221; or similar
terminology) is a holding company and a business company incorporated in the British Virgin Islands (&#8220;BVI&#8221;) with no material
operations of its own. We conduct substantially all of our operations through our subsidiaries established in mainland China. Our equity
structure is a direct holding structure, that is, ReTo, the BVI entity listed in the U.S., controls Beijing REIT and other PRC operating
entities through REIT Holdings. See &#8220;<i>Item 4. Information on the Company - A. History and development of the company&#8221; </i>For
more details.</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">We face various risks and
uncertainties relating to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex
and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly
regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept
foreign investments, or list and conduct offerings on a United States or other foreign exchange. These risks could result in a material
adverse change in our operations and the value of our Common Shares, significantly limit or completely hinder our ability to continue
to offer securities to investors, or cause the value of such securities to significantly decline. For a detailed description of risks
relating to doing business in China, see &#8220;<i>Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business
in China.&#8221;</i></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">The PRC government&#8217;s
significant discretion and authority in regulating our operations and its oversight and control over offerings conducted overseas by,
and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer
securities to investors. Implementation of industry-wide regulations in this nature may cause the value of our securities to significantly
decline or become worthless. For more details, see <i>&#8220;Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Relating to Doing
Business in China&#8212; The PRC government&#8217;s significant oversight and discretion over the conduct of our business and may intervene
or influence our operations at any time which could result in a material adverse change in our operation and/or the value of our Common
Shares.</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; text-indent: 0.5in">Risks and uncertainties arising
from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations
in China, could result in a material adverse change in our operations and cause our Common Shares to decrease in value or become worthless.
For more details, see &#8220;<i>Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in China&#8212; There
are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations. The rules and regulations in China
can change quickly with little advance notice and uncertainties in the interpretation and enforcement of PRC laws, rules and regulations
could limit the legal protections available to you and us.</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; 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"><b>Cash and Other Assets Transfers between the Holding Company and
Its Subsidiaries</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Upon the closing of ReTo&#8217;s
initial public offering (&#8220;IPO&#8221;) in November 2017, ReTo received net proceeds of approximately $14.3 million. In March 2021,
ReTo issued a convertible debenture to an institutional investor in the principal amount of $2,300,000 and received net proceeds of $1,476,915.
In July 2021, ReTo issued a convertible debenture to an institutional investor in the principal amount of $2,500,000 and received net
proceeds of $2,189,256. In March 2022, ReTo issued the Note (as defined below) in the principal amount of $3,415,500 and received net
proceeds of $3,000,000. On May 25, 2022, ReTo issued 5,970,000 Common Shares to Hainan Tashanshi Digital Information Co. Ltd. (&#8220;Hainan
Tashanshi&#8221;) at $0.60 per share for aggregate gross proceeds of $3,582,000 (the &#8220;Private Placement&#8221;), RMB19.6 million
(approximately $2.9 million) of which was transferred to Beijing REIT as a shareholder loan and approximately RMB4.4 million (approximately
$0.6 million) of which was transferred to Beijing REIT Ecological as a shareholder loan. As of the date of this annual report, with respect
to the net proceeds from the IPO, the convertible debentures, the Note and the Private Placement, ReTo had transferred an aggregate of
approximately $21.4 million to Beijing REIT through REIT Holdings via shareholder loans and capital contribution and approximately $0.6
million to Beijing REIT Ecological via shareholder loans.</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">Other than the IPO, the convertible
debentures, the Note and the Private Placement, ReTo has not raised funds from investors as of the date of this annual report, nor has
it transferred any other funds to its subsidiaries. To date, there have not been any dividends or other distributions from our PRC subsidiaries
to REIT Holdings and ReTo, both of which are located outside of mainland China. ReTo, as a BVI holding company, may rely on dividends
and other distributions on equity paid by its PRC subsidiaries for its cash and financing requirements, including the funds necessary
to pay dividends and other cash distributions to its shareholders, subject to ReTo&#8217;s M&amp;A and the Act or to service any expenses
and other obligations it may incur.</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">Within our direct holding
structure, the cross-border transfer of funds from ReTo to its PRC subsidiaries is permitted under laws and regulations of the PRC currently
in effect. Specifically, ReTo is permitted to provide funding to its PRC subsidiaries in the form of shareholder loans or capital contributions,
subject to satisfaction of applicable government registration, approval and filing requirements in China. There are no quantity limits
on ReTo&#8217;s ability to make capital contributions to its PRC subsidiaries under the PRC law and regulations. However, the PRC subsidiaries
may only procure shareholder loans from REIT Holding in an amount equal to the difference between their respective registered capital
and total investment amount as recorded in the Chinese Foreign Investment Comprehensive Management Information System or 2.5 times of
its net assets, at the discretion of such PRC subsidiary.</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">For additional information,
see &#8220;<i>Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Related to Doing Business in China &#8212; PRC regulation on loans
to, and direct investment in, PRC entities by offshore holding companies and governmental control in currency conversion may delay or
prevent us from using the proceeds of our offerings to make loans to or make additional capital contributions to our PRC subsidiaries,
which could materially and adversely affect our liquidity and our ability to fund and expand our business.&#8221;</i></p><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; 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; text-indent: 0.5in">Subject to the passive foreign
investment company rules, the requirements of ReTo&#8217;s M&amp;A and the Act, the gross amount of any distribution that we make to investors
with respect to our securities (including any amounts withheld to reflect PRC withholding taxes) will be taxable as a dividend, to the
extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Any
proposed dividend would be subject to ReTo&#8217;s M&amp;A and the Act; specifically, ReTo may only pay a dividend if ReTo&#8217;s directors
are satisfied, on reasonable grounds, that, immediately after the dividend is paid, the value of its assets will exceed its liabilities
and it will be able to pay its debts as they fall due.</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">The PRC Enterprise Income
Tax Law (the &#8220;EIT Law&#8221;) and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to
dividends payable by PRC companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central
government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the
tax agreement between mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment
of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant
tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the
relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5%
withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce
the amount of dividends we may receive from our PRC subsidiaries.</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">We maintain bank accounts
in China, including cash in Renminbi in the amount of RMB672,792 and cash in USD in the amount of US$97,554 as of December 31, 2022. Funds
are transferred between ReTo and its subsidiaries for their daily operation purposes. The transfer of funds between our PRC subsidiaries
are subject to the Provisions of the Supreme People&#8217;s Court on Several Issues Concerning the Application of Law in the Trial of
Private Lending Cases (2020 Second Revision, the &#8220;Provisions on Private Lending Cases&#8221;), which was implemented on January
1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on
Private Lending Cases set forth that private lending contracts will be upheld as invalid under the circumstance that (i) the lender swindles
loans from financial institutions for relending; (ii) the lender relends the funds obtained by means of a loan from another profit-making
legal person, raising funds from its employees, illegally taking deposits from the public; (iii) the lender who has not obtained the lending
qualification according to the law lends money to any unspecified object of the society for the purpose of making profits; (iv) the lender
lends funds to a borrower when the lender knows or should have known that the borrower intended to use the borrowed funds for illegal
or criminal purposes; (v) the lending is in violation of public orders or good morals; or (vi) the lending is in violation of mandatory
provisions of laws or administrative regulations. We have relied on the opinion of our PRC counsel, Yuan Tai Law Offices, that the Provisions
on Private Lending Cases does not prohibit using cash generated from one subsidiary to fund another subsidiary&#8217;s operations. We
have not been notified of any other restriction which could limit our PRC subsidiaries&#8217; ability to transfer cash between subsidiaries.
As of the date of this annual report, we have not adopted any cash management policies that dictate how funds are transferred between
our holding company and our subsidiaries.</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">There is no assurance that
the PRC government will not intervene or impose restrictions on the ability of us or our subsidiaries to transfer cash. Most of our cash
is in Renminbi, and the PRC government could prevent the cash maintained in our bank accounts in mainland China from leaving mainland
China, could restrict deployment of the cash into the business of our subsidiaries and restrict the ability to pay dividends. For details
regarding the restrictions on our ability to transfer cash between us, and our subsidiaries, see &#8220;<i>Item 3. Key Information&#8212;D.
Risk Factors&#8212;Risks Related to Doing Business in China &#8212; The PRC government could prevent the cash maintained in our bank accounts
in mainland China from leaving mainland China, restrict deployment of the cash into the business of its subsidiaries and restrict the
ability to pay dividends to U.S. investors, which could materially adversely affect our operations.</i>&#8221; We currently do not have
cash management policies that dictate how funds are transferred between our BVI holding company and our subsidiaries.</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"><b>Restrictions on Our Ability to Transfer Cash
Out of China and to U.S. Investors</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; text-indent: 0.5in">Our PRC subsidiaries&#8217;
ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay
dividends to their respective shareholders only out of their accumulated profits, if any, as determined in accordance with PRC accounting
standards and regulations. In addition, under PRC law, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax
profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. These
reserves are not distributable as cash dividends. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments
governing such debt may restrict its ability to pay dividends to ReTo.</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>

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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; text-indent: 0.5in">To address persistent capital
outflows and the RMB&#8217;s depreciation against the U.S. dollar in the fourth quarter of 2016, the People&#8217;s Bank of China and
the State Administration of Foreign Exchange, or SAFE, implemented a series of capital control measures in the subsequent months, including
stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder
loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries&#8217; dividends and other
distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into
foreign currencies and the remittance of currencies out of mainland China. Therefore, we may experience difficulties in completing the
administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any.</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>Effect of The Holding Foreign Companies Accountable
Act</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; text-indent: 0.5in">The Holding Foreign Companies
Accountable Act (the &#8220;HFCAA&#8221;), which was signed into law on December 18, 2020, requires a foreign company to submit that it
is not owned or manipulated by a foreign government or disclose the ownership of governmental entities and certain additional information,
if the PCAOB is unable to inspect completely a foreign auditor that signs the company&#8217;s financial statements. If the PCAOB is unable
to inspect the Company&#8217;s auditors for three consecutive years, the Company&#8217;s securities will be prohibited from trading on
a national exchange. The Accelerating Holding Foreign Companies Accountable Act, which was enacted on December 29, 2022, has decreased
the number of non-inspection years from three years to two, thus reducing the time period before our Common Shares may be prohibited from
trading or delisted.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 16, 2021, the
PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms
headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB
included in the report of its determination a list of the accounting firms that are headquartered in mainland China or Hong Kong. This
list did not include YCM CPA Inc., our current auditor. Our auditor, as an auditor of companies that are traded publicly in the United
States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections
to assess its compliance with the applicable professional standards. On August 26, 2022, the PCAOB signed a Statement of Protocol with
the CSRC and MOF, 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 without any limitations on scope. However, uncertainties exist with respect to the implementation
of this framework and there is no assurance that the PCAOB will be able to execute, in a timely manner, its future inspections and investigations
in a manner that satisfies the Statement of Protocol. On December 15, 2022, the PCAOB 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.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These developments could add
uncertainties to the trading of our securities, including the possibility that the SEC may prohibit trading in our securities if the PCAOB
cannot fully inspect or investigate our auditor and we fail to appoint a new auditor that is accessible to the PCAOB and that Nasdaq can
delist our Common 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; text-indent: 0.5in">If it is later determined
that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection.
Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken
in China that prevents the PCAOB from regularly evaluating our auditors&#8217; audits and their quality control procedures, could result
in a lack of assurance that our financial statements and disclosures are adequate and accurate, then such lack of inspection could cause
our securities to be delisted from the stock exchange.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 2, 2021, the SEC
adopted final amendments to its rules implementing the HFCAA. Such final rules establish procedures that the SEC will follow in (i) determining
whether a registrant is a &#8220;Commission-Identified Issuer&#8221; (a registrant identified by the SEC as having filed an annual report
with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable
to inspect or investigate completely because of a position taken by an authority in that jurisdiction) and (ii) prohibiting the trading
of an issuer that is a Commission-Identified Issuer for three consecutive years under the HFCAA. The SEC began identifying Commission-Identified
Issuers for the fiscal years beginning after December 18, 2020. A Commission-Identified Issuer is required to comply with the submission
and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified
Issuer based on its annual report for the fiscal year ended, for example, September 30, 2021, the registrant will be required to comply
with the submission or disclosure requirements in its annual report filing covering the fiscal year ended September 30, 2022.</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; text-indent: 0.5in">For details on the effects
of HFCAA on us, see &#8220;<i>Item 3. Key Information&#8212;D. Risk Factors &#8212; Risks Related to Doing Business in China &#8212; Our
Common Shares may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors. The
delisting of our Common Shares, or the threat of their being delisted, may materially and adversely affect the value of your investment.
Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections. Furthermore,
on December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was enacted, which amends the HFCAA and requires 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.</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"><b>Regulatory Permissions and Developments</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; text-indent: 0.5in">We have been advised by our
PRC&#160;Counsel, Yuan Tai Law Offices, that pursuant to the relevant laws and regulations in China, none of our PRC subsidiaries&#8217;
currently engaged business is stipulated on the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2021
Version) (the &#8220;2021 Negative List&#8221;) promulgated by the Ministry of Commerce (the &#8220;MOFCOM&#8221;) and the National Development
and Reform Commission of the People&#8217;s Republic of China (&#8220;NDRC&#8221;) which entered into force on January 1, 2022. Therefore,
our PRC subsidiaries are able to conduct their business without being subject to restrictions imposed by the foreign investment laws and
regulations of the PRC. Certain of the business scope of our PRC subsidiaries are listed on the 2021 Negative List, such as value-added
telecommunication business, which the ratio of investment by foreign investors in a foreign-invested telecommunication enterprise that
engages in the operation of a value-added telecommunication business (except e-commerce, domestic multi-party communication, storage and
forwarding class and call center) shall not exceed 50%. Based on the confirmation of the PRC subsidiaries, these subsidiaries have not
been actually engaged in such business activities.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain of the business stated
on the business license of our PRC subsidiaries are subject to additional licenses and permits, such as value-added telecommunication
certification and construction enterprise qualifications. Based on the confirmation of the PRC subsidiaries, these subsidiaries have not
been actually engaged in business activities those require special licenses or permits and they will only carry out business activities
after obtaining corresponding licenses or permits. Currently, none of our PRC subsidiaries is required to obtain additional licenses or
permits beyond a regular business license for their operations currently being conducted. Each of our PRC subsidiaries is required to
obtain a regular business license from the local branch of the State Administration for Market Regulation (&#8220;SAMR&#8221;). Each of
our PRC subsidiaries has obtained a valid business license for its respective business scope, and no application for any such license
has been denied.</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">As of the date of this annual
report, ReTo and its PRC subsidiaries are not subject to permission requirements from the CSRC, the Cyberspace Administration of China
(the &#8220;CAC&#8221;) or any other entity that is required to approve of its PRC subsidiaries&#8217; operations. Recently, the PRC government
initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China with
little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based
companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly
enforcement.</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; text-indent: 0.5in">Among other things, the Regulations
on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the &#8220;M&amp;A Rules&#8221;) and Anti-Monopoly Law of the
People&#8217;s Republic of China promulgated by the Standing Committee of the National People&#8217;s Congress (the &#8220;SCNPC&#8221;)
which became effective in 2008 and amended and put into effect as from August 1, 2022 (the &#8220;Anti-Monopoly Law&#8221;), established
additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and
complex. Such regulation requires, among other things, that the MOFCOM be notified in advance of any change-of-control transaction in
which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain
thresholds under the Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators, issued by
the State Council in 2008 and amended on September 19, 2018, are triggered. Moreover, the Anti-Monopoly Law requires that transactions
which involve the national security, the examination on the national security shall also be conducted according to the relevant provisions
of the State Council. In addition, the PRC Measures for the Security Review of Foreign Investment which became effective in January 2021
require acquisitions by foreign investors of PRC companies engaged in military-related or certain other industries that are crucial to
national security be subject to security review before consummation of any such acquisition.</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>

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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; text-indent: 0.5in">On July 6, 2021, the relevant
PRC governmental authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas
listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems
to deal with the risks and incidents faced by China-based overseas-listed companies. As these opinions are recently issued, official guidance
and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. Given
the current PRC regulatory environment, it is uncertain when and whether ReTo, REIT Holdings or any of our PRC subsidiaries will be required
to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether
it will be denied or rescinded. See &#8220;<i>Item 3. Key Information&#8212;D. Risk Factors&#8212;Risks Relating to Doing Business in
China&#8212;The approval and/or other requirements of the CSRC or other PRC governmental authorities may be required in connection with
an offering under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to obtain
such approval.&#8221; As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding
offshore offering from the CSRC or any other PRC governmental authorities.</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; text-indent: 0.5in">On July 10, 2021, the CAC
published the Measures for Cybersecurity Review (Revised Draft for Comments), or the Measures, for public comments, which propose to authorize
the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security,
including listings in foreign countries by companies that possess the personal data of more than one million users. On December 28, 2021,
the Measures for Cybersecurity Review (2021 Version) was promulgated and became effective on February 15, 2022, which iterates that any
&#8220;online platform operators&#8221; controlling personal information of more than one million users which seeks to list in a foreign
stock exchange should also be subject to cybersecurity review. The Measures for Cybersecurity Review (2021 Version), further elaborates
the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk
of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the
country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information
being affected, controlled, or maliciously used by foreign governments after listing abroad. We have relied on the opinion of our PRC
counsel, Yuan Tai Law Offices, that as a result of: (i) we do not hold personal information on more than one million users in our business
operations; and (ii) data processed in our business does not have a bearing on national security and thus may not be classified as core
or important data by the authorities, we are not required to apply for a cybersecurity review under the Measures for Cybersecurity Review
(2021 Version).</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As advised by our PRC legal
counsel, Yuan Tai Law Offices, the PRC governmental authorities may have wide discretion in the interpretation and enforcement of these
laws, including the interpretation of the scope of &#8220;critical information infrastructure operators&#8221;. In anticipation of the
strengthened implementation of cybersecurity laws and regulations and the continued expansion of our business, we may face challenges
in addressing its requirements and make necessary changes to our internal policies and practices in data processing. As of the date of
this annual report, we have not been involved in any investigations on cybersecurity review made by the CAC on such basis, and we have
not received any inquiry, notice, warning, or sanctions in such respect.</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">On August 20, 2021, the SCNPC
promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights
and privacy protection and took effect on November 1, 2021. Personal information refers to information related to identified or identifiable
natural persons which is recorded by electronic or other means and excluding anonymized information. The Personal Information Protection
Law provides that a personal information processor could process personal information only under prescribed circumstances such as with
the consent of the individual concerned and where it is necessary for the conclusion or performance of a contract to which such individual
is a party to the contract. If a personal information processor shall provide personal information to overseas parties, various conditions
shall be met, which includes security evaluation by the national network department and personal information protection certification
by professional institutions. The Personal Information Protection Law raises the protection requirements for processing personal information,
and many specific requirements of the Personal Information Protection Law remain to be clarified by the CAC, other regulatory authorities,
and courts in practice. We may be required to make further adjustments to our business practices to comply with the personal information
protection laws and regulations.</p><div>

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

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None of our PRC subsidiaries
currently operates in an industry that prohibits or limits foreign investment. As a result, as advised by our PRC counsel, Yuan Tai Law
Offices, other than those requisite for a domestic company in mainland China to engage in the businesses similar to those of our PRC subsidiaries,
none of our PRC subsidiaries is required to obtain any permission from Chinese authorities, including the CSRC, the CAC, or any other
governmental agency that is required to approve its current operations. However, if our PRC subsidiaries do not receive or maintain the
approvals, or we inadvertently conclude that such approvals are not required, or applicable laws, regulations, or interpretations change
such that our PRC subsidiaries are required to obtain approval in the future, we may be subject to investigations by competent regulators,
fines or penalties, ordered to suspend our PRC subsidiaries&#8217; relevant operations and rectify any non-compliance, prohibited from
engaging in relevant business or conducting any offering, and these risks could result in a material adverse change in our PRC subsidiaries&#8217;
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. As of the date of this annual report, we and our PRC subsidiaries have
received from PRC authorities all requisite licenses, permissions, or approvals needed to engage in the businesses currently conducted
in China, and no permission or approval has been denied.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">CSRC released the Tentative
Measures for Administration of the Overseas Issuance and Listing of Securities by Domestic Enterprises (the &#8220;Tentative Measures&#8221;)
on February 17, 2023, which became effective on March 31, 2023. The Tentative Measures lay out the filing regulation arrangement for both
direct and indirect overseas listing by PRC domestic companies, and clarify the determination criteria for indirect overseas listing in
overseas markets. Any future securities offerings and listings outside of mainland China by our Company, including but not limited to,
follow-on offerings, secondary listings and going private transactions, will be subject to the filing requirements with the CSRC under
the Tentative Measures, and we cannot assure you that we will be able to comply with such filing requirements in a timely manner, or at
all.&#160; As of the date of this annual report, we have not received any formal inquiry, notice, warning, sanction, or objection from
the CSRC or any other PRC governmental authorities with respect to our listing on Nasdaq. As the Tentative Measures were newly published
and there is uncertainty with respect to the filing requirements and their implementation, if we are required to submit to the CSRC and
complete the filing procedure, we cannot be sure that we will be able to complete such filings in a timely manner, or at all. Any failure
or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability
to offer or continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our
reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of
our securities to significantly decline or be 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; text-indent: 0.5in">Except as disclosed above,
in connection with our issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the
date of this annual report, we and our PRC subsidiaries, (i) are not required to obtain permissions from the PRC authorities, including
the CSRC or the CAC, and (ii) have not received or were denied such permissions by any PRC authority. We are subject to the risks of uncertainty
of any future actions of the PRC government in this regard including the risk that we inadvertently conclude that the permission or approvals
discussed here are not required, that applicable laws, regulations or interpretations change such that we and our PRC subsidiaries are
required to obtain approvals in the future.<b>&#160;</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%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 48px"><span style="font-size: 10pt"><b>A.</b></span></td>
    <td><span style="font-size: 10pt"><b>[Reserved]</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 48px"><span style="font-size: 10pt"><b>B.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Capitalization and indebtedness.</i></b></span></td></tr>
  </table><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-indent: 0.5in">Not applicable.</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-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 13; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 48px"><span style="font-size: 10pt"><b>C.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Reasons for the offer and use of proceeds.</i></b>&#160;</span></td></tr>
  </table><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-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 48px"><span style="font-size: 10pt"><b>D.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Risk factors.</i></b></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"><b>Summary of Risk Factors</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; text-indent: 0.5in">Below please find a summary
of the principal risks we face, organized under relevant headings.</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"><b><i>Risks Related to Doing Business in China
</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; text-indent: 0.5in">We face risks and uncertainties
related to doing business in China in general, including, but not limited to, the following:</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%">
  <tr>
    <td style="width: 0.5in; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="vertical-align: top; width: 0.25in; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="vertical-align: top; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="vertical-align: top; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt">&#160;</td></tr>
  <tr>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="vertical-align: top; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt">
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#9679;</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">&#160;</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#9679;</p></td>
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The impact on our operations and value of our
    Common Shares by PRC government&#8217;s significant oversight, control, intervention and/or influence over our business operation;</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">The complex and evolving laws and regulations
    regarding privacy and data protection, including China&#8217;s new Data Security Law, Cybersecurity Review Measures, Personal Information
    Protection Law, that our business is subject to;</p></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="width: 0.5in; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="width: 0.25in; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify"><span style="font-size: 10pt">Uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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if the PCAOB is unable to inspect our auditor;</p></td></tr>
  <tr style="vertical-align: top">
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#9679;</td>
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which may be required in connection with our offshore offerings under Chinese law and, if required, our inability to obtain such approval
or complete such filing;</td></tr>
  <tr style="vertical-align: top">
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td></tr>
  <tr>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="vertical-align: top; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt">
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#9679;&#160;</p>
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under the EIT Law and the risk of being subject to PRC income tax on our global income;</p></td></tr>
  <tr>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="vertical-align: top; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="vertical-align: top; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td></tr>
  <tr>
    <td style="padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
    <td style="vertical-align: top; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="vertical-align: top; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt">
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Foreign exchange controls in China, which could
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#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">The complex procedures under the PRC laws and regulation in connection with certain acquisitions of China-based companies by foreign investors;</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><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; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679; </span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#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">Any limitation on the ability of our PRC subsidiaries to make payments to us;</span></td></tr>

<tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
<tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt; width: 0.5in">&#160;</td>
    <td style="text-align: justify; font-size: 10pt; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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<tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt">&#160;</td>
    <td style="text-align: justify; font-size: 10pt">&#160;</td>
    <td style="text-align: justify; font-size: 10pt">&#160;</td></tr>
<tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The adverse impact on our business by the war in Ukraine;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#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">The potential supply chain disruptions; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#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">Any severe or prolonged downturn in the global or Chinese economy.</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: 14; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- 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"><b><i>Risks Related to Our Business and Industry</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; text-indent: 0.5in">We are subject to risks and
uncertainties related to our business and industry, including, but not limited to, the following:</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%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#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 potential slowdown of the industries in which our customers operate;</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="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><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">&#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>
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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: 0.5in">&#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: 0.5in">&#160;</td>
    <td style="width: 0.25in"><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"><b>&#160;</b></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>
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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: 0.5in">&#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: 0.5in">&#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>

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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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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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%">
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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">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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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%">
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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%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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

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

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

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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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</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%">
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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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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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">&#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>Risks Related to Our Common 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; text-indent: 0.5in">We face risks and uncertainties
related to our Common Shares, including, but not limited to, the following:</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>

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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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="vertical-align: top; padding-top: 0.25pt; padding-right: 0.25pt; padding-left: 0.25pt; text-align: justify">&#160;</td>
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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>

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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"><b>Risks Related to Doing Business in China</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"><b><i>Changes in the political and economic policies
of the PRC government or in relations between China and the United States may materially and adversely affect our business, financial
condition and results of operations and may result in our inability to sustain our growth and expansion strategies.</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; text-indent: 0.5in">Substantially all of our operations
are conducted in mainland China and substantially all of our revenues is sourced from mainland China. Accordingly, our financial condition
and results of operations are affected to a significant extent by economic, political and legal developments in the PRC or changes in
government relations between China and the United States or other governments. There is significant uncertainty about the future relationship
between the United States and China with respect to trade policies, treaties, government regulations and tariffs.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The PRC economy differs from
the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth
rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization
of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition,
the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government
also exercises significant control over China&#8217;s economic growth by allocating resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular
industries or companies.&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">While the PRC economy has
experienced significant growth in the past four decades, growth has been uneven, both geographically and among various sectors of the
economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some
of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our financial condition and results
of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that
are applicable to us. In addition, the PRC government has implemented in the past certain measures, including interest rate increases,
to control the pace of economic growth. These measures may cause decreased economic activity.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2021, the Chinese
government provided new guidance on China-based companies raising capital outside of China. In light of such developments, the SEC has
imposed enhanced disclosure requirements on China-based companies seeking to register securities with the SEC. As substantially all of
our operations are based in China, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising
or other activities by China based companies could adversely affect our business and results of operations. If the business environment
in China deteriorates from the perspective of domestic or international investment, or if relations between China and the United States
or other governments deteriorate, our operations in China as well as the market price of our Common Shares may be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>&#160;</i></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><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 is subject to complex and evolving
laws and regulations regarding privacy and data protection. Compliance with China&#8217;s new Data Security Law, Cybersecurity Review
Measures, Personal Information Protection Law, as well as additional laws, regulations and guidelines that the Chinese government promulgates
in the future may entail significant expenses and could materially affect 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; text-indent: 0.5in">Regulatory authorities in
China have implemented and are considering further legislative and regulatory proposals concerning data protection. China&#8217;s new
Data Security Law went into effect on September 1, 2021. The Data Security Law provides that the data processing activities must be conducted
based on &#8220;data classification and hierarchical protection system&#8221; for the purpose of data protection and prohibits entities
in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval by
the Chinese government. The Data Security Law sets forth the legal liabilities of entities and individuals found to be in violation of
their data protection obligations, including rectification order, warning, fines of up to RMB5 million, suspension of relevant business,
and revocation of business permits or licenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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; text-indent: 0.5in">In
addition, the PRC Cybersecurity Law provides that personal information and important data collected and generated by operators of critical
information infrastructure in the course of their operations in the PRC should be stored in the PRC, and the law imposes heightened regulation
and additional security obligations on operators of critical information infrastructure. According to the Cybersecurity Review Measures
promulgated by the CAC and certain other PRC regulatory authorities in April 2020, which became effective in June 2020, operators of critical
information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national
security. Any failure or delay in the completion of the cybersecurity review procedures may prevent the critical information infrastructure
operator from using or providing certain network products and services, and may result in fines of up to ten times the purchase price
of such network products and services. The PRC government recently launched cybersecurity reviews against a number of mobile apps operated
by several U.S.-listed Chinese companies and prohibiting these apps from registering new users during the review periods. We do not believe
that we constitute a critical information infrastructure operator under the Cybersecurity Review Measures.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 10, 2021, the CAC
issued the Cybersecurity Review Measures (revised draft for public comments), which proposed to authorize the relevant government authorities
to conduct cybersecurity review on a range of activities that affect or may affect national security. The PRC National Security Law covers
various types of national security, including technology security and information security. The Cybersecurity Review Measures (2021 Version)
took effect on February 15, 2022. The Cybersecurity Review Measures (2021 Version) expand the cybersecurity review to data processing
operators in possession of personal information of over 1 million users if the operators intend to list their securities in a foreign
country. Under the Cybersecurity Review Measures (2021 Version), the scope of entities required to undergo cybersecurity review to assess
national security risks that arise from data processing activities would be expanded to include all critical information infrastructure
operators who purchase network products and services and all data processors carrying out data processing activities that affect or may
affect national security. In addition, such reviews would focus on the potential risk of core data, important data, or a large amount
of personal information being stolen, leaked, destroyed, illegally used or exported out of China, or critical information infrastructure
being affected, controlled or maliciously used by foreign governments after such a listing. An operator that violates these measures shall
be dealt with in accordance with the provisions of the PRC Cybersecurity Law and the PRC Data Security Law.</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; text-indent: 0.5in">According to the Cybersecurity
Review Measures (2021 Version), cybersecurity review will be required when (i) operators of critical information infrastructure purchasing
network products and services or online platform operators carry out data processing activities which do or may affect national security;
and (ii) any online platform operator controlling personal information of more than one million users which seeks to list in a foreign
stock exchange. The factors to be considered when assessing the national security risks of the relevant activities, including, among others,
(i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used
or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal
information being affected, controlled, or maliciously used by foreign governments after listing abroad. The CAC has said that under the
new rules companies holding data of more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other
nations because of the risk that such data and personal information could be &#8220;affected, controlled, and maliciously exploited by
foreign governments.&#8221; The cybersecurity review will also look into the potential national security risks from overseas initial public
offerings. As advised our PRC legal counsel , because (i) none of our PRC subsidiaries collecting personal information or processing data
in actual operation, and (ii) none of our PRC subsidiaries is an &#8220;online platform operator holding more than one million users&#8217;
personal information&#8221;, we believe the cybersecurity review requirement is not applicable us. However, there remains uncertainty
as to the interpretation and implementation of the revised Cybersecurity Review Measures and we cannot assure you that the CAC will reach
the same conclusion as our PRC counsel. As advised by our PRC legal counsel, the PRC governmental authorities may have wide discretion
in the interpretation and enforcement of these laws, including the interpretation of the scope of &#8220;critical information infrastructure
operators.&#8221; If the Company or any of its PRC subsidiaries is deemed as a critical information infrastructure operator under the
PRC cybersecurity laws and regulations, we and our PRC subsidiaries must fulfill certain obligations as required under the PRC cybersecurity
laws and regulations, including, among others, storing personal information and important data collected and produced within the PRC territory
during our operations in China, which we and our PRC subsidiaries have fulfilled in our business, and we and our PRC subsidiaries may
be subject to review when purchasing internet products and services. We and our PRC subsidiaries may be subject to review when conducting
data processing activities, and may face challenges in addressing its requirements and make necessary changes to our internal policies
and practices in data processing. As of the date of this annual report, we and our PRC subsidiaries have not been involved in any investigations
on cybersecurity review made by the CAC on such basis, and we and our PRC subsidiaries have not received any inquiry, notice, warning,
or sanctions in such respect.</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">On November 14, 2021, the
CAC released the Regulations on Network Data Security (draft for public comments) and accepted public comments until December 13, 2021.
The draft Regulations on Network Data Security provide more detailed guidance on how to implement the general legal requirements under
legislations such as the Cybersecurity Law, Data Security Law and the Personal Information Protection Law. The draft Regulations on Network
Data Security follow the principle that the state will regulate based on a data classification and multi-level protection scheme. We believe
that we or any of our PRC subsidiaries do not constitute an online platform operator under the draft Regulations on Network Data Security
as proposed, which is defined as a platform that provides information publishing, social network, online transaction, online payment and
online audio/video services. None of our PRC subsidiaries is an online platform operator themselves, nor is any of them required to obtain
an ICP license for their current operations.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On August 20, 2021, the SCNPC
promulgated the Personal Information Protection Law which became effective on November 1, 2021. The Personal Information Protection Law
provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands
data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in
China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing
products and services to, or analyzing and evaluating the behavior of, persons in China. The Personal Information Protection Law also
provides that critical information infrastructure operators and personal information processing entities who process personal information
meeting a volume threshold to be set by Chinese cyberspace regulators are also required to store in China personal information generated
or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal
information. Lastly, the Personal Information Protection Law contains proposals for significant fines for serious violations of up to
RMB 50 million or 5% of annual revenues from the prior year and may also be ordered to suspend any related activity by competent authorities.
We have access to certain information of our customers in providing services and may be required to further adjust our business practice
to comply with new regulatory requirements.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interpretation, application
and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation,
amendments to existing legislation or changes in enforcement. Compliance with the PRC Cybersecurity Law and the PRC Data Security Law
could significantly increase the cost to us of providing our service offerings, require significant changes to our operations or even
prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future.
Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information
security, it is possible that our practices or service offerings could fail to meet all of the requirements imposed on us by the PRC Cybersecurity
Law, the PRC Data Security Law and/or related implementing regulations. Any failure on our part to comply with such law or regulations
or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized
access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing
types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting
with us or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation,
any of which could materially adversely affect our business, financial condition and results of operations. Even if our practices are
not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely
affect our business, financial condition and results of operations. Moreover, the legal uncertainty created by the Data Security Law and
the recent Chinese government actions could materially adversely affect our ability, on favorable terms, to raise capital, including engaging
in follow-on offerings of our securities in the U.S. market.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>There are uncertainties regarding the interpretation
and enforcement of PRC laws, rules and regulations. The rules and regulations in China can change quickly with little advance notice and
uncertainties in the interpretation and enforcement of PRC laws, rules and regulations could limit the legal protections available to
you and us.</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; text-indent: 0.5in">Substantially all of our operations
are conducted in mainland China, and are governed by PRC laws, rules and regulations. Our PRC subsidiaries are subject to laws, rules
and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike
the common law system, prior court decisions may be cited for reference but have limited precedential value. In 1979, the PRC government
began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general. The overall effect of
legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investment in
China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not sufficiently
cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by PRC regulatory agencies.
In particular, because these laws, rules and regulations, especially those relating to the internet, are relatively new, and because of
the limited number of published decisions and the nonbinding nature of such decisions, and because the laws, rules and regulations often
give the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of these laws, rules and
regulations involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system is based in part on government
policies and internal rules, some of which are not published on a timely basis or at all, and may have a retroactive effect. As a result,
we may not be aware of our violation of these policies and rules until after the occurrence of the violation. Any administrative and court
proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. The rules
and regulations in China can change quickly with little advance notice and uncertainties in the interpretation and enforcement of PRC
laws, rules and regulations could limit the legal protections available to you and us.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The PRC government has recently
announced its plans to enhance its regulatory oversight of Chinese companies listing overseas. The Opinions on Strictly Cracking Down
on Illegal Securities Activities issued on July 6, 2021 called for:</p><div>

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

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  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><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">&#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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</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: top">
    <td style="width: 0.5in">&#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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As the Opinions on Strictly
Cracking Down on Illegal Securities Activities were recently issued, there are great uncertainties as to how soon legislative or administrative
regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will
be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on companies like us,
but among other things, our ability and the ability of our subsidiaries to obtain external financing through the issuance of equity securities
overseas could be negatively affected.</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">CSRC released the Tentative
Measures and five supporting guidelines on February 17, 2023, which became effective on March 31, 2023. The Tentative Measures lay out
the filing regulation arrangement for both direct and indirect overseas listing by PRC domestic companies, and clarify the determination
criteria for indirect overseas listing in overseas markets. Any future securities offerings and listings outside of mainland China by
our Company, including but not limited to follow-on offerings, secondary listings and going private transactions, will be subject to the
filing requirements with the CSRC under the Tentative Measures, and we cannot assure you that we will be able to comply with such filing
requirements in a timely manner, or at all.&#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 PRC government&#8217;s significant oversight
and discretion over the conduct of our business and may intervene or influence our operations at any time which could result in a material
adverse change in our operation and/or the value of our Common 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; text-indent: 0.5in">We conduct our business in
mainland China primarily through our PRC subsidiaries. Our operations in mainland China are governed by PRC laws and regulations. The
PRC government&#8217;s significant oversight and discretion over the conduct of our business and may intervene or influence our operations
at any time which could result in a material adverse change in our operation and/or the value of our Common Shares. Also, the PRC government
has recently indicated an intent to exert more oversight over offerings that are conducted overseas and/or foreign investment in China-based
issuers. Any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors.
In addition, implementation of industry-wide regulations directly targeting our operations could cause our securities to significantly
decline in value or become worthless. Therefore, investors of ReTo face potential uncertainty from actions taken by the PRC government
affecting our business.</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>The CSRC has published the Tentative Measures
for filing regulation arrangement for both direct and indirect overseas listing, including but not limited to initial public offering,
follow-on offerings, and secondary listings, which could significantly limit or completely hinder our ability to offer or continue to
offer our Common Shares to investors and could cause the value of our Common Shares to significantly decline or become worthless.</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; text-indent: 0.5in">On February 17, 2023, the
CSRC published the Tentative Measures, which became effective on March 31, 2023. The Tentative Measures lay out the filing regulation
arrangement for both direct and indirect overseas listing, and clarify the determination criteria for indirect overseas listing in overseas
markets. Among other things, if a domestic enterprise intends to indirectly offer and list securities in an overseas market, the record-filing
obligation is with a major operating entity incorporated in mainland China appointed by the issuer and such filing obligation shall be
completed within three business days after the overseas listing application is submitted. The required filing materials for an initial
public offering and listing should include at least the following: report, commitment from issuer and securities company, the resolutions,
shareholding structure chart and control structure chart, the information of issuer and intermediary project team members, Chinese legal
opinion and commitment of Chinese counsel, the Prospectus, approval and other documents issued by competent regulatory authorities of
relevant industries (if applicable); and security assessment opinion issued by relevant regulatory authorities (if applicable).</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, an overseas offering
and listing is prohibited under any of the following circumstances: (1) if the intended securities offering and listing is specifically
prohibited by national laws and regulations and relevant provisions; (2) if the intended securities offering and listing may constitute
a threat to or endangers national security as reviewed and determined by competent authorities under the State Council in accordance with
law; (3) if, in the past three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption,
bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy,
or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations;
(4) if, the domestic enterprise is being investigated according to law due to suspected crimes or major violations of laws and regulations,
and there is no clear conclusion; (5) if there are material ownership disputes over the equity of the controlling shareholder or shareholders
controlled by controlling shareholders and actual controllers.&#160;The Tentative Measures defines the legal liabilities of breaches such
as failure in fulfilling filing obligations or fraudulent filing conducts, imposing a fine between RMB 1 million and RMB 10 million, and
in cases of severe violations, a parallel order to suspend relevant business or halt operation for rectification, revoke relevant business
permits or operational license.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any future securities offerings
and listings outside of mainland China by our Company, including but not limited to follow-on offerings, secondary listings, and going
private transactions, will be subject to the filing requirements with the CSRC under the Tentative Measures, and we cannot assure you
that we will be able to comply with such filing requirements in a timely manner, or at all. Any failure of us to fully comply with new
regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our Common Shares, cause
significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our
financial condition and results of operations and cause our Common Shares 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"><b><i>&#160;</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Restrictions on currency exchange or outbound
capital flows may limit our ability to utilize our PRC revenue effectively.</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; text-indent: 0.5in">Substantially all of our revenue
is denominated in Renminbi. The Renminbi is currently convertible under the &#8220;current account,&#8221; which includes dividends, trade
and service-related foreign exchange transactions, but requires approval from or registration with appropriate government authorities
or designated banks under the &#8220;capital account,&#8221; which includes foreign direct investment and loans, such as loans we may
secure from our onshore subsidiaries. Currently, our PRC subsidiaries, a foreign invested enterprise, may purchase foreign currency for
settlement of &#8220;current account transactions,&#8221; including payment of dividends to us, without the approval of the SAFE by complying
with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase
foreign currencies in the future for current account transactions.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Since 2016, PRC governmental
authorities have imposed more stringent restrictions on outbound capital flows, including heightened scrutiny over &#8220;irrational&#8221;
overseas investments for certain industries, as well as over four kinds of &#8220;abnormal&#8221; offshore investments, which are:</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">
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    <td style="width: 0.5in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">investments in targets that are not related to onshore parent&#8217;s main business; and</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">investments with abnormal sources of Renminbi funding suspected to be involved in illegal transfer of assets or illegal operation of underground banking.</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; text-indent: 0.5in">On January 26, 2017, SAFE
promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification,
which tightened the authenticity and compliance verification of cross-border transactions and cross-border capital flow. In addition,
the Outbound Investment Sensitive Industry Catalogue (2018) lists certain sensitive industries that are subject to NDRC pre-approval requirements
prior to remitting investment funds offshore, which subjects us to increased approval requirements and restrictions with respect to our
overseas investment activity. Since a significant amount of our PRC revenue is denominated in Renminbi, any existing and future restrictions
on currency exchange or outbound capital flows may limit our ability to utilize revenue generated in Renminbi to fund our business activities
outside of mainland China, make investments, service any debt we may incur outside of mainland China or pay dividends in foreign currencies
to our shareholders, including holders of our Common Shares.</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>PRC regulation on loans to, and direct investment
in, PRC entities by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the
proceeds of our offerings to make loans to or make additional capital contributions to our PRC subsidiaries, 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; text-indent: 0.5in">ReTo is a company incorporated
in the BVI structured as a holding company conducting its operations in mainland China through its PRC subsidiaries. As permitted under
PRC laws and regulations, in utilizing the proceeds of its offerings, ReTo may make loans to its PRC subsidiaries subject to the approval
from governmental authorities and limitation of amount, or ReTo may make additional capital contributions to its PRC subsidiaries. Furthermore,
loans by ReTo to its PRC subsidiaries to finance their activities cannot exceed the difference between their respective total project
investment amount and registered capital or 2.5 times of their net worth and capital contributions to its PRC subsidiaries are subject
to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information System and registration
with other governmental authorities in China.</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; text-indent: 0.5in">The SAFE promulgated the Notice
of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested
Enterprises, or SAFE Circular 19, effective on June 1, 2015, in replacement of the Circular on the Relevant Operating Issues Concerning
the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, the Notice
from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration of Foreign Exchange Businesses,
and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign
Exchange Businesses. According to SAFE Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered
capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the
repayment of inter-enterprise loans or the repayment of bank loans that have been transferred to a third party. Although SAFE Circular
19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity
investments within mainland China, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of
a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether
the SAFE will permit such capital to be used for equity investments in mainland China in actual practice. The SAFE promulgated the Notice
of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital
Account, or SAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changes
the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company
to issue RMB entrusted loans to a prohibition against using such capital to grant loans to non-associated enterprises. Violations of SAFE
Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit
our ability to transfer any foreign currency we hold, including the net proceeds from our follow-on offering, to our PRC subsidiaries,
which may adversely affect our liquidity and our ability to fund and expand our business in mainland 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; text-indent: 0.5in">In light of the various requirements
imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we cannot assure you that
we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if
at all, with respect to future loans by us to our PRC subsidiaries or with respect to future capital contributions by us to our PRC subsidiaries.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from our offerings and to capitalize
or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability
to fund and expand our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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 PRC government could prevent the cash
maintained in our bank accounts in mainland China from leaving mainland China, restrict deployment of the cash into the business of its
subsidiaries and restrict the ability to pay dividends to U.S. investors, which could materially adversely affect our 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; text-indent: 0.5in">The PRC government controls
the conversion of Renminbi into foreign currencies and the remittance of currencies out of mainland China. We receive substantially all
of our revenues in Renminbi, and most of our cash is in Renminbi. Under our corporate structure, ReTo, a BVI holding company, primarily
relies on dividend payments from our PRC subsidiaries to fund any cash and financing requirements it may have. Under the existing PRC
foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade- and-service-related
foreign exchange transactions, can be made in foreign currencies without prior approval from the SAFE by complying with certain procedural
requirements. As such, under the existing exchange restrictions, cash generated from the operations of our PRC subsidiaries is able to
be paid as dividends in foreign currencies to ReTo without prior approval from the SAFE by complying with certain procedural requirements.
However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign
currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
The PRC government may also at its discretion in the future restrict access to foreign currencies for current account transactions. There
is no assurance that the PRC government will not intervene or impose restrictions on the ability of us, our subsidiaries to transfer cash.
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 from the PRC subsidiaries to the offshore subsidiaries, across borders, and
to our shareholders, including the U.S. investors. These foreign exchange restrictions and limitations could prevent the cash maintained
from leaving mainland China, and restrict our ability to pay dividends to ReTo and the U.S. investors.</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; text-indent: 0.5in">There are limitations on our
PRC subsidiaries&#8217; ability to distribute earnings to their respective shareholders. On the one hand, under the current PRC laws and
regulations, our PRC subsidiaries may pay dividends only out of their accumulated profits. In addition, our PRC subsidiaries are required
to set aside at least 10% of their accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the
aggregate amount of such fund reaches 50% of their registered capital. Our PRC subsidiaries may at their discretion allocate a portion
of their after-tax profits to staff welfare and bonus funds in accordance with relevant PRC rules and regulations. These reserve funds
and staff welfare and bonus funds cannot be distributed as cash dividends. Moreover, if the PRC subsidiaries incur debt on their own behalf
in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.</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">In addition, any transfer
of funds by ReTo to our PRC subsidiaries, either as a shareholder loan or as an increase in the registered capital, is subject to a series
of procedural requirements imposed by SAFE or its local counterparts. This may hinder or delay our deployment of cash into our subsidiaries&#8217;
business, which could result in a material and adverse effect on our operations.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our Common Shares may be delisted under
the HFCAA if the PCAOB is unable to inspect our auditors. The delisting of our Common Shares, or the threat of their being delisted, may
materially and adversely affect the value of your investment. Furthermore, on December 29, 2022, the Accelerating Holding Foreign Companies
Accountable Act was enacted, which amends the HFCAA and requires 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.</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; text-indent: 0.5in">The HFCAA was enacted on December
18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has
not been subject to inspection by the PCAOB for three consecutive years, the SEC shall prohibit our Common Shares from being traded on
a national securities exchange or in the over the counter trading market in the U.S.</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">On March 24, 2021, the SEC
adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. We will
be required to comply with these rules if the SEC identifies us as having a &#8220;non-inspection&#8221; year under a process to be subsequently
established by the SEC. The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition
requirements described above. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework
for the PCAOB to use when determining, as contemplated under the HFCAA, 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.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 2, 2021, the SEC
adopted final amendments to its rules implementing the HFCAA. Such final rules establish procedures that the SEC will follow in (i) determining
whether a registrant is a &#8220;Commission-Identified Issuer&#8221; (a registrant identified by the SEC as having filed an annual report
with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable
to inspect or investigate completely because of a position taken by an authority in that jurisdiction) and (ii) prohibiting the trading
of an issuer that is a Commission-Identified Issuer for three consecutive years under the HFCAA. The SEC began identifying Commission-Identified
Issuers for the fiscal years beginning after December 18, 2020. A Commission-Identified Issuer is required to comply with the submission
and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified
Issuer based on its annual report for the fiscal year ended, for example, September 30, 2021, the registrant will be required to comply
with the submission or disclosure requirements in its annual report filing covering the fiscal year ended September 30, 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; text-indent: 0.5in">Furthermore, on December&#160;29,
2022, the Accelerating Holding Foreign Companies Accountable Act was enacted, which amends the HFCAA and requires 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.</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; text-indent: 0.5in">On December 16, 2021, the
PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms
headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB
included in the report of its determination a list of the accounting firms that are headquartered in mainland China or Hong Kong. This
list does not include, YCM CPA Inc.</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">Our independent registered
public accounting firm, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB,
is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable
professional standards. Our auditor is currently registered under the PCAOB and subject to PCAOB inspections. However, the recent developments
would add uncertainties to our offering and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more
stringent criteria to us after considering the effectiveness of our auditor&#8217;s audit procedures and quality control procedures, adequacy
of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.</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">On August 26, 2022, the PCAOB
signed the Protocol with the CSRC and MOF, 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 without any limitations on scope. However, uncertainties exist with
respect to the implementation of this framework and there is no assurance that the PCAOB will be able to execute, in a timely manner,
its future inspections and investigations in a manner that satisfies the Protocol.&#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; text-indent: 0.5in">The SEC may propose additional
rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President&#8217;s
Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese
Companies to the then President of the United States. This report recommended the SEC implement five recommendations to address companies
from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these
recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than the HFCAA.
For example, if a company&#8217;s auditor was not subject to PCAOB inspection, the report recommended that the transition period before
a company would be delisted would end on January 1, 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; text-indent: 0.5in">On December 15, 2022, the
PCAOB 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 will consider the need to issue a new determination.</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">The SEC has announced that
the SEC staff is preparing a consolidated proposal for the rules regarding the implementation of the HFCAA and to address the recommendations
in the PWG report. It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any,
of the PWG recommendations will be adopted. The implications of this possible regulation in addition to the requirements of the HFCAA
are uncertain. Such uncertainty could cause the market price of our Common Shares to be materially and adversely affected, and our securities
could be delisted or prohibited from being traded &#8220;over-the-counter&#8221; earlier than would be required by the HFCAA. If our securities
are unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase
our Common Shares when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact
on the price of our Common 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"><b><i>We may be treated as a resident enterprise
for PRC tax purposes under the EIT Law, and we may therefore be subject to PRC income tax on our global income.</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; text-indent: 0.5in">China passed an Enterprise
Income Tax Law (the &#8220;EIT Law&#8221;) and implementing rules, both of which became effective on January&#160;1, 2008, EIT Law was
subsequently amended by the SCNPC and became effective on February 24, 2017. Under the EIT Law, resident enterprises pay income tax at
the rate of 25% for their worldwide income while non-resident enterprises pay 20% for their income generated from China and income generated
overseas but are substantially related to the entities established in China by the non-resident enterprises. As far as the definition
of resident enterprises, according to the EIT Law, an enterprise established outside of China with &#8220;de facto management bodies&#8221;
within China is considered a &#8220;resident enterprise.&#8221; The implementing rules of the EIT Law define de facto management as &#8220;substantial
and overall management and control over the production and operations, personnel, accounting, and properties&#8221; of the enterprise.</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; text-indent: 0.5in">On April 22, 2009, the State
Administration of Taxation of China issued Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered
Enterprises as Resident Enterprises with the Actual Standards of Organizational Management, or Circular 82, further interpreting the application
of the EIT Law and its implementation to offshore entities controlled by a Chinese enterprise or group. Pursuant to the Circular 82, an
enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a &#8220;resident
enterprise&#8221; with its &#8220;de facto management body&#8221; located within China if&#8201; (i) the place where the senior management
and core management departments that are in charge of its daily operations perform their duties is mainly located in China; (ii) its financial
and human resources decisions are made by or are subject to approval by persons or bodies in China; (iii) its major assets, accounting
books, company seals, and minutes and files of its board and shareholders&#8217; meetings are located or kept in China; and (iv) at least
half of the enterprise&#8217;s directors or senior management with voting rights frequently reside in China. A resident enterprise would
have to pay a withholding tax at a rate of 10% when paying dividends to its non-mainland-China stockholders.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Given that ReTo does not have
a mainland China individual or a mainland China enterprise or group, but a Hong Kong enterprise, as its primary controlling shareholder,
we believe Circular 82 will not apply to us. However, Circular 82 did mention that the facts-oriented recognition is more important than
format in the case of recognizing &#8220;de facto management&#8221;. Although we have never been determined by any competent tax authorities
to be a &#8220;resident enterprise&#8221;, and we have not seen any corporations with similar structures to ours to be determined as a
&#8220;resident enterprise&#8221;, whether or not we will be recognized as a &#8220;resident enterprise&#8221; is subject to the PRC tax
authorities&#8217; discretion and their interpretation of the term &#8220;de facto management body&#8221;.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As for our Hong Kong business,
we do not believe that we meet some of the conditions outlined. As a holding company, the key assets and records of REIT Holdings, 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 mainland China. Accordingly, we believe that REIT Holdings 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 Circular 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; text-indent: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the PRC tax authorities
determine that we are a &#8220;resident enterprise&#8221; for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences
could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise
income tax reporting obligations. In our case, this would mean that income such as non-mainland-China source income would be subject to
PRC enterprise income tax at a rate of 25%. Second, under the EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries
would qualify as &#8220;tax-exempt income.&#8221; Finally, it is possible that future guidance issued with respect to the new &#8220;resident
enterprise&#8221; classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC
stockholders and with respect to gains derived by our non-PRC stockholders from transferring 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; background-color: white"><b><i>Fluctuations in
exchange rates could result in foreign currency exchange losses to us and may reduce the value of, and amount in U.S. Dollars of dividends
payable on, our shares in foreign currency terms.&#160;</i></b></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; background-color: white">Changes
in the value of the RMB against the U.S. dollar, Euro and other foreign currencies are affected by, among other things, changes in China&#8217;s
political and economic conditions. Any significant revaluation of the RMB may have a material adverse effect on our revenues and financial
condition, and the value of, and any dividends payable on our shares in U.S. dollar terms. Although we use the United States dollar for
financial reporting purposes, all of the transactions effected by our PRC subsidiaries are denominated in China&#8217;s currency, the
RMB. The value of the RMB fluctuates and is subject to changes in China&#8217;s political and economic conditions. We do not currently
engage in hedging activities to protect against foreign currency risks. Even if we choose to engage in such hedging activities, we may
not be able to do so effectively. Future movements in the exchange rate of the RMB could adversely affect our financial condition as we
may suffer financial losses when transferring money raised outside of China into the country or paying vendors for services performed
outside of China. For example, to the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB
against the U.S. dollar would have an adverse effect on RMB amount we would receive from the conversion. Conversely, if we decide to convert
our RMB into U.S. dollars for the purpose of paying dividends on our Common Shares or for other business purposes, appreciation of the
U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations of the RMB
against other currencies may increase or decrease the cost of imports and exports, and thus affect the price-competitiveness of our products
against products of foreign manufacturers or products relying on foreign inputs.</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; background-color: white">Since
July 2005, the RMB is no longer pegged to the U.S. dollar. Although the People&#8217;s Bank of China regularly intervenes in the foreign
exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly
in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future Chinese authorities may lift
restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.</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; background-color: white">We
reflect the impact of currency translation adjustments in our financial statements under the heading &#8220;Foreign currency translation
gain (loss).&#8221; For the years ended December 31, 2022, 2021 and 2020, we had a negative adjustment of $1,183,819, a positive adjustment
of $493,769 and a positive adjustment of $1,923,316, respectively, for foreign currency translations. Very limited hedging transactions
are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions.
While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and
we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by China
exchange control regulations that restrict our ability to convert RMB into foreign currencies.</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; background-color: white">Besides,
Fluctuation of the Renminbi could materially affect our financial condition and results of operations. The value of the Renminbi against
the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions.
On July 21, 2005, the Chinese government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under
the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies.
This change in policy has resulted in an appreciation of the Renminbi against the U.S. dollar. While the international reaction to the
Renminbi revaluation has generally been positive, there remains international pressure on the Chinese government to adopt an even more
flexible currency policy, which could result in a further and more rapid appreciation of the Renminbi against the U.S. dollar. Any material
revaluation of Renminbi may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of,
and any dividends payable on, our Common Shares in U.S. dollars. For example, an appreciation of Renminbi against the U.S. dollar would
make any new Renminbi denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into
Renminbi for such purposes.</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 subject to foreign exchange controls
in China, which could limit our use of funds that would be raised in future offerings, which could have a material adverse effect on our
business.</i></b></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">Beijing REIT, REIT Technology
and REIT Ordos are subject to Chinese rules and regulations on currency conversion. In China, SAFE regulates the conversion of the RMB
into foreign currencies. Currently, FIEs are required to apply to SAFE for &#8220;Registration of Establishment as FIEs&#8221;. Beijing
REIT, REIT Technology and REIT Ordos are FIEs. With such registration, Beijing REIT, REIT Technology and REIT Ordos are allowed to open
foreign currency accounts including the &#8220;current account&#8221; and the &#8220;capital account&#8221;. Currently, conversion within
the scope of the &#8220;current account&#8221; and general &#8220;capital account&#8221; can be effected without requiring the approval
of SAFE. However, conversion of currency in some restricted &#8220;capital account&#8221; (e.g. for capital items such as direct investments,
loans, securities, etc.) still requires the approval of SAFE.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In particular, if Beijing
REIT, REIT Technology or REIT Ordos borrow foreign currency through loans from ReTo or other foreign lenders, these loans must be registered
with SAFE. If Beijing REIT, REIT Technology or REIT Ordos are financed by means of additional capital contributions, reporting to or filings
with certain Chinese government authorities, including MOFCOM, or the local counterparts of SAFE and SAMR or its local counterparts, in
respect of these capital contributions. These restrictions could limit our use of funds which would be raised in our future offerings,
which could have an adverse effect on our business.</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><i>If we fail to comply
with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans, the PRC plan participants
or we could be subject to fines and other legal or administrative sanctions.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating
in Stock Incentive Plan of Overseas Publicly Listed Company (the &#8220;SAFE Circular 7). Pursuant to SAFE Circular 7, directors, supervisors,
senior management and other employees participating in any stock incentive plan of an overseas publicly listed company who are PRC citizens
or who are non-PRC citizens residing in China for a continuous period of not less than one year, are required to register with SAFE through
a domestic qualified agent, which could be the PRC subsidiary of such overseas-listed company, and complete certain other procedures,
unless certain exceptions are available. In addition, an overseas-entrusted institution must be retained to handle matters in connection
with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees
who are PRC citizens or non-PRC citizens living in China for a continuous period of not less than one year and have been granted options
are subject to these regulations as our company has become an overseas-listed company. Failure to complete SAFE registrations may subject
them to fines of up to RMB50,000 for individuals and may also limit our ability to contribute additional capital into our WFOE and our
WFOE&#8217; ability to distribute dividends to us. If any unapproved outflow or inflow of capital occurs and constitutes foreign exchange
evasion or arbitrage, the amount of fine will be higher.</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; background-color: white">In
addition, the Ministry of Finance and the State Administration of Taxation have issued certain circulars concerning employee share options
and restricted shares. Under these circulars, our employees working in China who exercise share options or are granted restricted shares
will be subject to PRC individual income tax. Our relevant PRC subsidiary has obligations to file documents related to employee share
options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their
share options or are granted restricted share. If our employees fail to pay or we fail to withhold their income taxes according to relevant
laws and regulations, we 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; background-color: white"><b><i>PRC regulations
relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries
to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries&#8217; ability
to increase their registered capital or distribute profits.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">SAFE
promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents&#8217; Offshore Investment and Financing
and Roundtrip Investment through Special Purpose Vehicles, or the SAFE Circular 37, on July 4, 2014, which replaced the former circular
commonly known as &#8220;SAFE Circular 75&#8221; promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to register
with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of
overseas investment and financing, with such PRC residents&#8217; legally owned assets or equity interests in domestic enterprises or
offshore assets or interests, referred to in SAFE Circular 37 as a &#8220;special purpose vehicle&#8221;. SAFE Circular 37 further requires
amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or
decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event
that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries
of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent
cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital
into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability
under PRC law for evasion of foreign exchange controls.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
have notified substantial beneficial owners of Common Shares who we know are PRC residents of their filing obligation, and are aware that
all substantial beneficial owners have completed the necessary registration with the local SAFE branch or qualified banks as required
by SAFE Circular 37. However, we may not at all times be aware of the identities of all of our beneficial owners who are PRC residents.
We do not have control over our beneficial owners and cannot assure you that all of our PRC-resident beneficial owners will comply with
SAFE Circular 37 and subsequent implementation rules. The failure of our beneficial owners who are PRC residents to register or amend
their SAFE registrations in a timely manner pursuant to SAFE Circular 37 and subsequent implementation rules, or the failure of future
beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in SAFE Circular 37 and subsequent
implementation rules, may subject such beneficial owners or our PRC subsidiaries to fines and legal sanctions. Furthermore, since SAFE
Circular 37 was recently promulgated and it is unclear how this regulation, and any future regulation concerning offshore or cross-border
transactions, will be interpreted, amended and implemented by the relevant PRC government authorities, we cannot predict how these regulations
will affect our business operations or future strategy. Failure to register or comply with relevant requirements may also limit our ability
to contribute additional capital to our PRC subsidiaries and limit our PRC subsidiaries&#8217; ability to distribute dividends to our
company. These risks may have a material adverse effect on our business, financial condition and results of operations.</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><i>Failure to comply
with the Individual Foreign Exchange Rules relating to the overseas direct investment or the engagement in the issuance or trading of
securities overseas by our Chinese resident stockholders may subject such stockholders to fines or other liabilities.</i></b></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; background-color: white">Other
than Circular 37, 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 &#8220;Individual Foreign Exchange Rules&#8221;). Under the Individual Foreign Exchange Rules, any Chinese 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. Chinese individuals who fail to make such registrations may be
subject to warnings, fines or other liabilities.</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; background-color: white">We
may not be fully informed of the identities of all our beneficial owners who are Chinese residents. For example, because the investment
in or trading of our shares will happen in an overseas public or secondary market where shares are often held with brokers in brokerage
accounts, it is unlikely that we will know the identity of all of our beneficial owners who are Chinese residents. Furthermore, we have
no control over any of our future beneficial owners and we cannot assure you that such Chinese residents will be able to complete the
necessary approval and registration procedures required by the Individual Foreign Exchange Rules.</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; background-color: white">It
is uncertain how the Individual Foreign Exchange Rules will be interpreted or enforced and whether such interpretation or enforcement
will affect our ability to conduct foreign exchange transactions. Because of this uncertainty, we cannot be sure whether the failure by
any of our Chinese resident stockholders to make the required registration will subject our subsidiaries to fines or legal sanctions on
their operations, restriction on remittance of dividends or other punitive actions that would have a material adverse effect on our business,
results of operations and financial condition.</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><i>You may experience&#160;difficulties&#160;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.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
holding company is a company incorporated under the laws of the British Virgin Islands, but we conduct substantially all of our operations
in China and substantially most of our assets are located in China. In addition, most of our senior executive officers are PRC nationals
and reside within China for a significant portion of the time. As a result, it may be difficult for you to effect service of process upon
us or those persons inside mainland China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts
based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who reside and whose
assets are located outside the United States. In addition, there is uncertainty as to whether the courts of the British Virgin 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.</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; background-color: white">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 reciprocity
with the United&#160;States 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 United States.</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; background-color: white">Shareholder
claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue
as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information
needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities
in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement
cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States
have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law
which took effect in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection
activities within the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities,
no organization or individual may provide the documents and materials relating to securities business activities to overseas parties.</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 war in Ukraine could materially and
adversely affect our business 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; text-indent: 0.5in">In February 2022, the Russian
Federation commenced a military invasion of Ukraine, and as a result, the United States, the European Union, the United Kingdom and other
jurisdictions have imposed sanctions on certain Russian and Ukrainian persons and entities, including certain Russian banks, energy companies
and defense companies, and have imposed restrictions on exports of various items to Russia and certain regions of Ukraine (including the
self-proclaimed&#160;Donetsk People&#8217;s Republic and Luhansk People&#8217;s Republic and Crimea). Moreover, on February&#160;22, 2022,
the Office of Foreign Assets Control of the United States issued sanctions aimed at limiting Russia&#8217;s ability to raise funds through
sovereign debt.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The war in Ukraine has already
affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this conflict
could result in protracted and/or severe damage to the global economy. Russia&#8217;s invasion of Ukraine has led to, and may continue
to lead to, additional sanctions being levied by the United&#160;States, European Union and other countries against Russia. Russia&#8217;s
military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect the global
markets, our customers or suppliers&#8217; businesses and potentially our business, even though we do not conduct any business in Russia
or Ukraine.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of the date of this annual
report, we do not have any business, operation or assets in Russia or Ukraine, nor do we have any direct or indirect business or contracts
with any Russian or Ukraine entity as a supplier or customer. Additionally, we do not have any knowledge as to whether our customers or
suppliers have any business, operation or assets in Russia or Ukraine, or have any direct or indirect business or contracts with any Russian
or Ukraine entity as a supplier or customer. However, our operations, especially the supply chain, could be adversely impacted as a result
of the dramatic fuel cost increases or delay to international shipping, in particular marine freight, that may be caused by the war.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The extent and duration of
the military action, sanctions and resulting market disruptions of the war in Ukraine are impossible to predict, but could be substantial.
Any such disruptions caused by Russian military actions or resulting sanctions may magnify the impact of other risks described in this
section. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly
developing and beyond our control. Prolonged unrest, intensified military activities or more extensive sanctions impacting the region
could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business,
financial condition, results of operations and prospects.</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>We may be subject to supply chain disruptions,
which could have a material adverse effect on 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; text-indent: 0.5in">Our operations, in particular
sales of construction materials and equipment, are subject to supply chain disruptions. We have not experienced any suspension of production,
purchase or sale of our products and equipment; however, we have experienced some disruption to our supply chain during the PRC government
mandated lockdown due to the COVID-19&#160;pandemic, including but not limited to, restrictions or suspensions of logistics and shipping
services in certain areas of China and increase in raw material 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; text-align: justify; text-indent: 0.5in">While all of our major suppliers
are currently fully operational, any future disruption in their operations would impact our ability to produce and deliver our products
to customers. In addition, reductions in commercial airline and cargo flights, disruptions to ports and other shipping infrastructure
resulting from the COVID-19&#160;pandemic are resulting in increased transport times to deliver our products to customers. This has limited
our ability to fulfill orders and we may be unable to satisfy all of the demand for our products and equipment in a timely manner, which
has adversely affected our relationships with our customers. As a result, the supply chain disruptions have materially affected our operations
and may impact our outlook or business goals.&#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; text-indent: 0.5in">We have also experienced higher
costs of raw materials for manufacture and sale of our equipment, primarily steel and certain electronic parts due to limited availability
or increased commodity prices caused by the COVID -19 pandemic. We have expanded our supplier network in order to control the procurement
costs, diversify supply of our raw materials and ensure timely fulfillment of customer orders. As a result, we believe we can still supply
products and equipment at competitive prices amid the COVID-19 impact.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of Russia&#8217;s
military invasion of Ukraine, the United States, the European Union, the United Kingdom and other jurisdictions have imposed sanctions
on certain Russian and Ukrainian persons and entities, including certain Russian banks, energy companies and defense companies, and have
imposed restrictions on exports of various items to Russian and certain regions of Ukraine. These geopolitical issues have resulted in
increasing global trading uncertainties and thus could potentially affect our supply chain, even though we do not have any business, operation
or assets in Russia or Ukraine, nor do we have any direct or indirect business or contracts with any Russian or Ukraine entity as a supplier
or customer. See &#8221; &#8211; <i>The war in Ukraine could materially and adversely affect our business and results of operations</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; text-indent: 0.5in">Our management has analyzed
the current and future international and domestic political and economic situations and formulated different development strategies and
measures for each of our business segments, with a goal to reduce the existing and potential impact of supply chain disruptions. For the
equipment and construction materials businesses, we have made market development efforts to expand sales and have strengthened the management
of raw material procurement by adding backup suppliers. Moreover, we have focused on production design and processing processes to improve
quality and efficiency as well as reduce costs. We also plan to focus more on the growth of our software development and RSA
services, which are generally less prone to any supply chain disruptions. However, there is no assurance that our efforts to mitigate
the impact of supply chain disruptions will be successful. If our efforts were not successful, our business, financial condition and results
of operations could be materially adversely affected.</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; background-color: white"><b><i>Wage increases
in China may prevent us from sustaining our competitive advantage and could reduce our profit margins.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Labor
costs in China have increased with China&#8217;s economic development. Rising inflation in China is also putting pressure on wages. Wage
costs for our employees form a significant part of our costs. For instance, for the years ended December 31, 2022, 2021 and 2020, our
compensation and benefit costs for our employees were approximately $2.9 million, $3.3 million and $3.4 million, respectively. In addition,
we are required by PRC laws and regulations to pay various statutory employee benefits, including pensions, housing funds, medical insurance,
work-related injury insurance, unemployment insurance and maternity insurance to designated governmental agencies for the benefit of our
employees. We expect that our labor costs, including wages and employee benefits, will continue to increase, particularly as we seek to
expand our operations. In addition, the future issuance of equity-based compensation to our professional staff and other employees would
also result in additional stock dilution for our shareholders. Unless we are able to pass on these increased labor costs to our customers
by increasing prices for our products, services and projects, our profitability and results of operations may be materially and adversely
affected. Furthermore, the PRC government has promulgated new laws and regulations to enhance labor protections in recent years, such
as the Labor Contract Law and the Social Insurance Law. As the interpretation and implementation of these new laws and regulations are
still evolving, our employment practice may not at all times be deemed in compliance with the new laws and regulations. If we are subject
to penalties or incur significant liabilities in connection with labor disputes or investigation, our business and profitability may be
adversely affected.</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>

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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; background-color: white"><b><i>We face risks related
to natural disasters, health epidemics and other outbreaks, such as the COVID-19 pandemic, which could significantly disrupt our operations.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
recent years, there have been outbreaks of epidemics in China and globally, including the outbreak of COVID-19. In March 2020, the World
Health Organization declared the COVID-19 a pandemic. COVID-19 has resulted in quarantines, travel restrictions, and the temporary closure
of businesses and facilities in China and worldwide.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
worldwide outbreak of COVID-19 pandemic has resulted in significant disruptions in the global economy. To contain the spread of COVID-19,
the Chinese government has taken certain emergency measures, including extension of the Lunar New Year holidays, implementation of travel
bans, blockade of certain roads and closure of factories and businesses, and encouragement of remote working arrangements and cancellation
of public activities. Recently, there has been a recurrence of COVID-19 outbreaks in certain provinces of China, including Shanghai, due
to the Delta and Omicron variants. As a result, the Chinese government has implemented similar emergency measures to contain further spread
of COVID-19.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">As
it has historically, the COVID-19 pandemic may continue to, among other things, (i) disrupt our supply chain, delay our ability to timely
fulfill our customer orders and lead to higher fulfilment expenses, (ii) reduce or curtail our customers&#8217; expenditures and overall
demand for our products or services, and increase the volatility of their purchase patterns from period-to-period, (iii) cause delays
in production and collection of accounts receivable, and (iv) require us to take the initiatives in response to COVID-19 and many other
efforts to leverage our technology, products and services to help contain the pandemic, all of 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; text-indent: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
operations are not located in affected regions, which could however reduce the capacity and efficiency of our operations and negatively
impact normal business operations. Our other measures taken to reduce the impact of this epidemic outbreak included upgrading our telecommuting
system, monitoring our employees&#8217; health on a daily basis and optimizing our technology system to support potential growth in user
traffic. We continue to monitor the evolving situation and guidance from government and public health authorities and may take additional
actions based on their recommendations.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">There
remains uncertainty around the severity and duration of the COVID-19 pandemic and the measures taken, or may be taken, in response to
the COVID-19 pandemic, which will depend on numerous factors, including, among others, the emergence of new cases of COVID-19 and its
variants, hospitalization and mortality rates, and the availability and distribution of safe and effective treatments and vaccines.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
are also vulnerable to natural disasters and other calamities. Although we have servers that are hosted in an offsite location and our
backup system is able to capture data on a real-time basis, we may still be unable to recover certain data in the event of a server failure.
We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power
loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise
to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or
corruption of data or malfunctions of software or hardware as well as adversely affect our ability to operate or provide services to our
customers.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Any
future outbreak of contagious diseases, extreme unexpected bad weather or natural disasters would adversely affect our operations and
delivery of our products, services and projects. If there is a recurrence of an outbreak of certain contagious diseases or natural disasters,
our operations may materially be affected and the delivery of our products services and projects may be delayed, which may have a material
adverse effect on our business and operating results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Our revenue will
decrease if the industries in which our customers operate experience a protracted slowdown.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
customers generally operate in the construction industry. Therefore, we are subject to general changes in economic conditions impacting
this segment of the economy. If the construction industry does not grow or if there is a contraction in this industry, demand for our
business would decrease. Demand for our business is typically affected by a number of overarching economic factors, including interest
rates, environmental laws and regulations, the availability and magnitude of private and governmental investment in infrastructure projects
and the health of the overall economy. If there is a decline in economic activity in China or the other markets in which we operate, or
there is a protracted slowdown in industries upon which we rely for our sales, demand for our projects and products and our revenue would
likewise decrease, which could have a materially adverse effect on our business.</p><div>

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

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

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>Any decline in
the availability or increase in the cost of raw materials could materially impact our earnings.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
construction material products, manufacturing equipment and projects depend heavily on the ready availability of various raw materials.
The availability of raw materials may decline, and their prices may fluctuate greatly. If our suppliers are unable or unwilling to provide
us with raw materials on terms favorable to us, we may be unable to produce certain products, equipment or complete projects. The inability
to produce certain products or projects for customers could result in a decrease in profit and damage to our corporate reputation. In
the event our raw material costs increase, we may not be able to pass these higher costs on to our customers in full or at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>We rely on a limited
number of vendors, and the loss of any significant vendor could harm our business, and the loss of any one of such vendors could have
a material adverse effect on our business.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
consider our major vendors to be those vendors that accounted for more than 10% of overall purchases in any given fiscal period. For the
years ended December 31, 2022, 2021 and 2020, the Company purchased approximately 19%, 53% and 43% of its raw materials from one major
supplier, respectively. We have not entered into long-term contracts with all of our significant vendors and instead rely on individual
contracts with such vendors. Although we believe that we can locate replacement vendors readily on the market for prevailing prices, any
difficulty in replacing a vendor on terms acceptable to us could negatively affect our company&#8217;s performance to the extent it results
in higher prices or a slower supply chain.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>We face substantial
inventory risk, which if not addressed could have a material adverse effect on our business.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
must order materials for our products and projects and build inventory in advance of production. We typically acquire materials through
a combination of purchase orders, supplier contracts and open orders, in each case based on projected demand.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">As
of December 31, 2022, our inventory from continuing operations was $337,798. Inventory turnover associated with our continuing operations
for the fiscal year ended December 31, 2022 was 24 days. As our markets are competitive and subject to rapid technology and price changes,
there is a risk that we will forecast incorrectly and order or produce incorrect amounts of products or not fully utilize firm purchase
commitments. If we were unsuccessful in accurately quantifying appropriate levels of inventory, our business, financial condition and
results of operation may be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Any disruption
in the supply chain of raw materials and our products could adversely impact our ability to produce and deliver products, which could
have a material adverse effect on our business.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
order to optimize our product manufacturing, we must manage our supply chain for raw materials and delivery of our products. Supply chain
fragmentation and local protectionism within China further increase supply chain disruption risks. Local administrative bodies and physical
infrastructure built to protect local interests may pose transportation challenges for raw material transportation as well as product
delivery. In addition, profitability and volume could be negatively impacted by limitations inherent within the supply chain, including
competitive, governmental, legal, natural disasters, and other events that could impact both supply and price. Any of these occurrences
could cause significant disruptions to our supply chain, manufacturing capability and distribution system that could adversely impact
our ability to produce and deliver products. If we are unsuccessful in maintaining efficient operation of our supply chain, our business,
financial condition and results of operation may be materially and adversely affected.</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"><b><i>We do not maintain
a reserve for warranty or defective products and installation claims. Our costs could increase if we experience a significant number of
claims, which could have a material adverse effect on our business.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
generally obtain customers&#8217; acceptance when we deliver products, equipment or projects. In practice, we allow our customers to reserve
approximately 5-20% of the agreed purchase or installation price as a security retention for a period of one or two years after we deliver
or implement a solution. We consider this one or two year term to be a warranty period for our products or projects sold. Historically,
we have not experienced significant customer complaints concerning our products or projects, and none of our customers have claimed damages
for any loss incurred due to quality problems. In addition to our one to two year reserve, China&#8217;s Product Quality Law generally
allows customers two years to seek compensation for damages caused by product quality deficiencies in cases in which a product lacks an
expiration period.</p><div>

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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
expect our customer support teams and our quality assurance and manufacturing monitoring procedures to continue to keep claims at a level
that does not support a need for a financial reserve. However, if we experience significant increases in claims or customers&#8217; failure
to pay the final 5-20% of a purchase/installation price as a result of quality concerns, our financial results could be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>We face certain
risks in collecting our accounts receivable, the failure to collect could have a material adverse effect on our business.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">As
of December 31, 2022, 2021 and 2020, our net accounts receivable associated with our continuing operations were <span style="font-family: Times New Roman, Times, Serif">$</span>2,234,186
(including accounts receivable from third party customers of $2,150,450 and accounts receivable from related party customers of $83,736),
$535,292 (including accounts receivable from third party customers of $441,703 and accounts receivable from related party customers of
$93,589) and $3,056,104 (including accounts receivable from third party customers of $2,856,105 and accounts receivable from related party
customers of approximately $199,999), respectively. These amounts represented 35%, 15% and 37% of our total revenues from continuing operations
in 2022, 2021 and 2020, respectively. For the years ended December 31, 2022, 2021 and 2020, our accounts receivable turnover associated
with our continuing operations was 154 days, 182 days and 222 days, respectively.&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Although
we believe that we have developed a robust receivables management system and have not incurred a situation where an account receivable
has become uncollectable, as our business continues to scale, we believe that our accounts receivable balance will continue to grow. This,
in turn, increases our risks for bad debts and uncollectible receivables. To the extent we incur additional bad debts and/or uncollectible
receivables, our business, financial condition and results of operation may be materially and adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>Our return on investment
in client projects may be different from our projections.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
return on investment in client projects will take some time to materialize. At the initial stages of project investment and construction,
the depreciation of newly added materials and fixed assets will negatively affect our operating results. In addition, the projects may
be subject to changes in market conditions during the installation and implementation phases. Changes in industry policy, the progress
of the projects, project management, raw materials supply, market conditions and other variables may affect the profitability and the
time in which we profit on projects, which may be different from our initial forecast, thus affecting the actual return on investment
of the projects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>The sales of our
eco-friendly construction materials are subject to geographic market risks, which could adversely affect our revenues and profitability.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Currently,
our eco-friendly construction materials are sold in China. Accordingly, we are subject to risks related to the economy of China. In addition
to economic conditions, the geographic concentration suggests that regional specific legislation, taxes and disasters such as earthquakes
could disproportionately affect us and our financial performance. For example, a downturn in the demand for eco-friendly construction
materials or economic conditions in Hainan Province could result in a material decline in our business, financial condition and results
of operation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>The report of our
independent registered public accounting firm on our financial statements for the years ended December 31, 2022, 2021 and 2020 includes
an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern, and if our business is unable
to continue it is likely investors will lose all of their investment. </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">As
discussed in Note 3 to the consolidated financial statements to this annual report, we have suffered significant losses from operations
and has a significant decrease in working capital that raises substantial doubt about our ability to continue as a going concern. Our
auditor, YCM CPA Inc., has indicated in their report on our financial statements for the fiscal year ended December 31, 2022 that there
is a substantial doubt about our ability to continue as a going concern for the next 12 months from the issuance of the consolidated financial
statements. A &#8220;going concern&#8221; opinion could impair our ability to finance our operations through the sale of equity, incurring
debt, or other financing alternatives.</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Management&#8217;s
plan to alleviate the substantial doubt about our ability to continue as a going concern include working to improve our liquidity and
capital sources mainly through cash flow from its operations, renewal of bank borrowings, equity or debt offering and borrowing from related
parties. In order to fully implement its business plan and recover from continuing losses, we may also seek equity financing from outside
investors. At the present time, however, we do not have commitments of funds from any potential investors. There can be no assurance that
additional financing, if required, would be available on favorable terms or at all and/or that these plans and arrangements will be sufficient
to fund our ongoing capital expenditures, working capital, and other requirements.&#160; If we are unable to achieve these goals, our
business will be jeopardized and we may not be able to continue. If we ceased operations, it is likely that all of our investors will
lose their investment.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>We cannot assure
you that our growth strategy will be successful, which may result in a negative impact on our growth, financial condition, results of
operations and cash flow.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
intend to grow by expanding our business, increasing market penetration of our existing products, developing new products and increasing
our targeting of domestic and international markets. However, many obstacles to this expansion exist, including increased competition
from similar businesses, our ability to improve our products and product mix to realize the benefits of our research and development efforts,
unexpected costs and costs associated with marketing efforts. As such, we cannot assure you that we will be able to successfully overcome
these potential challenges and establish our business in additional markets. Our inability to implement this growth strategy successfully
may have a negative impact on our growth, future financial condition, and results of operations or cash flows.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>If we fail to protect
our intellectual property rights, it 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-indent: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white"><span style="font-size: 10pt">We
own an aggregate of 123</span>&#160;<span style="font-size: 10pt">patents (ten of which are owned jointly with Luoyang
Water-Conservancy Surveying &amp; Design Co., Ltd. (&#8220;Luoyang&#8221;), an independent third party), three of which were awarded
Gold and Silver Prize of International Exhibition of Inventions of Geneva. We also have 73 pending patent applications in China. In
addition, we own 25 software copyrights in China.&#160;&#160;We rely on a combination of patent, trademark and trade secret laws and
non-disclosure agreements and other methods to protect our intellectual property rights. </span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
process of seeking patent protection on future patents can be lengthy and expensive, our patent applications may fail to result in patents
being issued, and our existing and future patents may be insufficient to provide us with meaningful protection or commercial advantage.
Our patents and patent applications may also be challenged, invalidated or circumvented.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Implementation
of Chinese intellectual property-related laws have historically been lacking, primarily because of ambiguities in PRC laws and enforcement
difficulties. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United
States or other western countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we
may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our
proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could result in substantial
costs and diversion of resources and management attention, which could harm our business and competitive position.</p><div>

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

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

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>We may be exposed
to intellectual property infringement and other claims by third parties which, if successful, could disrupt our business and have a material
adverse effect on our financial condition and results of operations.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
success depends, in large part, on our ability to use and develop our technology and know-how without infringing third party intellectual
property rights. We face a high risk of being the subject of claims for intellectual property infringement, invalidity or indemnification
relating to other parties&#8217; proprietary rights because we sell our products and manufacturing equipment internationally and litigation
is becoming more common in China. Our current or potential competitors, many of which have substantial resources and have made substantial
investments in competing technologies, may have or may obtain patents that will prevent, limit or interfere with our ability to make,
use or sell our branded products in either China or other countries, including the United States and other countries in Asia. In addition,
the defense of intellectual property suits, including patent infringement suits, and related legal and administrative proceedings can
be costly, time consuming and may significantly divert the efforts and resources of our technical and management personnel. Furthermore,
an adverse determination in any such litigation or proceedings to which we may become a party could cause us to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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">
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    <td style="text-align: justify"><span style="font-size: 10pt">pay damage awards;</span></td></tr>
  </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; width: 100%; background-color: white">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#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">seek licenses from third parties;</span></td></tr>
  </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; width: 100%; background-color: white">
  <tr style="vertical-align: top">
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    <td style="width: 0.25in"><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: 0.5in; 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">
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    <td style="width: 0.5in">&#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">redesign our branded products; or</span></td></tr>
  </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; width: 100%; background-color: white">
  <tr style="vertical-align: top">
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    <td style="width: 0.25in"><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: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Each
of these events could effectively prevent us from pursuing some or all of our business and result in our customers or potential customers
deferring or limiting their purchase or use of our branded products, which could 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; text-indent: 0.5in; 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"><b><i>Confidentiality
agreements with employees and third parties may not prevent unauthorized disclosure of proprietary information and trade secrets.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
addition to patents, we rely on confidentiality agreements to protect our technical know-how and other proprietary information. In addition,
our officers and each of our main technical and management employees have signed a confidentiality agreement. Nevertheless, there can
be no guarantee that an employee or a third party will not make an unauthorized disclosure of our proprietary confidential information.
This might happen intentionally or inadvertently. It is possible that a competitor will make use of such information, and that our competitive
position will be compromised, in spite of any legal action we might take against persons making such unauthorized disclosures.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>The use of unqualified
individual subcontractors may result in substantial liability.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Beijing
REIT Ecological Engineering Technology Co., Ltd. (&#8220;Beijing REIT Ecological&#8221;) subcontracts portions of its projects to third
parties. According to Construction Law and Qualification Standard for Labor Subcontracting in Construction Business of China, individual
contractors are not in a position to obtain any qualification of labor subcontracting. Accordingly, contracts subcontracted out by Beijing
REIT Ecological to individual contractors may be declared void and unenforceable by applicable courts. Article 29 of the Construction
Law requires that &#8220;the overall contractors and subcontractors shall bear joint responsibilities to project owners for the subcontracted
projects&#8221;. It is possible that Beijing REIT Ecological may subcontract projects to individuals or parties without required qualifications.
If the construction completed by unqualified individual subcontractors does not meet required quality standards and an accident occurs,
we may jointly bear the consequences pursuant to Article 67 of the Construction Law. Also, according to Article 54 of the Regulation on
the Quality Management of Construction Projects, the liabilities for the consequences could be indemnifying the damages and paying a penalty
ranging from RMB 500,000 (approximately $72,000) up to RMB 1.0 million (approximately $144,000).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>If we experience
a significant disruption in, or a breach in security of, our information technology systems or if we fail to implement, manage or integrate
new systems, software and technologies successfully, it could harm our business.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
information technology (&#8220;IT&#8221;) systems are an integral part of our business. We depend on our IT systems to process transactions,
manage logistics, keep financial records, prepare our financial reporting and operate other critical functions. Security breaches, cyber-attacks
or other serious disruptions of our IT systems can create systemic disruptions, shutdowns or unauthorized disclosure of confidential information.
If we are unable to prevent or adequately respond to such breaches, attacks or other disruptions, our operations could be adversely affected
or we may suffer financial or reputational damage.</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; 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; text-indent: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
addition, our ability to effectively implement our business plan in a rapidly evolving market requires effective planning, reporting and
analytical processes and systems. We are improving and expect that we will need to continue to improve and further integrate our IT systems,
reporting systems and operating procedures on an ongoing basis. If we fail to do so effectively, it could adversely affect our ability
to achieve our objectives.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>Product defects
and unanticipated use or inadequate disclosure with respect to our products could adversely affect our business, reputation and financial
performance.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Manufacturing
or design defects (including in products or components that we source from third parties), unanticipated use of, or inadequate disclosure
of risks relating to, the use of products or equipment that we make and sell may lead to personal injury, death or property damage. These
events could lead to recalls or alerts relating to our products, result in the removal of a product or equipment from the market or result
in product liability claims being brought against us. Product and equipment recalls, removals and liability claims can lead to significant
costs, as well as negative publicity and damage to our reputation that could reduce demand for our products and equipment.</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"><b><i>Outstanding bank
loans may reduce our available funds.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
had approximately $1.3 million in bank loans loan outstanding as of December 31, 2022 (all short-term bank loans). The loans are held
at multiple banks, and all of the debt is guaranteed by third-party guaranty companies and certain company officers. There can be no guarantee
that we will be able to pay all amounts when due or refinance the amounts on terms that are acceptable to us or at all. If we are unable
to make our payments when due or to refinance such amounts, our property could be foreclosed and our business could be negatively affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>A financial intermediary
may have acquired investment funds from investors to invest in our Company&#8217;s business before reaching a final mutual agreement with
us to obtain such investments, which may subject us to on-going or future litigation, which could have a material adverse effect on our
financial condition. </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
2018, a financial intermediary and REIT New Materials Xinyi Co., Ltd. (&#8220;Xinyi REIT&#8221;) began negotiations towards a potential
cooperation where the financial intermediary would introduce potential investors to facilitate investment in Xinyi REIT&#8217;s business.
In December 2018, an investor invested RMB1,000,000 (approximately $0.15 million) in Xinyi REIT through this financial intermediary. Xinyi
REIT rejected this investment and returned the total investment funds it received to the investor and informed the financial intermediary
to cease facilitating investments from other investors. In addition, despite there not being a final mutual agreement between the parties,
it appears the financial intermediary may have acquired investment funds in the aggregate amount of RMB15,450,000 (approximately $2.15
million) from certain investors, and Xinyi REIT did not receive any funds from these investments.</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Mr.
Hengfang Li, the Company&#8217;s Chief Executive Officer and Chairman, has agreed to assume full responsibility for liabilities, if any,
and assume the creditor&#8217;s rights for these claims on behalf of the Company for any legal claims or lawsuits against the Company
due to these investments. In May 2020, Mr. Li paid RMB 300,000 (approximately $44,000) to an investor in a lawsuit against Xinyi REIT
to return the investment funds. In 2022 and 2023, a few other investors brought legal actions against Xinyi REIT for the same claim and
judgments were rendered in their favor. Subsequently, Xinyi REIT appealed these judgments, and the appeals are still pending in higher
courts as of the date of this annual report. The Company does not believes that any liability resulting from the outcome of such proceedings,
if any, will have a material adverse effect on the Company&#8217;s consolidated financial position or results of operations or liquidity.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">However,
in the event that Mr. Li personally fails to satisfy any losses related to the investments on our behalf, the Company may be required
to repay related liabilities, which although is remote, could have a material adverse effect on our financial condition<i>.</i></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>Our future growth
depends on new products, environmental solutions and new technology innovation, and failure to invent and innovate could adversely impact
our business prospects.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
future growth depends in part on maintaining our competitive advantage with current products in new and existing markets, as well as our
ability to develop new products, and technologies to serve such markets. To the extent that competitors develop competitive products,
and technologies, or new products, or technologies that achieve higher customer satisfaction, our business prospects could be adversely
impacted. In addition, regulatory approvals for new products, equipment or technologies may be required, and these approvals may not be
obtained in a timely or cost-effective manner, which could adversely impact our business prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&#160;</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; background-color: white">&#160;</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"><b><i>Changes in demand
for our products, equipment and business relationships with key customers and suppliers may negatively affect operating results.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">To
achieve our objectives, we must develop and sell products and equipment that are subject to the demands of our customers. This is dependent
on many factors, including managing and maintaining relationships with key customers, responding to the rapid pace of technological change
and obsolescence, which may require increased investment by us or result in greater pressure to commercialize developments rapidly or
at prices that may not fully recover the associated investment, and the effect on demand resulting from customers&#8217; research and
development, capital expenditure plans and capacity utilization. If we are unable to keep up with our customers&#8217; demands, our sales,
earnings and operating results may be negatively affected.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>We may be unable
to deliver our backlog on time, which could affect future sales and profitability and our relationships with customers.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
ability to meet customer delivery schedules for backlog is dependent on a number of factors including sufficient manufacturing plant
capacity, adequate supply channel access to raw materials and other inventory required for production, an adequately trained and capable
workforce, project engineering expertise for certain large projects and appropriate planning and scheduling of manufacturing resources.
Many of the contracts we enter into with our customers require long manufacturing lead times. Failure to deliver in accordance with customer
expectations could subject us to contract cancellations and financial penalties, and may result in damage to existing customer relationships
and could have a material adverse effect on our business, financial condition and results of operations. We cannot assure you that our
backlog will result in revenue on a timely basis or at all, or that any cancelled contracts will be replaced.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>Our operations
are subject to various hazards that may cause personal injury or property damage and increase our operating costs, and which may exceed
the coverage of our insurance.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">There
are inherent risks to our operations. Our workers are subject to the usual hazards associated with providing services on construction
sites, while our plant personnel are subject to the hazards associated with moving and storing large quantities of heavy raw materials
and finished products. Operating hazards can cause personal injury and loss of life, damage to or destruction of property, plant and
equipment and environmental damage. Although we conduct training programs designed to reduce these risks, we cannot eliminate these risks.
We rely on state mandated social insurance for work-related injuries of our employees. However, any claim that exceeds the scope of our
insurance coverage, if successful and of sufficient magnitude, could result in the incurrence of substantial costs and the diversion
of resources, which could have a material adverse effect on us. In addition, we do not have any business liability, disruption, litigation
or property insurance coverage for our operations. Any uninsured occurrence of loss or damage to property, or litigation or business
disruption may also materially and adversely affect our ability to operate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>We may incur material
costs and losses as a result of claims our products do not meet regulatory requirements or contractual specifications.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
operations involve providing products that must meet building code or other regulatory requirements and contractual specifications for
durability, stress-level capacity, weight-bearing capacity and other characteristics. If we fail or are unable to provide products meeting
these requirements and specifications, we may face economic penalties, including price adjustments, rejection of deliveries and/or termination
of contracts, and our reputation could be damaged. If a significant product-related claim or claims are made and resolved against us
in the future, such resolution may have a material adverse effect on our business, financial condition, results of operations and cash
flows.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&#160;</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; 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"><b><i>Our operations
may incur substantial liabilities to comply with environmental laws and regulations.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
construction materials manufacturing operations are subject to laws and regulations relating to the release or disposal of materials
into the environment or otherwise relating to environmental protection. Our failure to have complied with the applicable laws may result
in the assessment of administrative, civil and criminal penalties, the incurrence of investigatory or remedial obligations and the imposition
of injunctive relief. Resolution of these matters may require considerable management time and expense. In addition, changes in environmental
laws and regulations occur frequently and any changes that result in more stringent or costly manufacturing, storage, transport, disposal
or cleanup requirements could require us to make significant expenditures to reach and maintain compliance and may otherwise have a material
adverse effect on our industry in general and on our own results of operations, competitive position or financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>We depend on our
key personnel, and our business and growth prospects may be severely disrupted if we lose their services.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
future success depends heavily upon the continued service of our key executives. In particular, we rely on the expertise and experience
of Hengfang Li, our founder, Chairman and Chief Executive Officer. We rely on his industry expertise and experience in our business operations,
and in particular, his business vision, management skills, and working relationship with our employees, our other major shareholders,
the regulatory authorities, and many of our clients. If he became unable or unwilling to continue in his present position, or if he joined
a competitor or formed a competing company in violation of his employment agreement, we may not be able to replace him easily, our business
may be significantly disrupted and our financial condition and results of operations may be materially adversely affected.</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
do not maintain key man life insurance on any of our senior management or key personnel. The loss of any one of them would have a material
adverse effect on our business and operations. Competition for senior management and our other key personnel is intense and the pool
of suitable candidates is limited. We may be unable to locate a suitable replacement for any senior management or key personnel that
we lose. In addition, if any member of our senior management or key personnel joins a competitor or forms a competing company, they may
compete with us for customers, business partners and other key professionals and staff members of our Company. Although each of our senior
management and key personnel has signed a confidentiality and non-competition agreement in connection with his or her employment with
us, we cannot assure that we will be able to successfully enforce these provisions in the event of a dispute between us and any member
of our senior management or key personnel.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
addition, we compete for qualified personnel with other industry competitors, and we face competition in attracting skilled personnel
and retaining the members of our senior management team. These personnel possess technical and business capabilities, including expertise
relevant to the construction materials industry, which are difficult to replace. There is intense competition for experienced senior
management with technical and industry expertise in the construction materials industry, and we may not be able to retain our key personnel.
Intense competition for these personnel could cause our compensation costs to increase, which could have a material adverse effect on
our results of operations. Our future success and ability to grow our business will depend in part on the continued service of these
individuals and our ability to identify, hire and retain additional qualified personnel. If we are unable to attract and retain qualified
employees, we may be unable to meet our business and financial goals.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>We have limited
business insurance coverage. Any future business liability, disruption or litigation we experience might divert management focus from
our business and could significantly impact our financial results.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Availability
of business insurance products and coverage in China is limited, and most such products are expensive in relation to the coverage offered.
We have determined that the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurances
on commercially reasonable terms make it impractical for us to maintain such insurances. As a result, we do not have any business liability,
disruption or litigation insurance coverage for our operations in China. Accordingly, a business disruption, litigation or natural disaster
may result in substantial costs and divert management&#8217;s attention from our business, which would have an adverse effect on our
results of operations and financial condition.</p><div>

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

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

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>We may require
additional financing in the future and our operations could be curtailed if we are unable to obtain required additional financing when
needed.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
may need to obtain additional debt or equity financing to fund future capital expenditures. Any additional equity financing may result
in dilution to the holders of our outstanding shares of capital stock. Additional debt financing may put us in situations that would
restrict our freedom to operate our business, such as situations that:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in; 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">
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    <td style="text-align: justify; padding-left: 4.5pt; font-size: 10pt; text-indent: -4.5pt"><span style="font-size: 10pt">limit our
    ability to pay dividends or require us to seek consent for the payment of dividends;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; 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="text-align: justify; width: 0.5in">&#160;</td>
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    conditions;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; background-color: white">&#160;&#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="text-align: justify; width: 0.5in">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; 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="text-align: justify; width: 0.5in">&#160;</td>
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  </table><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; text-align: justify; margin: 0pt 0; text-indent: 0.5in; background-color: white">We
cannot guarantee that we will be able to obtain additional financing on terms that are acceptable to us, or any financing at all, and
the failure to obtain sufficient financing could adversely affect our business operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>Potential disruptions
in the capital and credit markets may adversely affect our business, including the availability and cost of short-term funds for liquidity
requirements, which could adversely affect our results of operations, cash flows and financial condition.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Potential
changes in the global economy may affect the availability of business and consumer credit. We may need to rely on the credit markets,
particularly for short-term borrowings from banks in China, as well as the capital markets, to meet our financial commitments and short-term
liquidity needs if internal funds from our operations are not available to be allocated to such purposes. Disruptions in the credit and
capital markets could adversely affect our ability to draw on such short-term bank facilities. Our access to funds under such credit
facilities is dependent on the ability of the banks that are parties to those facilities to meet their funding commitments, which may
be dependent on governmental economic policies in China. Those banks may not be able to meet their funding commitments to us if they
experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from us and other borrowers
within a short period of time.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Long-term
disruptions in the credit and capital markets could result from uncertainty, changing or increased regulations, reduced alternatives
or failures of financial institutions could adversely affect our access to the liquidity needed for our business. Any disruption could
require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for
our business needs can be arranged. Such measures may include deferring capital expenditures, and reducing or eliminating discretionary
uses of cash. These events would adversely impact our results of operations, cash flows and financial position.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>Changes in China&#8217;s
environmental laws and policies may affect our financial condition.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
eco-friendly construction materials are primarily used in the construction industry. Our business is in line with China&#8217;s current
focus on environmental protection policies, specifically the 14<sup>th</sup>&#160;Five-Year Plan (2021-2025). However, should China alter
its environmental policies towards less regulation, we believe demand for our eco-friendly construction materials and equipment will
decrease, adversely impacting our results of operations, cash flows and financial position.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Our business benefits
from certain government subsidies and incentives. Expiration, reduction or discontinuation of, or changes to, these incentives will increase
our burden and reduce our net income, which could have a material adverse effect on our business and operations.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
have received subsidies from some governmental agencies after meeting certain conditions, such as developing certain technologies, which
are chosen as annual key research and development, or obtaining certain technological certifications. For the years ended December 31,
2022, 2021 and 2020, we included government subsidies of $235,084, $261,197 and $269,061, respectively, in other income.</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Beijing
REIT obtained the High-New Technology Enterprise (&#8220;HNTE&#8221;) Certificate and is entitled to a preferential income tax rate of
15% for the three years from December 2020 to December 2022. Such HNTE Certificate has been renewed for another three years from December
2022 to December 2025. Hainan Yile IoT obtained an HNTE Certificate and is entitled to a preferential income tax rate of 15% for the
three years from October 2020 to October 2023. Hainan Yile IoV Technology Research Institute Co., Ltd. (&#8220;IoV Technology Research&#8221;)
obtained an HNTE Certificate and is entitled to a preferential income tax rate of 15% for the three years from October 2022 to October
2025. The 15% tax rate is less than the standard 25% income tax rate in China. The estimated tax savings as a result of the Company&#8217;s
tax benefits for the years ended December 31, 2022, 2021 and 2020 amounted to nil, nil &#160;and $164,071, respectively. In the event
any of Beijing REIT, Hainan Yile IoT or IoV Technology Research is unable to renew its HNTE status, its applicable tax rate will increase
from 15% to 25%, the standard business income tax rate in China. In addition, the termination of any one-time subsidies for eco-friendly
construction materials could increase the burden of manufacturing and selling these materials in the future. The reduction or discontinuation
of any of these economic incentives could negatively affect our business and operations.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Failure to make
adequate contributions to certain employee benefit plans as required by PRC regulations may subject us to penalties.&#160;</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
are required under PRC law to participate in various government sponsored employee benefit plans, including social security insurance,
housing provident funds and other welfare-oriented payments, and contribute to the plans in amounts equal to certain percentages of salaries,
including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations
where we operate our businesses. We have not made adequate employee benefit payments to the housing provident fund. We may be required
to pay the shortage of our contributions. If we are subject to late fees or fines in relation to the underpaid employee benefits, our
financial condition and results of operations may be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Since the majority
of our operations and assets are located in China, shareholders may find it difficult to enforce a U.S. judgment against the assets of
our Company, our directors and executive officers.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Other
than REIT India, our operations and assets are located in China. In addition, a majority of our executive officers and directors are
non-residents of the U.S., and substantially all the assets of such persons are located outside the U.S. As a result, it could be difficult
for investors to effect service of process in the U.S., or to enforce a judgment obtained in the U.S. against us or any of these persons.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Substantial uncertainties
exist with respect to the interpretation and implementation of the framework rules of the PRC Foreign Investment Law, and its application
may require further rules to be issued by the PRC government, which may incur and increase our compliance costs and expenses and accordingly
our financial condition and operation will be adversely affected.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">On
Mach 15, 2019, the National People&#8217;s Congress of China promulgated the Foreign Investment Law of the PRC aiming to replace the
major existing laws governing foreign investment in China. The Foreign Investment Law became effective on January 1, 2020. The Foreign
Investment Law applies to PRC enterprises established, acquired or otherwise invested wholly or partially by foreign investors in a manner
prescribed under applicable PRC laws and regulations. It also governs investment projects and activities in China by foreign investors.
Accordingly, as our company qualifies as a &#8220;foreign investor&#8221; for these purposes, our PRC subsidiaries are subject to the
Foreign Investment Law.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Under
the Foreign Investment Law, a &#8220;negative list&#8217; promulgated or approved by the State Council will set forth industries that
are prohibited industries and restricted industries. A foreign investor is prohibited to invest in any prohibited industry included therein.
If a foreign investor is found to invest in any prohibited industry set forth under the &#8220;negative list&#8221;, such foreign investor
may be required to, among other aspects, cease its investment activities, dispose of its equity interests in or assets of the &#8220;foreign-invested
enterprise&#8221; (&#8220;FIE&#8221;) and have its income confiscated. A foreign investor may be permitted to invest in a FIE that is
in a restricted industry set forth in the &#8220;negative list&#8221;, provided that relevant conditions are satisfied and certain approvals
are acquired from relevant PRC governmental authorities. With respect to industries in which foreign investment is not prohibited or
restricted, domestic and foreign investors will be equally treated. On December 27, 2021, the MOFCOM and the NDRC jointly issued the
latest version of Negative List (Edition 2021). Currently, our business falls within the permitted category. However, we cannot assure
you that our current operations or any newly-developed business in the future will still deemed to be &#8220;permitted&#8221; in the
&#8220;negative list&#8221;, which may be promulgated or be amended from time to time by the MOFCOM and the NDRC.</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Some
of our PRC subsidiaries are as FIEs. Once an entity is determined to be a FIE and its business operations fall within a restricted industry
under the &#8220;negative list&#8221;, in order for a foreign investor to invest in the FIE, such entity will be required to obtain entry
clearance and approvals from the MOFCOM or its local counterparts and other relevant PRC government agencies. Our main products currently
manufactured by us, including eco-friendly construction materials and equipment used for the production of these eco-friendly construction
materials, the RSA services and software products and solutions services do not fall in the prohibited or restricted industries under
&#8220;negative list&#8221; that is currently effective.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
Foreign Investment Law also requires that the entity form, main organizations and business activities of an FIE established before the
enactment of the Foreign Investment Law and in accordance with the Chinese-Foreign Equity Joint Venture Enterprise Law, the Chinese-Foreign
Cooperative Joint Venture Enterprise Law or the Wholly Foreign-Owned Enterprise Law comply with the PRC Company Law, the PRC Partnership
Law and other laws (as the case might be) and there is a five-year transition period from January 1, 2020 for FIEs to fully comply with
such requirements.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
relevant business carried out by our PRC subsidiaries and our investment in the PRC subsidiaries currently are not subject to the national
security review under applicable PRC laws and regulations. However, if our future business operations or potential mergers and acquisitions
we enter into in the PRC are related to national security sensitive areas or industries involving certain key technologies, national
security review requirements will likely apply and the review result that is in compliance with PRC laws should be definitive. It remains
unclear when the specific implementation measures of the Foreign Investment Law will be issued by the State Council. Given the uncertainties
exist with respect to the interpretation and implementation of the Foreign Investment Law, its application may require further rules
to be issued by PRC government, which may incur and increase our compliance costs and expenses and accordingly our financial condition
and operation will be adversely affected.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><b><i>The integration of newly acquired businesses
may not provide the benefits anticipated at the time of acquisition.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
line with our strategy to expand our operations and services in markets in which we currently operate as well as into new and emerging
markets, leveraging our existing know-how and infrastructure, in December 2021, we acquired REIT Mingde, and we may make future acquisitions.
We are required to devote management attention and resources to integrating business practices and operations of REIT Mingde. Potential
difficulties we may encounter in the integration process include the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
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    technologies, products and services, in a manner that permits us to achieve the anticipated cost savings, revenue synergies and business
    growth, which could result in the anticipated benefits of the Acquisition not being realized partly or wholly in the time frame currently
    anticipated or at all;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
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    the businesses deciding not to do business with us, or deciding to decrease their amount of business in order to reduce their reliance
    on a single company;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
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    systems and facilities;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">potential unknown liabilities and unforeseen increased expenses, delays
    or regulatory conditions following the Acquisition;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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">
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    cultures, while maintaining focus on providing consistent, high-quality products and services;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">consolidating and rationalizing information technology platforms and
    administrative infrastructures as well as accounting systems and related financial reporting activities and difficulty implementing
    effective internal controls over financial reporting and disclosure controls and procedures in particular; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">preserving important relationships of the Company and REIT Mingde and
    resolving potential conflicts that may arise.</span></td></tr>
  </table><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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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Furthermore,
it is possible that the integration process could result in the loss of key employees or skilled workers of REIT Mingde. The loss of
key employees and skilled workers could adversely affect our ability to successfully conduct the newly acquired business because of their
experience and knowledge of REIT Mingde&#8217;s businesses. In addition, we could be adversely affected by the diversion of management&#8217;s
attention and any delays or difficulties encountered in connection with the integration of REIT Mingde&#8217;s businesses. The process
of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of our operations. If
we experience difficulties with the integration process, the anticipated benefits of the Acquisition may not be realized fully or at
all, or may take longer to realize than expected. These integration matters could have an adverse effect on our business, results of
operations, financial condition or prospects during this transition period and for an undetermined period after completion of the Acquisition.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>We have a limited
operating history in the newly acquired businesses and may be unable to achieve or sustain profitability or accurately predict the future
results of such businesses.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Hainan
Yile IoT commenced the RSA services operations in 2020 and the development and sales of software solutions in May 2019. Because its businesses
and the market for its services are both new and evolving, evaluating the current business and its future performance is difficult and
based upon limited historical data, a changing market, and its ability to influence the market. This applies to predictions of both revenue
and expenses.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Building
its businesses to date, Hainan Yile IoT has accumulated losses. The continued investment in new technology and services will add to its
operating expenses. We cannot assure you that Hainan Yile IoT will be profitable, that it will be able to sustain profitability, or of
the magnitude of its profitability. Our financial performance may be adversely impacted if we fail to address the &#8220;<i>Risk Factors</i>&#8221;
described in this section, or any other risks and challenges that we may face. If its assumptions for addressing the risks that Hainan
Yile IoT has identified and other business conditions are incorrect, our plans for operating the business may be impacted and it may
not achieve our planned and expected results.</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"><b><i>Growing the newly
acquired businesses requires us to continue investing in technology, resources, and new business capabilities; these investments may
contribute to losses, and we cannot guarantee that any will be successful or contribute to profitability.</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; text-indent: 0.5in; background-color: white">Our
plans for operating the newly acquired businesses and leading further growth of its RSA services and software solution offerings. These
plans include developing new products and services. These investments could contribute to losses, and we cannot guarantee whether or
when any of the new products and services will become operational, be successful with customers, or whether they will be profitable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Any failure to
offer high quality services and support may adversely affect our relationships with our customers and prospective customers, and adversely
affect our business, results of operations and financial condition.</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; text-indent: 0.5in; background-color: white">Our
software solutions clients depend on our customer support team to assist them in deploying the solutions effectively, to help them to
resolve post-deployment issues quickly, and to provide ongoing support. If we do not devote sufficient resources or are otherwise unsuccessful
in assisting our customers effectively, it could adversely affect our ability to retain existing customers and could discourage prospective
customer from purchasing and using our software solutions. We may be unable to respond quickly enough to accommodate short-term increases
in demand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support to compete with
changes in the support services provided by our competitors. Increased demand for customer support, without corresponding revenue, could
increase costs and adversely affect our business, results of operations and financial condition. Any failure to maintain high quality
customer support, or a market perception that we do not maintain high quality customer support, could erode customer trust and adversely
affect our reputation, business, results of operations and financial condition.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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; text-indent: 0.5in; 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"><b><i>The software and
information technology service market in which we participate is competitive, and if we do not compete effectively, our business, results
of operations and financial condition could be harmed.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
software and information technology service market is competitive and rapidly evolving. The principal competitive factors in our market
include completeness of product offerings, level of customization of solutions, credibility with developers, global reach, ease of integration
and programmability, product features, platform scalability, reliability, security and performance, brand awareness and reputation, the
strength of sales and marketing efforts, customer support, as well as the cost of deploying and using our products.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Some
of our existing competitors and potential competitors have larger scale, greater brand name recognition, longer operating histories,
more established customer relationships and greater resources than we do. As a result, our competitors may be able to respond more quickly
and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. In addition, some competitors
may offer products, solutions or services that address one or a limited number of functions at lower prices, with greater depth than
our products or in different geographies. Our current and potential competitors may develop and market new products, solutions and services
with comparable functionality to ours, and this could force us to decrease prices in order to remain competitive. With the introduction
of new products, solutions and services and new market entrants, we expect competition to intensify in the future. In addition, some
of our customers may choose to use our products and solutions and our competitors&#8217; products and solutions at the same time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Hainan Yile IoT
receives a substantial portion of its revenues from a limited number of customers, and the loss of, or a significant reduction in usage
by, one or more of its customers would result in lower revenues and could harm our business.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our future success is dependent on establishing and maintaining successful
relationships with a diverse set of customers. Hainan Yile IoT currently receives a substantial portion of its revenues from a limited
number of customers, i.e. four insurance companies. In the years ended December 31, 2022, 2021 and 2020, total revenues generated from
the four insurance company customers accounted for 42%,&#160;54.3% and 8.5% of the total revenues of Hainan Yile IoT in the same periods,
respectively. It is likely that we will continue to be dependent upon a limited number of customers for a significant portion of our revenues
for the foreseeable future and, in some cases, the portion of our revenues attributable to one single customer may increase in the future.
The loss of one or more significant customers or a reduction in usage by any significant customers would reduce our revenues. If we fail
to maintain existing customers or develop relationships with new customers, our business would be harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>We operate in
an emerging and evolving market. If our market does not grow as we expect, or if we fail to adapt and respond effectively to rapidly
changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements or preferences, our
products and solutions may become less competitive.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
software and information technology service market in China is at an early stage of development. There are uncertainties over the size
and rate at which this market will grow, as well as whether our solutions and products will be widely adopted. Moreover, the industry
is subject to rapid technological change, evolving industry standards, changing regulations, as well as changing customer needs, requirements
and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on
a timely basis. If we are unable to develop new solutions and products that satisfy our customers and provide enhancements and new features
for our existing products that keep pace with rapid technological and industry change, our business, results of operations and financial
condition could be adversely affected. If new technologies emerge that are able to deliver competitive products and services at lower
prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete effectively.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
solutions must also integrate with a variety of network, hardware, software platforms and technologies, and we need to continuously modify
and enhance our products and solutions to adapt to changes and innovation. For example, if customers adopt new software platforms or
infrastructure, we may be required to develop new versions of our products to be compatible with those new software platforms or infrastructure.
This development effort may require significant resources, which would adversely affect our business, results of operations and financial
condition. Any failure of our products and solutions to operate effectively with evolving or new software platforms and technologies
could reduce the demand for our products and solutions. If we are unable to respond to these changes in a cost-effective manner, our
products and solutions may become less marketable and less competitive or obsolete, and our business, results of operations and financial
condition could be adversely affected.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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; text-indent: 0.5in; 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"><b><i>Security incidents
and attacks on our products or solutions could lead to significant costs and disruptions that could harm our business, financial results,
and reputation.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
business is dependent on providing our customers with safe, reliable and high-quality software solutions. Maintaining the security and
availability of our systems, network, and the security of information we hold is a critical issue for us and our customers. Attacks on
our customers and our own network are frequent and take a variety of forms. Malicious actors can attempt to fraudulently induce employees
or suppliers to disclose sensitive information through spamming, phishing, or other tactics. We may be subject to cyber-attacks from
third parties. If attacks like these were to occur in the future and if we do not have the systems and processes in place to respond
to them, our business could be harmed.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
costs incurred by us to avoid or alleviate cyber or other security problems and vulnerabilities may be significant. However, our efforts
to address these problems and vulnerabilities may not be successful. Any significant breach of our security measures could:</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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white">
  <tr style="vertical-align: top">
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    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">lead to the dissemination of proprietary information or sensitive,
    personal, or confidential data about us, our employees, or our customers&#8212;including personally identifiable information of individuals
    involved with our customers and their end-users;</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; 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: 48px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">lead to interruptions or degradation of performance in our products
    and solutions;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; 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: 48px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">threaten our ability to provide our customers with access to our products
    and solutions, and negatively affect our abilities to retain existing customers;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; 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: 48px">&#160;</td>
    <td style="width: 24px"><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; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">result in litigation and increased legal liability or fines; or</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; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">lead to governmental inquiry or oversight.</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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
occurrence of any of these events could harm our business or damage our brand and reputation, lead to customer credits, loss of customers,
higher expenses, and possibly impede our present and future success in retaining and attracting new customers. Security incidents or
attacks on our infrastructure would be damaging to our reputation and could harm our business.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Similar
security risks exist with respect to our business partners and our third-party suppliers for information technology support services
and administrative functions. As a result, we are subject to the risk that cyber-attacks on our business partners and third-party suppliers
may adversely affect our business even if an attack or breach does not directly impact our systems. It is also possible that security
breaches sustained by our competitors could result in negative publicity for our entire industry that indirectly harms our reputation
and diminishes demand for our platform.</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"><b><i>A significant
portion of our RSA service revenues were derived from customers in the insurance industry. The intensifying competition, change in sector
trend and landscape and government policies may have a direct impact on the insurance industry and negatively affect the stability of
our clients, which may subsequently have negative impact on our business.</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; text-indent: 0.5in; background-color: white">A
significant portion of our RSA service revenues were derived from insurance companies in Hainan province. Any change in the competitive
landscape, market trend or user behaviors in such sector may have a negative impact on our customers, thus harm their ability to make
payments and maintain and increase the usage of our services. In addition, the insurance industry in China is highly regulated by the
PRC government and numerous regulatory authorities of the central PRC government are empowered to issue and implement regulations governing
various aspects of the industry. As the laws and regulations are evolving and some of them are relatively new, changes to the current
laws and regulations may harm our business and results of operation. In addition, interpretation and enforcement of such laws and regulations
involve significant uncertainty. As a result, in certain circumstances it may be difficult to determine what actions or omissions may
be deemed to be in violations of applicable laws and regulations. If these laws and regulations or the uncertainty associated with their
interpretation negatively impact the insurance industry where our customers operate, our business may be adversely affected as well.</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"></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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Changes in practices
of insurance companies in the markets in which we provide, and sell, our RSA services could adversely affect our revenues and growth
potential.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
depend on the practices of insurance companies in the markets in which we provide our RSA services. The majority of our RSA customers
are insurance companies, which in turn sell our RSA services to their policy holders as policy benefits. Other customers of our RSA services
are drivers without any insurance coverage for RSA services. Therefore, we rely on insurance companies&#8217; continued practice of offering
RSA services as benefits under its policies and accepting our RSA services.&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">If
any of these policies or practices change, for regulatory or commercial reasons, or if market prices for these services fall, revenues
from our RSA services could decline, which could adversely affect our revenues and growth potential.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Defects or errors
in our products or solutions could diminish demand for our products or solutions, harm our business and results of operations and subject
us to liability.</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; text-indent: 0.5in; background-color: white">Our
customers use our products or solutions for important aspects of their businesses, and any errors, defects or disruptions to our products
and solutions and any other performance problems with our products or solutions could damage our customers&#8217; businesses and, in
turn, hurt our brand and reputation. We provide regular updates to our products or solutions, which have in the past contained, and may
in the future contain, undetected errors, failures, vulnerabilities and bugs when first introduced or released. Real or perceived errors,
failures or bugs in our products or solutions could result in negative publicity, loss of or delay in market acceptance of our products
or solutions, loss of competitive position, lower customer retention or claims by customers for losses sustained by them. In such an
event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct
the problem. In addition, we do not carry insurance to compensate us for any losses that may result from claims arising from defects
or disruptions in our products. As a result, our reputation and our brand could be harmed, and our business, results of operations and
financial condition may be adversely affected.</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; text-indent: 0.5in; background-color: white">In
addition, our solutions and products must interoperate with our customers&#8217; existing internal networks and infrastructure. These
complex internal systems are developed, delivered, and maintained by the customer and a myriad of vendors and service providers. As a
result, the components of our customers&#8217; infrastructure have different specifications, rapidly evolve, utilize multiple protocol
standards, include multiple versions and generations of products, and may be highly customized. We must be able to interoperate and provide
products to customers with highly complex and customized internal networks, which requires careful planning and execution between our
customers, our customer support teams and, in some cases, our channel partners. Further, when new or updated elements of our customers&#8217;
infrastructure or new industry standards or protocols are introduced, we may have to update or enhance our technologies and infrastructure
to allow us to continue to provide our products or solutions to customers. Our competitors or other vendors may refuse to work with us
to allow their products to interoperate with our products and solutions, which could make it difficult for our products and solutions
to function properly in customer internal networks and infrastructures that include these third-party products.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
may not deliver or maintain interoperability quickly or cost-effectively, or at all. These efforts require capital investment and engineering
resources. If we fail to maintain compatibility of our solutions and products with our customers&#8217; internal networks and infrastructures,
our customers may not be able to fully utilize our solutions and products, and we may, among other consequences, lose or fail to increase
our market share and experience reduced demand for our products or solutions which would materially harm our business, results of operations,
and financial condition.</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>A severe or prolonged downturn in the global
or Chinese economy could materially and adversely affect our business and our financial condition.</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; text-indent: 0.5in">The Chinese economy has slowed
down since 2012 and such slowdown may continue. There is considerable uncertainty over the long-term effects of the expansionary monetary
and fiscal policies adopted by the central banks and financial authorities of some of the world&#8217;s leading economies, including
the United States and China. There have been concerns over unrest and terrorist threats in the Middle East, Europe and Africa, which
have resulted in volatility in oil and other markets, and over the conflicts involving Ukraine and Syria. There have also been concerns
on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial
disputes. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political
policies and the expected or perceived overall economic growth rate 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"></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; text-indent: 0.5in">Due to the impact of the
COVID-19 pandemic, the global economy has slowed down, especially in infrastructure construction. Therefore, in the past two years, the
market and sales of our equipment and building materials have declined and we have experienced declines in demand of our products and
services. Entering into 2022, with the weakening of the pandemic situation, we expect that the international and domestic demand for
equipment will gradually resume.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any severe or prolonged slowdown
in the global or Chinese economy may materially and adversely affect our business, results of operations and financial condition. In
addition, continued turbulence in the international markets may adversely affect our ability to access capital markets to meet liquidity
needs.<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;<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 face challenges from the evolving regulatory
environment and user attitude toward data privacy and protection. Actual or alleged failure to comply with data privacy and protection
laws and regulations could materially and adversely affect our business 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; text-indent: 0.5in">We operate in a regulatory
environment in which data privacy and protection is evolving. We cannot assure you that relevant governmental authorities will not interpret
or implement the laws or regulations in ways that negatively affect the software and information technology service industry, our clients
and us. Regulatory investigations, restrictions, penalties and sanctions, whether targeted at us or not, may negatively affect the market
environment in which we operate, our existing or potential clients, and our products and services, which may in turn have a material
adverse effect on our business, results of operations and financial condition. It is also possible that we may become subject to additional
or new laws and regulations regarding data privacy and protection in connection with the data we have access to and the data products
and services we provide to our clients. Moreover, we may become subject to regulatory requirements as a result of utilization of our
products and services by residents of, or travelers who visit, certain jurisdictions, such as the General Data Protection Regulation
of the European Union, or the GDPR. Complying with additional or new regulatory requirements could force us to incur substantial costs
or require us to change our business practices. Moreover, if a high-profile security breach occurs with respect to our competitors, people
may lose trust in the security of software solutions providers generally, including us, which could damage the reputation of the industry,
result in heightened regulation and strengthened regulatory enforcement and adversely affect our business 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; text-indent: 0.5in">Our business partners and
customers may be subject to regulations related to the handling and transfer of certain types of sensitive and confidential information.
Any failure of our partners or customers to comply with applicable laws and regulations would harm our business, results of operations
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; text-indent: 0.5in">Our business partners and
customers that use our products may be subject to privacy- and data protection-related laws and regulations that impose obligations in
connection with the collection, processing and use of personal data, financial data, health data or other similar data.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any failure or perceived
failure by our business partners or customers to comply with applicable laws and regulations could result in their reputational damage
or governmental investigations, inquiries, enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity,
which may harm our business partnership and have a negative impact on 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; background-color: white"><b><i>We could be harmed
by data loss or other security breaches.</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; text-indent: 0.5in; background-color: white">Because
we process, store, and transmit data, including personal information, failure to prevent or mitigate risks of data loss or other security
breaches, including breaches of our vendors&#8217; or customers&#8217; technology and systems, could expose us or our customers to a
risk of loss or misuse of such information, adversely affect our operating results, result in litigation or potential liability for us,
deter customers from using our products and services, and otherwise harm our business and reputation. We use third-party technology and
systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery
to customers, back-office support, and other functions. Some of our systems have experienced past security breaches, and, although they
did not have a material adverse effect on our operating results, there can be no assurance of a similar result in the future. Although
we have developed systems and processes that are designed to protect customer information and prevent data loss and other security breaches,
including systems and processes designed to reduce the impact of a security breach at a third-party vendor or customer, such measures
cannot provide absolute security. Moreover, in the event of a major system disruption, hardware malfunction or damages to data centers
and servers caused by technologies failures, natural disasters or man-made problems, we may experience significant loss of data which
would materially and adversely affect 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; 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><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; 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"><b><i>Changes in laws
and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our products and
solutions, and could adversely affect our business, results of operations and financial condition.</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; text-indent: 0.5in; background-color: white">The
future success of our business depends upon the continued use of the internet as a primary medium for commerce, communications and business
applications. PRC or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations
affecting the use of the internet as a commercial medium. Changes in these laws or regulations could require us to modify our products
and solutions in order to comply with these changes. In addition, government agencies or private organizations have imposed and may impose
additional taxes, fees or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could
limit the growth of internet-related commerce or communications generally, or result in reductions in the demand for internet-based products
and services such as our products and solutions. In addition, the use of the internet as a business tool could be adversely affected
due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity, security,
reliability, cost, ease-of-use, accessibility and quality of service. The performance of the internet and its acceptance as a business
tool has been adversely affected by &#8220;viruses,&#8221; &#8220;worms,&#8221; and similar malicious programs. If the use of the internet
is reduced as a result of these or other issues, then demand for our products or solutions could decline, which could adversely affect
our business, results of operations and financial condition.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>Our services rely
on the stable performance of servers, and any disruption to our servers due to internal and external factors could diminish demand for
our products or solutions, harm our business, our reputation and results of operations and subject us to liability.</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; text-indent: 0.5in; background-color: white">We
rely in part upon the stable performance of our servers for provision of our solutions, products and services. Any disruption to our
servers may happen due to internal and external factors, such as inappropriate maintenance, defects in the servers, cyber-attacks targeted
at us, occurrence of catastrophic events or human errors. Such disruption could result in negative publicity, loss of or delay in market
acceptance of our solutions and products, loss of competitive position, lower customer retention or claims by customers for losses sustained
by them. In such an event, we may need to expend additional resources to help with recovering. In addition, we may not carry insurance
to compensate us for any losses that may result from claims arising from disruption in servers. As a result, our reputation and our brand
could be harmed, and our business, results of operations and financial condition may be adversely affected.</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"><b><i>Our use of open
source or third-party software could negatively affect our ability to sell our products and solutions, and subject us to possible litigation.</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; text-indent: 0.5in; background-color: white">Our
products and solutions incorporate open-source software, and we expect to continue to incorporate open source software in our products
and solutions in the future. Courts have interpreted few of the licenses applicable to open source software, and there is a risk that
these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize
our products and solutions. Moreover, although we have implemented policies to regulate the use and incorporation of open source software
into our products and solutions, we cannot be certain that we have not incorporated open source software in our products or solutions
in a manner that is inconsistent with such policies. If we or our employees fail to comply with open source licenses, we may be subject
to certain requirements, including requirements that we offer our products that incorporate the open source software for no cost, that
we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software
and that we license such modifications or derivative works under the terms of applicable open source licenses. If an author or other
third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of
these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant
damages, enjoined from generating revenues from customers using products that contained the open source software and required to comply
with onerous conditions or restrictions on these products. In any of these events, we and our customers could be required to seek licenses
from third parties in order to continue offering our products and solutions and to re-engineer our products or solutions or discontinue
offering our products to customers in the event re-engineering cannot be accomplished on a timely basis. Any of the foregoing could require
us to devote additional research and development resources to re-engineer our products or solutions, could result in customer dissatisfaction
and may adversely affect our business, results of operations and financial condition.</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"></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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>We could incur
substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual property could
adversely affect our business, results of operations and financial condition.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
success depends, in part, on our ability to protect our brand and the proprietary methods and technologies that we develop under patent
and other intellectual property laws in China so that we can prevent others from using our inventions and proprietary information. As
of the date of this annual report, we have registered 123 patents, 73 pending patent applications, 39 trademarks, 25 software copyrights,
and 10 domain names in China related to our newly acquired businesses. There can be no assurance that any patents that have been issued
or that may be issued in the future will provide significant protection for our intellectual property. If we fail to protect our intellectual
property rights adequately, our competitors might gain access to our technology and our business, results of operations and financial
condition may be adversely affected. There can be no assurance that the particular forms of intellectual property protection that we
seek, including business decisions about when to file trademark applications and patent applications, will be adequate to protect our
business. We may have to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary
in the future to enforce our intellectual property rights, determine the validity and scope of our proprietary rights or those of others,
or defend against claims of infringement or invalidity. Such litigation could be costly, time-consuming and distracting to management,
result in a diversion of significant resources, the narrowing or invalidation of portions of our intellectual property and have an adverse
effect on our business, results of operations and financial condition. Our efforts to enforce our intellectual property rights may be
met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights or alleging
that we infringe the counterclaimant&#8217;s own intellectual property. Any of our patents, copyrights, trademarks or other intellectual
property rights could be challenged by others or invalidated through administrative process or litigation.</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; text-indent: 0.5in; background-color: white">We
also rely, in part, on confidentiality agreements and non-compete agreements with our business partners, employees, consultants, advisors,
customers and others in our efforts to protect our proprietary technology, processes and methods. These agreements may not effectively
prevent disclosure of our confidential information, and it may be possible for unauthorized parties to copy our software or other proprietary
technology or information, or to develop similar software independently with us lacking an adequate remedy for unauthorized use or disclosure
of our confidential information. In addition, others may independently discover our trade secrets and proprietary information, and in
these cases, we would not be able to assert any trade secret rights against those parties. Costly and time-consuming litigation could
be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection
could adversely affect our competitive business position. In addition, to the extent we expand our international activities, our exposure
to unauthorized copying, transfer and use of our proprietary technology or information may increase.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
cannot be certain that our means of protecting our intellectual property and proprietary rights will be adequate or that our competitors
will not independently develop similar technology. If we fail to meaningfully protect our intellectual property and proprietary rights,
our business, results of operations and financial condition 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"></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>Risks Related to Our Common Shares</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"><b><i>The market price of our Common Shares has
recently declined significantly, and our Common Shares could be delisted from the Nasdaq or trading could be suspended.</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; text-indent: 0.5in">The listing of our Common
Shares on the Nasdaq Capital Market is contingent on our compliance with the Nasdaq Capital Market&#8217;s conditions for continued listing.
On June 9, 2022, we announced that we received written notification, or the Notification Letter, from the Nasdaq Stock Market LLC on
June 3, 2022 that we were not in compliance with the minimum bid price requirement of US$1.00 per share under the Nasdaq Listing Rules.
In accordance with Nasdaq Listing Rules, we must regain compliance within 180 calendar days, or by November 30, 2022. To regain compliance,
our Common Shares need to have a closing bid price of at least US$1.00 for a minimum of 10 consecutive business days. In the event we
do not regain compliance by November 30, 2022, we could be eligible for additional time to regain compliance or may face 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; text-indent: 0.5in">We have also received a written
notification from the Nasdaq on December 1, 2022, notifying us that we are eligible for an additional 180 calendar day period, or until
May 30, 2023, to regain compliance with Nasdaq&#8217;s continued listing requirement to maintain a minimum bid price of US$1.00 per share.
During the second 180-day extension period, we intend to monitor the price of our Common Shares, and intend to effect a reverse share
split of our Common Shares at a ratio which will be sufficient to increase the price of our Common Shares above $1.00. We plan to effect
the reverse share split in a timely manner, only if the closing bid price of our Common Shares does not increase above a minimum bid
price of at least $1.00 per share for 10 consecutive trading days prior to the end of the second 180-day extension period. There can
be no assurance that we will be able to regain compliance with the minimum bid price requirement, without having to effect a reverse
share split, or maintain compliance with the minimum bid price requirement, after we have regained compliance, even if we implement a
reverse share split.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot assure you that
we will be able to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules, or that we will not receive
other deficiency notifications from Nasdaq in the future. A decline in the closing price of our Common Shares could result in a breach
of the requirements for listing on the Nasdaq Capital Market. If we do not maintain compliance, Nasdaq could commence suspension or delisting
procedures in respect of our Common Shares. The commencement of suspension or delisting procedures by an exchange remains at the discretion
of such exchange and would be publicly announced by the exchange. If a suspension or delisting were to occur, there would be significantly
less liquidity in the suspended or delisted securities. In addition, our ability to raise additional necessary capital through equity
or debt financing would be greatly impaired. Furthermore, with respect to any suspended or delisted Common Shares, we would expect decreases
in institutional and other investor demand, analyst coverage, market making activity and information available concerning trading prices
and volume, and fewer broker-dealers would be willing to execute trades with respect to such Common Shares. A suspension or delisting
would likely decrease the attractiveness of our Common Shares to investors and cause the trading volume of our Common Shares to decline,
which could result in a further decline in the market price of our Common 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>In the event that our Common Shares are
delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in our Common Shares because they may be considered
penny stocks and thus be subject to the penny stock rules.</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; text-indent: 0.5in">The SEC has adopted a number
of rules&#160;to regulate &#8220;penny stock&#8221; that restricts transactions involving stock which is deemed to be penny stock. Such
rules&#160;include Rules&#160;3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These rules&#160;may
have the effect of reducing the liquidity of penny stocks. &#8220;Penny stocks&#8221; generally are equity securities with a price of
less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on Nasdaq if current price
and volume information with respect to transactions in such securities is provided by the exchange or system). Our Common Shares could
be considered to be a &#8220;penny stock&#8221; within the meaning of the rules. The additional sales practice and disclosure requirements
imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our Common Shares, which
could severely limit the market liquidity of such Common Shares and impede their sale in the secondary market.</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; text-indent: 0.5in">A U.S. broker-dealer selling
a penny stock to anyone other than an established customer or &#8220;accredited investor&#8221; (generally, an individual with a net
worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser&#8217;s written consent to the transaction prior to sale,
unless the broker-dealer or the transaction is otherwise exempt. In addition, the &#8220;penny stock&#8221; regulations require the U.S.
broker-dealer to deliver, prior to any transaction involving a &#8220;penny stock&#8221;, a disclosure schedule prepared in accordance
with SEC standards relating to the &#8220;penny stock&#8221; market, unless the broker-dealer or the transaction is otherwise exempt.
A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and
current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price
information with respect to the &#8220;penny stock&#8221; held in a customer&#8217;s account and information with respect to the limited
market in &#8220;penny stocks&#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; text-align: justify; text-indent: 0.5in">The market for &#8220;penny
stocks&#8221; has suffered in recent years from patterns of fraud and abuse. Such patterns include (i)&#160;control of the market for
the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii)&#160;manipulation of prices through
prearranged matching of purchases and sales and false and misleading press releases; (iii)&#160;&#8220;boiler room&#8221; practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv)&#160;excessive and undisclosed bid-ask
differentials and markups by selling broker-dealers; and (v)&#160;the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market
or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the
described patterns from being established with respect to our securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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"><b><i>If we are classified
as a passive foreign investment company, United States taxpayers who own our Common 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; text-indent: 0.5in; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Based
on the nature of our business activities, we may be classified as a passive foreign investment company (&#8220;PFIC&#8221;), by the U.S.
Internal Revenue Service (&#8220;IRS&#8221;), for U.S. federal income tax purposes. Such characterization could result in adverse U.S.
tax consequences to you if you are a U.S. investor. For example, if we are a PFIC, a U.S. investor will become subject to burdensome
reporting requirements. The determination of whether or not we are a PFIC is made on an annual basis and will depend on the composition
of our income and assets from time to time. Specifically, we will be classified as a PFIC for U.S. tax purposes if either:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-size: 10pt">&#9679;&#160;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">75% or more of our gross income in a taxable year is passive
    income; or&#160;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; 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; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in">&#9679; &#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">the average percentage of our assets by value in a taxable year that
    produce or are held for the production of passive income (which includes cash) is at least 50%.&#160;</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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
calculation of the value of our assets is based, in part, on the then market value of our Common Shares, which is subject to change.
In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raised in our prior
public offerings. We cannot assure that we will not be a PFIC for any taxable year. See &#8220;<i>Taxation &#8211; Material United States
Federal Income Tax Considerations &#8211; Passive Foreign Investment Company</i>.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>Securities analysts
may not publish favorable research or reports about our business or may publish no information at all, which could cause our stock price
or trading volume to decline.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">If
a trading market for our Common Shares develops, the trading market will be influenced to some extent by the research and reports that
industry or financial analysts publish about us and our business. We do not control these analysts. As a young public company, we may
be slow to attract research coverage and the analysts who publish information about our Common Shares will have had relatively little
experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely
that we fail to meet their estimates. In the event any of the analysts who cover us provide inaccurate or unfavorable research or issue
an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of us or
fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading
volume to decline and result in the loss of all or a part of your investment in us.</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>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><b><i>We have identified
material weaknesses in our internal control over financial reporting. If we are unable to implement and maintain effective internal control
over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price
of our Common Shares may decline.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">As
a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such
internal control. In addition, we are required to furnish a report by management on the effectiveness of our internal control over financial
reporting pursuant to Section 404 of the Sarbanes-Oxley Act. 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 in connection with this
annual report, we identified 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, or PCAOB, and other control deficiencies. The material weaknesses
identified relate to (i) a lack of full-time accounting and financial reporting personnel with appropriate knowledge of U.S. GAAP and
SEC reporting and compliance requirements; and (ii) a lack of an effective review by management for the year ended accounting close and
reporting. &#160;As a result, our management has concluded that our internal control was not effective 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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Following the identification of the material weaknesses and
control deficiencies, we have taken remedial measures, including (i) hiring external financial consultants with experience in U.S.
GAAP and SEC reporting obligations; and (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting
training programs for our accounting and financial reporting personnel. We plan to continue implementing the above remedial
initiatives including&#8239;engaging more qualified accounting personnel and consultants with relevant U.S. GAAP and SEC reporting
experience and qualifications to strengthen the financial reporting and U.S. GAAP training and to set up a financial and system
control framework. See &#8220;<i>Item 15. Controls and Procedures</i>.&#8221;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">However,
the implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting.
Our failure to correct the material weaknesses or our failure to discover and address any other material weaknesses or control deficiencies
could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting
requirements and related regulatory filings on a timely basis. Moreover, ineffective internal control over financial reporting significantly
hinders our ability to prevent fraud.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial
reporting in this annual report on Form 20-F as we are no longer an &#8220;emerging growth company.&#8221; However, as long as we remain
a &#8220;smaller reporting company&#8221; as defined in Rule 10(f)(1) of Regulation S-K, we are not required to comply with the independent
registered public accounting firm attestation requirement on our internal control over financial reporting. If we are unable to implement and maintain effective internal control
over financial reporting, investors may lose
confidence in the accuracy and completeness of our financial reports and the market price of our Common Shares could be negatively affected,
and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory
authorities, which could require additional financial and management resources.&#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"><b>General Risk Factors</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; background-color: white"><b><i>Our disclosure
controls and procedures may not prevent or detect all errors or acts of fraud.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
disclosure controls and procedures must provide reasonable assurance that information we are required to disclose in reports we file
or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well-conceived
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more
people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements
due to error or fraud may occur and not be detected.</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; background-color: white"><b><i>Our classified
board structure may prevent a change in control of our Company.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
board of directors is divided into three classes of directors.&#160;Class B directors hold office for a term expiring at the 2024 annual
meeting of shareholders, Class C directors hold office for a term expiring at the 2025 annual meeting of shareholders and Class A directors
hold office for a term expiring at the 2023 annual meeting of shareholders.&#160;Directors of each class are elected for three-year terms
upon the expiration of their current terms. The staggered terms of our directors may reduce the possibility of a tender offer or an attempt
at a change in control, even though a tender offer or change in control might be in the best interest of our shareholders. &#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; 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"><b><i>Shares eligible
for future sale may adversely affect the market price of our Common Shares, as the future sale of a substantial amount of outstanding
Common Shares in the public marketplace could cause the price of our Common Shares to decrease.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception
that these sales could occur.&#160;In addition, these factors could make it more difficult for us to raise funds through future offerings
of our Common Shares.</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"><b><i>As the rights
of stockholders under British Virgin Islands law differ from those under U.S. law, you may have fewer protections as a shareholder</i>.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Our
corporate affairs are governed by (among other things) our constitutional documents (consisting of our M&amp;A) and the British Virgin
Island&#8217;s primary corporate legislation, the British Virgin Islands Business Companies Act, 2004 (as amended) (the &#8220;BVI Act&#8221;).
The British Virgin Islands has a common law legal system based on the English model, comprising statute law and binding case precedents
influenced by the laws of England and other Commonwealth jurisdictions, with a right of final appeal to the Privy Council in London.
The rights of shareholders to take legal action against our directors, actions by minority stockholders and the fiduciary responsibilities
and duties of our directors under British Virgin Islands law are to a large extent found under common law and the BVI Act. While decisions
of the BVI courts are treated as precedents in the usual way, reference often needs to be made to decided cases in other jurisdictions.
While the common law of England is recognised in the jurisdiction by way of statutory enactment, this is subject to local conditions
that give the court a degree of flexibility. However, in practice, the courts ordinarily treat English judgments as highly persuasive
(although in certain cases, the BVI courts have declined to follow English precedents, which is normally justified by distinguishing
on the basis that the position is modified in the BVI by statute). The BVI forms part of the wider jurisdiction of the Eastern Caribbean
Supreme Court, so judgments from other courts in the same jurisdiction are normally persuasive, even though they are not technically
binding upon the court. Judgments from other leading Commonwealth jurisdictions, particularly Australia and Hong Kong, are also often
considered by the BVI courts. The rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin
Islands law may not be as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United
States. In particular, the British Virgin Islands may have a less developed body of securities laws as compared to the United States,
and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>British Virgin
Islands companies may not be able to initiate shareholder derivative actions in a federal court of the United States and may have to
proceed with such action in the British Virgin Islands, thereby limiting shareholders&#8217; ability to protect their interests</i>.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Whether
a British Virgin Islands company has standing to initiate a shareholder derivative action in a federal court of the United States is
a matter of United States law and in such case, that company may have to proceed with such action in the British Virgin Islands. Permission
is required from the BVI Court in order for a shareholder of a BVI company to bring a derivative action in the BVI. The circumstances
in which any such action may be brought, and the procedures and defenses that may be available with respect to any such action, may result
in the rights of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized
in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing
has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce against us judgments of courts in the United
States based on certain liability provisions of U.S. securities law; and to impose liabilities against us, in original actions brought
in the British Virgin Islands, based on certain liability provisions of U.S. securities laws that are penal in nature. There is no statutory
recognition in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin Islands
will generally recognize and enforce the non-penal monetary judgment of a foreign court of competent jurisdiction without retrial on
the merits.&#160;</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; 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"><b><i>The laws of the
British Virgin Islands provide little protection for minority shareholders, so minority shareholders will have little or no recourse
if the shareholders are dissatisfied with the conduct of our affairs</i>.</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Under
the law of the British Virgin Islands, there is little statutory law for the protection of minority shareholders other than the provisions
of the BVI Act dealing with shareholder remedies. The principal protection under statutory law is that shareholders may bring an action
to enforce the constituent documents of the corporation, in our case, our M&amp;A. Shareholders are entitled to have the affairs of the
Company conducted in accordance with the general law and the Memorandum and Articles.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>We are a &#8220;foreign
private issuer,&#8221; and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not
provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make
it more difficult for you to evaluate our performance and prospects.</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange
Act, we are subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting
companies. For example, we are not required to issue quarterly reports or proxy statements and we do not intend to file quarterly reports.
We are not required to disclose detailed individual executive compensation information and we do not intend to disclose detailed executive
compensation information. Furthermore, our directors and executive officers are not required to report equity holdings under Section
16 of the Exchange Act and are not subject to the insider short-swing profit disclosure and recovery regime and we do not intend to file
Section 16 reports for officers and directors.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">As
a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to
ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we do plan
to disclose material information to all investors at this time<i>.</i>&#160;In addition, we are still subject to the anti-fraud and anti-manipulation
rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private
issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us
and at the same time as the information provided by U.S. domestic reporting companies.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are subject to changing law and regulations
regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.
</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; text-indent: 0.5in">We are subject to rules and
regulations by various governing bodies, including, for example, the SEC, which are charged with the protection of investors and the
oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable law, including
the laws of the BVI. Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to
result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities
to compliance activities.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Moreover, because these laws,
regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance
becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated
by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent
changes, we may be subject to penalty and our business may be harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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>Mail addressed to the Company at its registered
office may be delayed due to forwarding practice.</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; text-indent: 0.5in">Mail addressed to the Company
and received at its registered office will be forwarded unopened to the forwarding address supplied by the Company to be dealt with.
None of the Company, its directors, officers, advisors or service providers (including the organization which provides registered office
services in the BVI) will bear any responsibility for any delay howsoever caused in mail reaching the forwarding address.</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-indent: 0.5in"></p><div>

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

</div><div><a id="a_007"></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><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: 48px">&#160;</td>
    <td style="width: 48px"><span style="font-size: 10pt"><b>A.&#160;</b></span></td>
    <td><span style="font-size: 10pt"><b><i>History and development of the company.&#160;</i></b></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"><span style="font-size: 10pt"><b><i>Corporate
History</i></b></span></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; text-indent: 0.5in">ReTo is a BVI business company
with limited liability, established under the laws of the BVI on August 7, 2015 as a holding company to develop business opportunities
in 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">On November 29, 2017, ReTo
completed its IPO of 3,220,000 Common Shares at a public offering price of $5.00 per share. In connection with the IPO, the Company&#8217;s
Common Shares began trading on the Nasdaq Capital Market beginning on November 29, 2017 under the symbol &#8220;RETO.&#8221;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">ReTo owns 100% equity interest
of REIT Holdings, a limited liability company established in Hong Kong. Beijing REIT was established on May 12, 1999 under the laws of
PRC. Over the years, Beijing REIT established four subsidiaries consisting of: Gu&#8217;an REIT Machinery Manufacturing Co., Ltd. (&#8220;Gu&#8217;an
REIT&#8221;), which was incorporated on May 12, 2008; Beijing REIT Ecological, which was incorporated on April 24, 2014; Langfang Ruirong
Mechanical and Electrical Equipment Co., Ltd., which was incorporated on May 12, 2014 and was subsequently dissolved in 2021; and REIT
Technology Development (America), Inc., a California corporation, which was incorporated on February 27, 2014 and was dissolved in March
2022.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 7, 2016, Beijing
REIT and its individual original shareholders entered into an equity transfer agreement, pursuant to which these shareholders agreed
to transfer all of their ownership interests in Beijing REIT with a carrying value of RMB 24 million (or $3,466,260) to REIT Holdings.
After this equity transfer, Beijing REIT became a wholly foreign-owned enterprise and amended the registration with the State Administration
of Market Regulation on March 21, 2016.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">REIT Changjiang was incorporated
in Hainan Province, China, on November 22, 2011 with the original registered capital of RMB 100 million (approximately $15.7 million).
REIT Changjiang was engaged in hauling and processing construction and mining waste, with which it produces recycled aggregates and bricks
for environmental-friendly uses prior to the disposition of REIT Changjiang in December 2021.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 1, 2015, REIT Construction
was incorporated as a wholly owned subsidiary of REIT Changjiang.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 15, 2015, Beijing
REIT established a joint venture, Xinyi REIT, together with Xinyi City Transportation Investment Co., Ltd. (&#8220;Xinyi TI&#8221;),
a third party. Beijing REIT owns 70% equity interest of Xinyi REIT, with the remaining 30% owned by Xinyi TI.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 20, 2015, Beijing
REIT acquired 100% of the equity interest of Nanjing Dingxuan Environment Protection Technology Development Co., Ltd. (&#8220;Nanjing
Dingxuan&#8221;) from a third party for no consideration given the company&#8217;s registered capital was not paid and had no assets
or operations. Nanjing Dingxuan was engaged in providing technical support and consulting services for environmental protection projects
but its operation was suspended in 2021 and the company was further dissolved on August 30, 2022.</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; text-indent: 0.5in">In February 2016, Beijing
REIT established a joint venture, REIT Q GREEN Machines Private Limited (&#8220;REIT India&#8221;), together with an Indian company,
Q Green Techcon Private Limited (&#8220;Q Green&#8221;). Beijing REIT owns 51% equity interest of REIT India with the remaining 49% owned
by Q Green.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 22, 2018, REIT
Ordos was incorporated as a wholly owned subsidiary of REIT Holdings.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On August 29, 2019, Datong
Ruisheng Environmental Engineering Co., Ltd. (&#8220;Datong Ruisheng&#8221;) was incorporated as a wholly owned subsidiary of Beijing
REIT. Datong Ruisheng is engaged in potential ecological restoration projects in Datong, Shanxi Province.</p><div>

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

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

</div><!-- Field: Page; Sequence: 54; Value: 1 --><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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 11, 2019, Yangbi
Litu Ecological Technology Co., Ltd. (&#8220;Yangbi Litu&#8221;) was jointly established by REIT Ordos and Yunnan Litu Technology Development
Co., Ltd. (&#8220;Yunnan Litu&#8221;). REIT Ordos owned 55% of the ownership interest in Yangbi Litu, with the remaining 45% equity interest
owned by Yunnan Litu. Because the Company&#8217;s ownership interest in Yunnan Litu was 55%, the Company held an aggregate 79.75% equity
interest in Yangbi Litu, directly and indirectly. Yangbi Litu will be engaged in providing services in comprehensive ecological restoration
and sales of environmentally friendly equipment and new materials. On July 13, 2020, REIT Ordos transferred its 55% equity interest in
Yunnan Litu to a third-party individual and two third-party companies for a nominal price. As a result, the Company&#8217;s equity ownership
interest in Yangbi Litu decreased from 79.75% to 55%. On July 13, 2020, ReTo transferred its 55% equity interests in Yunnan Litu to third
parties for a nominal price given the inactivity of Yunnan Litu&#8217;s business operations since its inception and ReTo&#8217;s ongoing
focus on its own organic business growth.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 2, 2020, Beijing
REIT signed a share transfer agreement with third party, Hebei Huishitong Techonology Inc. (&#8220;Huishitong&#8221;) and sold 100% of
its ownership interest in Gu&#8217;an REIT to Huishitong for total consideration of RMB 39.9 million (approximately $5.7 million).</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 7, 2020, Beijing
REIT entered into a share transfer agreement with the original shareholder of Shexian Ruibo Environmental Science and Technology Co.,
Ltd. (&#8220;Shexian Ruibo&#8221;) for the acquisition of 41.67% of the equity interests in Shexian Ruibo for a total consideration of
$3.6 million (RMB 25 million), including a cash payment of $2.7 million (RMB 18.5 million) and non-cash contribution of six patents valued
at $0.9 million (RMB 6.5 million). Beijing REIT made cash payment of $2.7 million (RMB 18.5 million) on October 20, 2020 and the six
patents had been transferred to Shexian Ruibo prior to September 15, 2020.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2020, we incorporated
Guangling REIT Ecological Cultural Tourism Co., Ltd. (&#8220;Guangling REIT&#8221;) in mainland China as a wholly owned subsidiary of
REIT Ordos. Guangling REIT will be engaged in the business of ecological restoration and management, and construction and operation of
health and cultural tourism projects.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 12, 2021, Beijing
REIT and REIT Holdings entered into an equity transfer agreement to sell 100% equity interest in REIT Changjiang to the purchasers, in
exchange for a total consideration of RMB 60,000,000 (approximately $9.4 million) in cash. The purchasers have issued to Beijing REIT
and REIT Holdings a promissory note in the principal amount of RMB 60,000,000, reflecting the purchase price to be paid in accordance
with the equity transfer agreement. As of December 31, 2022, we received a total of RMB 53.5 million (approximately US$7.76 million)
from the purchasers with the remaining RMB 7.4 million (approximately US$1.1 million) expected to be paid by the purchasers by June 30,
2024. In December 2021, we completed the disposition of REIT Changjiang following the approval of our shareholders and 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; text-indent: 0.5in">On December 27, 2021, REIT
Technology acquired 100% equity interest of REIT Mingde, as more fully described under the heading &#8220;<i>Recent Developments</i>&#8221;
below. As a result of this acquisition, the Company also acquired, indirectly through RETI Mingde, 100% of the equity interest of Yangpu
Fangyuyuan and 61.548% of the equity interest of Hainan Yile IoT, which, in turn, owns 90% of the equity interest of IoV Technology Research,
85% of the equity interest of Shanxi Global Travel Co., Ltd. and 45% of the equity interest of Hainan Beiqi Yinjian Yile Smart Travel
Technology Co., Ltd. Yangpu Fangyuyuan is engaged in facilitating logistic services through its cloud based platform in China. IoV Technology
Research provides RSA services in Hainan Province, 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; text-indent: 0.5in">On December 27, 2021, Yangpu
Fangyuyuan and Shanghai Ruida Fenghe Management Consulting Partnership (Limited Partnership) incorporated Hainan Kunneng as a limited
liability company to engage in the development of an international commodity trading platform for the Hainan International Trade Zone,
using digital supply chain technologies. Yangpu Fangyuyuan owns 51% of Hainan Kunneng&#8217;s equity interest while Shanghai Ruida Fenghe
Management Consulting Partnership (Limited Partnership) owns 49%. Hainan Kunneng commenced operations in January 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; text-indent: 0.5in">On August 24, 2022, due to
the addition of a new shareholder, REIT Mingde became a 90% owner of Yangpu Fangyuyuan&#8217;s equity interest.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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; text-indent: 0.5in">On August 25, 2022, Hainan
Coconut was incorporated as a wholly owned subsidiary of Yangpu Fangyuyuan. Hainan Coconut plans to build an online freight and logistics
platform to provide logistics and transportation services. As of the date of this annual report, Hainan Coconut has not commenced its
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; text-indent: 0.5in">On September 30, 2022, Gansu
Ruishi Tongda Ecological Management Co., Ltd. was incorporated as a limited liability company in mainland China and REIT Ecological owns
70% of its equity interest. Its business scope includes project management, project investment and financing, and other ecological management
projects. It was dissolved on March 7, 2023.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 29, 2022, Honghe
REIT Ecological Technology Co., Ltd. was incorporated as an operating limited liability company in mainland China and a wholly-owned
subsidiary of REIT Ordos. Its business scope includes EOD projects and related ecological restoration projects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 40pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-size: 10pt">On February 9, 2023,&#160;REIT Construction was dissolved.</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; text-indent: 0.5in"><span style="font-size: 10pt"><b><i>Corporate
Structure</i></b></span>&#160;<span style="font-size: 10pt">&#160;</span></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">The chart below summarizes
our corporate structure as of the date of this report:</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-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_001.jpg" style="width: 933px; height: 476px"/>&#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: justify; text-indent: 0.5in"></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="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 -->50<!-- 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-indent: 0.5in"><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 style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 48px"><span style="font-size: 10pt"><b>B.&#160;</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Business overview.&#160;</i></b></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"><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; text-indent: 0.5in">We, through our operating
subsidiaries in China, are engaged in the manufacture and distribution of eco-friendly construction materials (aggregates, bricks, pavers
and tiles), made from mining waste (iron tailings), as well as equipment used for the production of these eco-friendly construction materials.
In addition, we provide consultation, design, project implementation and construction of urban ecological protection projects through
our operating subsidiaries in China. We also provide parts, engineering support, consulting, technical advice and service, and other
project-related solutions for our manufacturing equipment and environmental protection projects. As more fully described below under
the heading &#8220;Our Products and Services,&#8221; through the newly acquired subsidiaries, we expand our product and service offerings
to include RSA services, and software development services and solutions utilizing Internet of Things (&#8220;IoT&#8221;)
technologies.</p><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; text-indent: 0.5in">We currently provide a full
spectrum of products and services related to recycling and reuse of solid wastes, from producing eco-friendly construction materials
and manufacturing equipment used to produce construction materials, to project installation. We differentiate us from our competitors
through strong research and development capabilities and advanced technologies and systems.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our products are eco-friendly,
as they contain approximately 70% of reclaimed iron tailings in place of traditional cement. The use of reclaimed iron tailings assists
in the protection of the environment by saving space in landfills used for the disposal of these materials, and assisting in the remediation
and reclamation of abandoned or closed mining sites. In addition, we believe less energy is consumed when manufacturing our eco-friendly
construction materials as compared with other traditional building materials. We believe our eco-friendly construction materials, with
superior water permeability and competitive prices, are in greater demand than traditional materials as governments and others increase
their focus on reducing the environmental impact of their activities.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Due to China&#8217;s recent
emphasis on environmental protection, we believe there is a unique opportunity to grow our company, which we expect will be driven by
demand for our eco-friendly construction materials and equipment used to produce these materials as well as our project construction
expertise. We believe our technological know-how, production capacity, reputation and offerings of products and services will enable
us to seize this opportunity.</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">Our clients are located throughout
mainland China, and internationally in Middle East, Southeastern Asia, Africa, Europe and North America. We are actively pursuing additional
clients for our products, equipment and projects, internationally in the Bangladesh, North America and in additional provinces of China.
We seek to establish long-term relationships with our clients by producing and delivering high-quality products and equipment and then
providing technical support and consulting services after equipment is delivered and projects are completed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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>Recent Developments </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>Spinoff of REIT Changjiang</i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 12, 2021, Beijing
REIT and REIT Holdings entered into an equity transfer agreement to sell 100% equity interest in REIT Changjiang to Zhixin Group (Hong
Kong) Co., Ltd. and Xiamen Zhixin Building Materials Co., Ltd. (collectively, the &#8220;Purchasers&#8221;) in exchange for a total consideration
of RMB 60,000,000 (approximately $9.4 million) in cash. The Purchasers have issued to Beijing REIT and REIT Holdings a promissory note
in the principal amount of RMB 60,000,000, reflecting the purchase price to be paid in accordance with the equity transfer agreement.
The parties entered into a supplemental agreement on December 24, 2021, providing for a revised payment schedule for the purchase price.
As of December 31, 2022, we received a total of RMB 53.5 million (approximately US$7.76 million) from the purchasers with the remaining
RMB 7.4 million (approximately US$1.1 million) expected to be paid by the purchasers by June 30, 2024. On December 17, 2021, we completed
the disposition of REIT Changjiang following the approval of our shareholders and 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; background-color: white"></p><div>

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    </div><!-- Field: /Page --><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"><b><i>Acquisition of REIT Mingde</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; text-indent: 0.5in">On December 27, 2021, REIT
Technology entered into an Equity Transfer Agreement (the &#8220;Agreement&#8221;) with REIT Mingde, Xiaoping Li and Jing Peng, former
shareholders of REIT Mingde and owning 99% and 1% of the equity interest of REIT Mingde prior to the Acquisition (as defined below),
respectively, and together with Hainan Yile IoT, a limited liability company incorporated in mainland China and subsidiary of REIT Mingde,
and Yangpu Fangyuyuan United Logistics Co., Ltd., a limited liability company incorporated in mainland China and subsidiary of REIT Mingde
(&#8220;Yangpu Fangyuyuan&#8221;). REIT Mingde owned 90% of the equity interest of Yangpu Fangyuyuan and 61.55% of the equity interest
of Hainan Yile IoT.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the Agreement,
among other things, REIT Technology acquired 100% of the equity interest of REIT Mingde for a total consideration of RMB10,000,000 (approximately
US$1.6 million) in cash or cash equivalents (the &#8220;Acquisition&#8221;). After the closing of the Acquisition, Xiaoping Li, who is
also the legal representative of REIT Mingde, will be appointed as a director and Executive Vice President of ReTo.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 22, 2022, ReTo
issued an aggregate of 2,580,000 Common Shares to Xiaoping Li and Jing Peng (and/or their designees), at $0.61 per share, in lieu of
the cash payment of an aggregate of RMB 10 million payable to Xiaoping Li and Jing Peng under the Acquisition. The 2,580,000 Common Shares
represented approximately 8.45% of the issued and outstanding Common Shares of ReTo immediately prior to the issuance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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>Convertible Note Financing</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; text-indent: 0.5in">On March 10, 2022, ReTo entered
into a Securities Purchase Agreement pursuant to which ReTo issued an unsecured convertible promissory note (the &#8220;Note&#8221;)
to Streeterville Capital, LLC, an institutional accredited investor (the &#8220;Investor&#8221;). The Note will mature 12 months after
the purchase price of the Note is delivered from the Investor to ReTo (the &#8220;Purchase Price Date&#8221;). The Note has an original
principal amount of $3,105,000 and Investor gave consideration of $3,000,000, reflecting an original issue discount of $90,000 and $15,000
for Investor&#8217;s fees, costs and other transaction expenses incurred in connection with the purchase and sale of the Note. The transaction
contemplated under the Securities Purchase Agreement was closed on March 11, 2022 and the Company anticipates using the proceeds for
general working capital purposes.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 28, 2022, ReTo and
Investor entered into an amendment to the Note, pursuant to which ReTo has agreed to satisfy any conversion request from Investor by
making a cash payment equal to 110% of any converted amount if, at the time of the conversion, the Floor Price (as defined in the Note)
is higher than the then current conversion price.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On October 13, 2022, the
Company entered into a standstill agreement with the Investor. Pursuant to the standstill agreement, the Investor agreed not to seek
to convert any portion of the Note until December 10, 2022 (the &#8220;Standstill Period&#8221;). Balance of the Note was increased by
$310,500 (the &#8220;Standstill Fee&#8221;) as of the date of the standstill agreement. The parties have agreed to extend the Note and are in the process of negotiating the terms of the extension 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"><b>Industry and Market Opportunities </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>Construction and Construction Materials
Markets </i></b></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; text-indent: 0.5in">From 2011 to 2020, the total
output value of China&#8217;s construction industry showed an upward trend year by year. Although China&#8217;s economic growth has slowed
in recent years, it is believed China is, and will continue to be, the world&#8217;s largest construction market for a number of years
despite the decline of its share of the global construction industry.</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">The slowdown in China&#8217;s
urbanization process since 2020 has a significant impact on the construction industry. However, we believe our eco-friendly construction
materials will be in greater demand than traditional materials as the PRC construction market continues to grow and the PRC government
increases its focus on reducing the environmental impact of construction activities, which includes, among other things, recent environmental
initiatives.</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"><b><i>Sponge city</i></b>.
The concept of the &#8220;sponge city&#8221; proposed by PRC scientists and politicians is equivalent to the &#8220;Sustainable Drainage
Systems&#8221; (SuDS) in the United Kingdom as well as the &#8220;Low Impact Development&#8221; in the United States. Sponge cities are
being constructed nationwide in China, not only in new urban (town) areas, but also in the transformation of existing urban (town) areas.
In the &#8220;14th Five-Year Plan&#8221; (2021-2025) announced by China in March 2021, &#8220;sponge city construction&#8221; will remain
one of the PRC government&#8217;s investment focuses for the next few years, which will not only lead to changes in materials for municipal
pavement, pond slope protection and other construction purposes, but also create an ongoing need for these materials.</p><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; text-indent: 0.5in"><b><i>Water ecological restoration
and high-standard farmland construction. </i></b>In China&#8217;s 14th Five-Year Plan, water conservation continues to be the top priority
of the national infrastructure network, with emphases on water resource management, water ecological restoration and environmental water
protection. In 2021, the Ministry of Agriculture and Rural Affairs of China issued the <i>National High-standard Farmland Construction
Plan (2021-2030)</i>, and provide for some specific indicators for the farmlands, water and roads. We believe this will create higher
demands for construction projects such as ecological slope protection (retaining walls), dry barrier walls (SRWs), and drainage trenches
and thereby bring us new market from molding equipment and small precast concrete products.</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"><b><i>&#8220;Rural revitalization&#8221;
and &#8220;urban renewal&#8221;. </i></b>In January 2022, the <i>Opinions of the Central Committee of the Communist Party of China and
the State Council on Doing a Good Job in Comprehensively Promoting the Key Work of Rural Revitalization in 2022</i> was issued by the
Central Committee of the Communist Party of China and the State Council. Also known as &#8220;Document No. 1,&#8221; the Opinions is
the first official policy document issued by the PRC government in the new year that traditionally focuses on rural issues with this
year&#8217;s focus on the advancement of rural revitalization. Rural revitalization calls for high standard farmland construction, advancement
of agricultural infrastructure, and improvement of the implementation of rural conduction system, 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; text-indent: 0.5in">In addition, in November
2021, the General Office of the Ministry of Housing and Urban-Rural Development of the PRC issued the <i>Notice on Launching the First
Batch of Urban Renewal Pilot Work</i>, and decided to carry out the first batch of urban renewal pilot work in a two-year period in 21
cities (districts) including Beijing. The connotation of &#8220;urban renewal&#8221; is to &#8220;promote the optimization of urban structure,
function improvement and quality improvement&#8221;. It is believed that &#8220;Urban renewal&#8221; is fundamentally different from
the previous &#8220;old city renovation&#8221; and includes the renovation of the old city, with a higher level and a wider scope, including
house renovation (demolition) and road renovation, as well as preservation of urban culture and customs, and division of functional areas.
We believe the rural revitalization and urban renewal policies of the PRC government will create demand for construction materials, in
particular in the concrete blocks (bricks) industry, which will bring opportunities to increase product value and competition for product
differentiation, optimize product structures and improve the equipment functionalities.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>Eco-friendly raw materials
and low carbon products.</b> The current <i>Industrial Structure Adjustment Guidance Catalogue (2019 Version)</i> issued by the National
Development and Reform Commission of the PRC, list pavement bricks (boards), pavement permeable bricks (boards), square permeable bricks
(boards), decorative bricks (blocks), antique bricks, slope protection ecological bricks (blocks), hydraulic ecological bricks (blocks)
and other green building materials in the Encouraged Category: Building Materials. The catalogue proposes in &#8220;Encouraged Categories:
Environmental protection and comprehensive utilization of resource conservation, the comprehensive utilization of tailings, waste residues
and other resources and the manufacture of supporting equipment&#8221; as well as the &#8220;construction waste recycling project and
industrialization.&#8221; As China aims to achieve peak carbon dioxide emission before 2030 and achieve carbon neutrality before 2060,
certification of green buildings in China continues to advance. The government commitment and related policies to support green buildings
development will create growth opportunities for eco-friendly construction materials, including the concrete blocks (bricks) which are
one of our main products.</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>

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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; text-indent: 0.5in">As a result of the above
government initiatives and market trends, we expect the demand for equipment for manufacturing eco-friendly building materials to recover
and increase. In response, we have improved our existing equipment and technologies to meet the market demands. Specifically, we have
improved the degree of automation of our equipment, further optimized the technology to use solid waste, realized timely customer services
through use of Internet technology and developed production lines with a larger output. We plan to leverage our advanced production and
advanced research and development research capabilities to take advantages of the opportunities created by these government initiatives
and market demands and provide high quality eco-friendly construction materials.</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"><b><i>Automotive After-Sales Market</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; text-indent: 0.5in">According to the data reported
by Xinhua News Agency in 2020, the automotive after-sales market continues to recover and was estimated to exceed a total consumption
amount of RMB one trillion (approximately $157.1 billion ) for 2020. The automotive after-sales refers to the transactions or services
during the use of sold cars. In the automotive after-sales market, fuel is the largest segment with an average annual market size of
RMB 2.6 trillion (approximately $408.5 billion ) from 2019 to 2021, and insurance is the second largest segment with an average annual
market size of about RMB 800 billion (approximately $125.7 billion ), which is our targeted segment.</p><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; text-indent: 0.5in">In September 2020, the China
Banking and Insurance Regulatory Commission formulated and issued the <i>Guiding Opinions on Implementing Comprehensive Reform of Auto
Insurance</i>, requiring insurance companies to achieve the reform goals of &#8220;reducing prices, increasing coverage and improving
quality&#8221; of auto insurance. The Guiding Opinion also call for development of new insurance products, including the vehicle mileage
insurance. As a result, it is expected that the growth of the segment will slow down and market size will decrease in the near future.</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">With the explosive growth
of new energy vehicle production and sales, traditional auto insurance no longer meets the demand, and relevant insurance companies have
launched corresponding new energy vehicle insurance. The initial market size is expected to be RMB 17 billion (approximately $2.8 billion).
According to the &#8220;New Energy Vehicle Industry Development Plan (2021-2035)&#8221; issued by Ministry of Industry and Information
Technology, by 2025, China sets the goal to have its new energy vehicle sales account for about 20% of the total vehicle sales. New energy
vehicle insurance market in China is therefore expected to expand further.</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">However, after years of expansion,
China&#8217;s auto insurance market has started to experience a significant slowdown in the increase in premiums, as a result of the
reform and saturation of the auto insurance market and the resulting decrease in average premium per policy and increase marketization
of auto insurance. Auto insurance premiums in China showed an increasing growth trend during 2013 to 2020 and reached an aggregate of
RMB 824.5 billion (approximately $129.6 million) in 2020, representing an increase of 0.7% from the prior year. During the first three
quarters of 2021, China&#8217;s auto insurance premiums were RMB562.2 billion (approximately $88.3 million), showing a cumulative decrease
of 9.44% as compared to the same period in the prior year.</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">According to the s data released
by the Hainan Insurance Industry Association, there was a total of approximately 108,100 and 120,500 car accidents (involving solely
the mandatory liability insurance cases that occurred and closed during the relevant year, excluding single-vehicle accidents) in Hainan
province, representing an average of approximately 296 and 330 accident per day, 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>Software and Information Technology Service
Industry </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; text-indent: 0.5in">In recent years, with the
rapid expansion of China&#8217;s software and information technology service industry and the significant advancement in technologies,
the industry has become an important part of the strategic emerging industries. According to the 14th Five-Year Plan Software and Information
Technology Service Industry Development Plan, during the 13th Five-Year Plan period, the revenue of the software and information technology
service industry increased from RMB4.28 trillion (approximately $672.5 billion) in 2015 to RMB8.16 trillion (approximately $128.2 billion)
in 2020, with an average annual growth rate of 13.8%, and its share of the information industry has increased from 28% in 2015 to 40%
in 2020. The total profit of the software and information technology service industry has increased from RMB576.6 billion (approximately
$90.6 billion) in 2015 to RMB1,067.6 billion (approximately $16.7 billion) in 2020, with an average annual growth rate of 13.1% and its
share of the information industry has increased from 51% in 2015 to 64% in 2020. The information technology services revenue increased
from 51.2% of the information technology in 2015 to 61.1% in 2020. Emerging platform software, industrial application software, and embedded
software has developed rapidly while revenue from basic software and industrial software products has continued to grow. According to
the Analysis Report on Market Prospects and Investment Strategic Planning of China&#8217;s Software Industry released by the Prospective
Industry Research Institute, in 2021, there were more than 40,000 enterprises above designated size in the software and information technology
service industries in China, and the accumulated software business revenue was RMB9,499.4 billion (approximately $149.3 billion), representing
a year-on-year increase of 17.7%. The 14th Five-Year Plan for Software and Information Technology Service Industry Development Plan sets
out the development goals, i.e., the software business revenue of enterprises above designated size will exceed RMB14 trillion (approximately
$220 billion), with an average annual growth rate of more than 12%.</p><div>

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

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Our Competitive Strengths </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; text-indent: 0.5in">We believe the following
competitive strengths differentiate us from our competitors and contribute to our ongoing success.</p><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; text-indent: 0.5in"><b><i>Eco-friendly products</i></b><i>.</i>&#160;Unlike
many of our competitors, who still use traditional materials, we use reclaimed iron tailings to manufacture our construction materials.
In doing so, we help reduce environmental waste. In addition, the equipment we used to produce construction materials can recycle disposed
building materials, including, without limitation, waste clay bricks and waste concrete, to manufacture construction materials. &#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; text-indent: 0.5in"><b><i>Effective operational
management</i></b>. The consistent quality of our products and manufacturing equipment is achievable only through effective management
in all aspects of our operations, from purchasing to production and sales. In every step, we have fully trained, experienced and skilled
employees to ensure the quality of our construction materials and manufacturing equipment. In addition, we have a committed and qualified
management team who fully understand our corporate culture and effectively implement our business strategy.</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"><span style="font-size: 10pt"><b><i>Proprietary
technologies and strong research and development capabilities</i></b>. We have developed key technologies and knowhow in the&#160;manufacture
of various types of construction materials and manufacturing equipment. We own an aggregate of 123 PRC patents (ten of which are owned
jointly&#160;with Luoyang Water-Conservancy Surveying &amp; Design Co., Ltd. (&#8220;Luoyang&#8221;), an independent third party), including
31 design patents, 82 utility model patents and ten invention patents. Three of our patents were awarded Gold and Silver Prize of International
Exhibition of Inventions of Geneva. In addition, we own 25 software copyrights in China.</span>&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-size: 10pt">&#160;</span>&#160;<span style="font-size: 10pt">&#160;We
are committed to the research and development of new construction materials and the equipment used to produce these materials. As of
the date of this annual report, our research and development team consists of an aggregate of 41 staff, accounting for approximately
40% of our total employees. Of all our research and development staff, 25 hold bachelor&#8217;s degree or higher degrees. Our team has
an average of five years of experience in research and development in relevant industries.</span></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"><b><i>Full range of eco-friendly
project solutions.</i></b>&#160;We are able to provide consultation, design and implementation of projects such as sponge city and hydraulic
ecological projects for customers, in addition to manufacturing and sales of eco-friendly construction materials and equipment. Our one-stop
solution allows us to capture revenue from all stages of a project and serve more types of customers, such as municipalities and governments.</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"><b><i>Experienced management
team and work force</i></b>. Our management team, led by Hengfang Li, our Chief Executive Officer, who has extensive industry experience,
deep knowledge of our business and a demonstrated track record of managing costs, adapting to changing market conditions, and developing
new products. In addition, Mr. Li has a vast network and understating of the market. In addition, following the acquisition of REIT Mingde,
we expect to leverage the expertise of Mr. Li Xiaoping, Chairman of REIT Mingde, in the field of mobile communication and IoT and his
extensive experience in business management and operations, to grow and expand our businesses related to the application of the IoT technologies.
Mr. Li has more than 20 years of experience in the communication and IoT industry. He worked and held senior positions at Nokia Corporation
Asia Pacific, and Huawei Technology Services Co., Ltd. successively before he founded his own businesses, including Hainan Yile IoT,
among others.</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">We also maintain a well-trained
workforce that is highly skilled and capable to address complex and individualized client issues.</p><div>

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

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Our Strategies</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; text-indent: 0.5in">Our objective is to become
the leading provider of eco-friendly construction materials and equipment. Following our acquisition of REIT Mingde, we also aim to expand
the application of our IoT solutions and products for commercial use vehicles, build smart environmental protection solutions and logistics
and supply chain services. To achieve these goals, we are pursuing the following strategies:</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"><b><i>Market Opportunity</i></b>.
China&#8217;s 14th Five-Year Plan (2021-2025)&#160;promotes a cleaner and greener economy, with strong commitments to environmental management
and protection, clean energy and emissions controls, ecological protection and security, and the development of renewable energy industry.
This demonstrates a clear focus on charting a sustainable course for the economy in the long-term. The 14th Five-Year Plan offers opportunities
for the private sector to support China&#8217;s environmental goals of water resource management, water ecology remediation and environmental
protection of water, such as through the construction of sponge cities and the use of eco-friendly construction materials. Presently,
we are able to serve all facets of sponge city construction through our construction materials that are used in construction, our equipment
that can produce the construction materials and our general contracting expertise.</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">The 14th Five-Year Plan also
calls for the strengthening of the innovation and application of key digital technologies, the acceleration of digitalization development
in China and the promotion of transition of industry digitalization. The plan lists the IoT industry as one of the key industries of
a digital economy. We plan to take advantages of the resources and support available under the 14th Five-Year Plan and promote the in-depth
integration of the IoT technologies with the equipment manufacturing industry, the ecological restoration market and the automotive after-sales
market based our existing experience and expertise in the IoT technologies and RSA services.</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"><b><i>Expand our remediation
projects in mining regions</i></b>. We believe there are thousands of former mining locations in China that need to be remediated and
reclaimed. Abandoned ore mines contain tailings and abandoned or closed mines are normally associated with environmental concerns such
as contaminated water and soil. As part of the remediation and reclamation process, we are able to assist mining companies with the disposal
of tailings, and municipalities creating viable villages in former mining areas. For example, in 2015, we completed a sponge city project
in Hainan Province where a village located in a former mining area was built with our eco-friendly construction materials made from iron
tailings. We will continue to focus on using iron tailings in our eco-friendly construction materials and seek reclamation projects in
former mining areas.</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"><b><i>Continue to develop
new products.</i></b>&#160;We are committed to the research and development of new products for specific customer needs. We plan to develop
advanced technologies and devices for our equipment and innovate the new type of the construction products for sponge cities, water ecological
restoration and high-standard farmland construction. We believe scientific and technological innovations will help our Company achieve
its long-term strategic objectives.</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"><b><i>Increase our revenue
and market share by expanding our business network internationally</i></b>. In order to expand our international market share, we plan
to add four to five distributors in America, Southeast Asia, and the Middle East. We plan to change our advertising strategies to reach
new customers through new methods, such as digital marketing. We also plan to participate in targeted international marketing events,
such as seminars, workshops, and trade shows, where we can meet potential customers, promote our products and deepen our network to further
expand our sales.</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"><b><i>Take advantage of the
Hainan Free Trade Port policy.</i></b> Hainan province government recently promulgated the <i>Hainan Province&#8217;s Three-Year Action
Plan to Win the Battle of Science and Technology Innovation by Extraordinary Means (2021-2023)</i> (Qiong Fu Ban [2021] No. 24) and the
<i>Hainan Province Science and Technology Planning System Optimization and Reform Plan</i> (Qionke [2021] No. 250)in an aim to promote
the technology innovation-driven development of enterprises. The government is promoting the establishment of the Haikou City Research
and Development Center for Internet of Things Digitalization Application Engineering and Technology&#8221; and gathers resources for
and renovation and development of high technologies. The government offers subsidies, tax incentives as well as support for introducing
talents to the province, such as housing subsidies and bonuses. We plan to take advantages of the government resources and support of
the Hainan Free Trade Port to further the development of our technologies and our business operations. &#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; 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; text-indent: 0.5in"><b><i>Pursue Strategic Acquisitions</i></b><i>.&#160;</i>We
intend to continue to pursue expansion opportunities in existing and new markets, as well as in core and adjacent categories through
strategic acquisitions. Specifically, we are seeking to acquire construction material or construction material manufacturing equipment
companies in areas of China with more established economies. We believe the demand for eco-friendly construction materials and manufacturing
equipment used to produce these materials are and will continue to be in greater demand in these established economies.</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"><b>Our Products 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"><b><i>Eco-Friendly Construction Materials</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; text-indent: 0.5in">We manufacture eco-friendly construction materials (aggregates, bricks,
pavers and tiles) through our subsidiary, Xinyi REIT, which operates our plant in Xinyi, Jiangsu Province. We refer to our construction
materials as eco-friendly because we produce them from reclaimed iron mine tailings. Tailings are the materials left over after the process
of separating the valuable fraction from the worthless fraction of an ore. Iron ore tailings generally consist of hard rock and sand.
Waste rock and tailings constitute the largest (by volume) industrial solid waste generated in the mining process. Xinyi REIT has utilized construction and demolition waste (which is the disposed bricks and/or concrete after the old building is dismantled) as the
raw materials to produce the products. By recycling iron tailings and utilizing the construction and demolition waste, we believe that
our construction materials manufacturing process is a viable and environmentally friendly solution to disposal problems associated with
these materials.</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">Traditional bricks in China consist primarily of clay, which is mixed
with water and silt, pressed into a mold for shaping, then fired in a kiln, or furnace. We use reclaimed iron tailings or construction
and demolition waste primarily as a substitute for rocks. Through vibration technology, with these raw materials inputted, the finished
products can come out with different shape and types. Since the whole production is cured without fire, this process has the benefits
of less space required for production and less pollution generated to the environment. We believe iron tailings or construction and demolition
waste reduce both the density and heat conductivity of our construction materials without sacrificing their durability and strength. Our
construction materials&#8217; density and strength meet or exceed China national standards. In addition, because we use iron tailings
or construction and demolition waste in the manufacturing process, we believe our construction materials are consistent with China&#8217;s
recent environmental protection policies, such as energy conservation included in the 2016 China&#8217;s 14th Five-Year Plan (2021-2025).</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: 36pt">In addition to iron tailings
and construction and demolition waste, our construction materials contain river sand and granite. Our eco-friendly construction materials
are produced on a fully automatic production line primarily based upon our proprietary technology.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">Our eco-friendly construction materials
include, without limitation, the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>Ground works materials</i></b>. Essential materials for sponge
    cities to assist in water absorption, flood control and water retention. These construction materials can be used for urban roads,
    pedestrian streets and sidewalks, city squares, landmarks, parking lots, and docks.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>Landscape retaining materials</i></b>. These construction materials
    are mainly used for gardens, roads, bridges, city squares, retaining walls and slope construction.</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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>Hydraulic engineering materials</i></b>. Construction material
    for sponge city construction, they can be used for hydraulic ecological projects such as slope protection and river transformation.</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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>Wall materials</i></b>. These construction materials are used
    for insulation, decoration, and for building walls.</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>

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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><i>Eco-friendly Construction Materials Manufacturing
Equipment</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; text-indent: 0.5in">We produce manufacturing equipment
used to create eco-friendly construction materials. We sell our equipment to customers in China, South Asia, North America, the Middle
East, North Africa and Southeast Asia. The equipment consists of large-scale fully automated production equipment with hydraulic integration.
The equipment can be used to produce various types of eco-friendly construction materials that can be used for a variety of projects such
as ground works, hydraulic engineering, landscape retention and wall projects.</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; text-indent: 0.5in">Our equipment used to manufacture
construction materials include, without limitation, the following:</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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>REIT-Classic RT9A, RT9B, RT15A, RT15B</i></b>. These are fully
    automated block production lines and can be universally used for the manufacture of bricks, tiles, pavers with and without face mix,
    curbstones, hollow blocks and similar construction materials.</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>&#9679;</td>
    <td style="text-align: justify"><b>REITRT10 Series Equipment</b>. REITRT10 series equipment is used to produce bricks, tiles, pavers
    with and without face mix, curbstones, hollow blocks and similar construction materials.</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><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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>Horizontal Pull Holes Device</i></b>. Horizontal Pull Holes Device
    is used to produce interlocking bricks, water conservancy blocks and slope protection blocks.</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><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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b><i>REIT-I Concrete Block Splitter</i></b>. Synchronized concrete
    block cutting machine with four blades. The blades are guided by ultra-wear resistant guide leads and driven by a large bore hydraulic
    drive, which lowers the operating pressure of the hydraulic unit and increases the splitting force.</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><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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>REIT Foam Insert Device</i></b>. This
    device is used to insert a foam plate into the mold and produce thermal insulation blocks.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Gravity Separator for Iron Mine. </i></b>Gravity
separator is used to collect iron from the mine.</p></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"><b><i>Roadside Assistance Services </i></b></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; text-indent: 0.5in">Following the acquisition of REIT Mingde, we, through Hainan Yile IoT,
provide RSA services to drivers within Hainan Province, China, through our network of RSA
services providers of tow providers and automotive repair services. Our RSA services include towing, jump start, tire change, automobile
repair services, and other services. We do not directly provide the RSA services but coordinate with our contracted RSA service providers
who are licensed to provide such services. Our RSA services area covers the entire island of Hainan province, including 18 cities and
counties. Upon receipt of a request for RSA services, we will contact our tow providers and other RSA service providers in close proximity
to the vehicles and arrange the vehicles to be towed or repaired. We operate a proprietary platform, which connects insurance companies,
tow providers, automobile repair services, and other service providers as well as the drivers. The platform is accessible to users via
web interface and mobile applications, consisting of a central management system, a mobile application for RSA service providers to accept
orders and dispatch service teams, a mobile application for drivers to send requests and monitor status, and a mobile application for
insurance companies to monitor and review the request status.</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">Our RSA services are available
to insured drivers and uninsured drivers. Our services to insured drivers are based on the type of insurance policy they have with their
insurance company as well as the terms of our service contract with their insurance companies. Uninsured drivers pay our services fee
based our prevailing rates at the time of services. We maintain a 24/7 service team to ensure timely responses to RSA services requests.</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">Our RSA services commenced
in 2020 and we have established a network of an aggregate of 38 RSA services providers. Hainan Yile IoT has signed written agreements
with all of its RSA services providers and settles payments to these service providers on a periodical basis.</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">We are paid by the drivers
receiving RSA services or if they are insured, by their insurance companies. Hainan Yile IoT has entered into annual agreements with
four major insurance companies in China, including, without limitation, China Life Property &amp; Casualty Insurance Company Limited
and China Pacific Insurance (Group) Co., Ltd. Pursuant to these agreements, we agree to provide RSA services to the insured drivers of
these insurance companies upon requests and receive fees based on the services provided.</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 -->58<!-- 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><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Software Solutions </i></b></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; text-indent: 0.5in">Through Hainan Yile IoT,
we are also engaged in the design, development and sales of customized software solutions based on the client specifications. We have
developed the following software solutions for our clients during the fiscal years ended December 31, 2022, 2021 and 2020:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">-</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Logistics management system &#8211; </i>comprehensive software solutions
    for the management of&#160;multimodal logistics, encompassing functions including customer management, supplier management, order
    management, and vehicle management.</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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px">-</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Retail management system - </i>comprehensive software solutions
    for retail management, including functions such as invoicing, reporting, data statistics, online marketing.</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"><i>&#160;&#160;</i></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: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify">-</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Fleet management system </i>&#8211; comprehensive software solutions
    providing client with capabilities to manage its fleet including functions such as vehicle management, vehicle application, vehicle
    alarm, and location control.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify"><i>&#160;</i></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: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify">-</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><i>Vehicle rental management system</i> - comprehensive software solutions
    providing client with capabilities to manage its car rental services, including functions such as vehicle management, vehicle rental
    (rental renewal), and remote fuel and electricity disconnection.</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; text-indent: 0.5in">In connection with the sales
of software solutions, we also include hardware sales and/or service subscriptions based on the clients&#8217; requirements, which are
charged separately.</p><div>

</div><p style="font: 10pt Times New Roman, 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>Our Projects </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have acted as general contractor and consultant
for the construction of sponge cities since 2014 And as general contractor for ecological restoration projects since 2019. We are also
responsible for the planning, construction and design of such projects.</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>Representative Projects</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"><i>Sponge City &#8211; Changjiang County, Hainan
Province </i></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">We were the general contractor
for a sponge city project where an entire village was relocated and constructed in a former mining area. The project took 16 months to
complete resulting in revenue of approximately RMB 14 million ($2.2 million) for us. We made all construction materials out of recycled
iron tailings. A total of 86 single-family homes were built with a total construction area of 9,400 square meters (101,000 square feet).
An estimated 1,810,000 pieces of bricks were used for walls, 90,000 roof tiles, and 4,200 square meters (approximately 45,000 square
feet) of ground was covered with our construction materials. The completed project has won recognitions at various government levels
in Hainan Province, and has been designated as a demonstration or model project for promotion of sponge city construction.</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"><i>Sponge City &#8211; Haikou City, Hainan Province
</i></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">We acted as a consultant
for a sponge city project in Haikou City, Hainan Province. We also paved 50,000 square meters for this project. To assist with the
nationwide efforts to promote pilot cities in sponge city construction, we will collaborate with international institutions in
sponge city construction such as Jude Technology Corporation located in Germany. By gradually increasing our efforts, and expanding
the scale in the planning, design and construction of sponge cities, we aim to become a key enterprise in sponge city
construction.&#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 -->59<!-- 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"><i>Ecological Restoration Projects &#8211; Datong
City, Shanxi Province </i></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">Pursuant to a strategic cooperation
agreement entered into with Hunyuan County People&#8217;s Government, we have acted as the general contractor in connection with the
restoration of abandoned coal mines and disposal of solid wastes in Hunyuan County, Datong City, Shanxi Province. We commenced the project
in November 2019 and are in charge of the project feasibility study, design, implementation and supervision of the project. This project
covers several affected villages and has an aggregate area of approximately 386 acres. We expect to complete this project by the end
of 2023. We believe the completion of the project is expected to enable the local government to complete geological disaster prevention
and control of an area of approximately 329 acres and reclaim land for agricultural use of approximately 133 acres, among other restoration
to the environment. Upon completion of the project, we will be paid our fees upon receipt of proceeds from the sale of restored lands.</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>Customers</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; text-indent: 0.5in">Our eco-friendly construction
materials are sold only in China. Sales of construction materials accounted for $0.8 million, $1.7 million and $1.8 million of our total
revenues for the years ended December 31, 2022, 2021 and 2020, respectively.</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; text-indent: 0.5in">Our primary customers for software development services are state-owned
petroleum companies and telecommunications companies. The primary customers for RSA services are insurance companies with the rest being
individual customers. The majority of our customers for software development services and RSA services are located in Hainan Province.</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; text-indent: 0.5in">We have international customers
located in Asia, India, the Middle East, North Africa and North America for our manufacturing equipment. The following is a summary of
our total revenues from our continuing operations by geographic market for each of the last three years for our manufacturing equipment
used to produce construction materials.</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="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Region</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left">Middle East</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">556,867</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">50,573</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></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>India</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">261,922</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">491,192</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,120,381</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Pakistan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">837</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">12,457</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: White">
    <td>China</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,458,528</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,212,824</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,603,587</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Malaysia</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">20,656</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: White">
    <td style="padding-bottom: 1.5pt">Maldives</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">20,495</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">804,112</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: 1.5pt">Total</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,298,649</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</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>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the year ended December
31, 2022, one customer accounted for 21% of the Company&#8217;s total revenue. For the year ended December 31, 2021, one customer accounted
for 11% of the Company&#8217;s total revenue. For the year ended December 31, 2020, no single customer accounted for more than 10% of
the Company&#8217;s total revenue.</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"><b>Sales and Marketing</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; text-indent: 0.5in">We are increasing our marketing
and sales efforts, including a directed focus on online marketing. Online marketing allows us to efficiently educate prospective customers
about the products and services we have to offer and assists us in expanding the reach of our market, both in China and internationally.
We will also participate in exhibitions, trade shows, conferences to introduce our equipment and machineries in China and internationally.</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">In order to expand our international
market, we plan to add four to five distributors in the Americas, Southeast Asia, and the Middle East by the end of 2023. We will transform
our advertising strategies to reach new and existing customers through new methods, such as digital marketing. We also plan to participate
in targeted international marketing events, such as seminars, workshops, and trade shows, where we can meet potential customers, promote
our products and deepen our network to further expand our sales.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have obtained new customers
by word-of-mouth referrals and have found that satisfied customers are loyal customers. We believe quality products and excellent services
are a good marketing tool to retain and expand our customer base and as such we will improve the performance and quality of our equipment
and combine the internet technology to our equipment to improve our after-sale services and satisfy the customers&#8217; needs. In addition,
the introduction of new products, such as permeable floor tiles for sponge city construction and slope and damn protection blocks in
water conservancy construction have helped open new markets. In addition, we have developed the equipment to reuse waste rock wool products
for manufacturing of construction materials. We believe that this approach has been crucial in winning and retaining clients and increasing
our ability to withstand competition.</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">Our current market for software development and RSA services is Hainan
Province. We plan to expand our offering of those services to other provinces in China through client referrals and targeted marketing.</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"><b>Competition </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; text-indent: 0.5in">We face significant competition
in both our manufacturing equipment and construction materials markets. We have both domestic and international competitors in our manufacturing
equipment market. In the international market for our manufacturing equipment our main competition is from German made manufacturing
equipment. We believe our competitive strength against these competitors is the lower cost of our equipment with the same technical standards
and high-quality service. Our disadvantage is that the German-made equipment has a better aesthetic appearance as compared to the equipment
we manufacture. To improve the appearance of our equipment, we have collaborated with Tsinghua University and have jointly developed
an aesthetic one-piece soundproof cover on our equipment and obtained patents for the design.</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; text-indent: 0.5in">Our construction materials
are manufactured by Xinyi REIT, which is located in Xuzhou City, the transportation hub connecting five neighboring provinces. The main
competitors of our building materials are the small workshops in the region, who primarily rely on low-price competition to seize the
market. However, we believe we can effectively compete with them based on large-scale automatic production lines, wide recognition by
local governments and customers and strong research and development capabilities.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our main competitors in the
PRC market for our manufacturing equipment are small PRC companies located in Fujian Province. We believe our competitive strength against
these competitors is the quality of our equipment while our competitive disadvantage is the higher cost of our equipment. There is an
increased demand for fully automated construction materials production lines due to the increase of PRC labor costs. We are positioned
to take advantage of the increased demand for fully automated construction lines due to our current ability to manufacture such equipment.</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">In both the domestic and
international markets we are increasing our research and development of technology for construction materials manufacturing equipment.
In addition, we are researching a variety of construction materials that can be made with our manufacturing equipment. We believe that
a continued focus on a broad array of products and product designs coupled with our engineering and manufacturing expertise will enable
us to provide customers with differentiated product performance and customer support.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In Hainan, our primary competitors
for providing RSA services are the tow providers and other RSA service providers who may also be our contracted service providers. We
believe we effectively compete with other RSA service providers in the following aspects:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; 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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Proprietary platform that can be customized and offered
    to different customers, enabling broader outreach to potential customers;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Streamlined service process fully supported by our operation, technology
    and customer support teams;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Efficiency and responsiveness of service requests; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Province wide service coverage.</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; 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; text-indent: 0.5in">The rapidly evolving market
for our software solutions is competitive and highly fragmented in certain of our regions, particularly by geography and customer segment.
We compete with other developers of software solutions and services locally in Hainan and nationwide in China, such as Digital Hainan
Co., Ltd., Inspur Group Co., Ltd., and Neusoft Group Co., Ltd. &#160;Some of our actual and potential competitors may enjoy competitive
advantages over us, such as greater name recognition, longer operating histories, more varied services, and larger marketing budgets,
as well as greater financial, technical, and other resources. We believe that the key competitive factors in our market include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0.25in">&#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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</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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</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: 48px">&#160;</td>
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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">
    <td style="width: 48px">&#160;</td>
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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">
    <td style="width: 48px">&#160;</td>
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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">
    <td style="width: 48px">&#160;</td>
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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: 0.5in">We believe that our patented
technologies, focus on segments with high demand as well as dedication to customers in Hainan province enable us to compete effectively
in Hainan province.&#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"><b>Research and Development</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; text-indent: 0.5in">Soon after its establishment,
we set up a research and development center in Xi&#8217;an. We believe scientific and technological innovation will help our Company
achieve its long-term strategic objectives. We conduct research and development in the following areas:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></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>&#160;</td>
    <td><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">Recycling and utilization of solid wastes;</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>
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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>&#160;</td>
    <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-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">We conduct our research and
development according to strategic objectives, the market and customer needs. Combining application research and advanced research, we
will not only improve current products, but also develop future strategic products, realizing technology development in line with the
market demand.</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; text-indent: 0.5in">Our research and development
activities mainly focus on solid waste utilization and recycling, ecological environmental friendly construction materials, technology
and equipment, thermal insulation products and related production equipment.</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; text-indent: 0.5in">We accounted for the payments
as research and development expenses in accordance with ASC 730-20 for the related periods. For the years ended December 31, 2022, 2021,
and 2020, we spent $960,598, $346,951 and $334,904, respectively, on research and development associated with our continuing operations.
We expect to increase our allocation of research and development funds in the future in an effort to enhance our core competence.</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; text-indent: 0.5in">Quality control is an important
aspect of our research and development department&#8217;s work and ensuring quality at every stage of the process has been as key driver
in maintaining and developing our brand value. We have set up a separate research and development division to account for our investment
in research and development. As of December 31, 2022, we employed 41 professionals in research and technology development. We expect
to increase our allocation of research and development funds in an effort to enhance its core competence.</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-indent: 0.5in">Sample research and development projects from
2020 to 2022 include the following:</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">Year 2020&#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%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">A automatic palletizing system</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"></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">Year 2021</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%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">A servo control system for cubing plant V1.0</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><span style="font-size: 10pt">A control system V1.0 for finger cart</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><span style="font-size: 10pt">An environmentally friendly permeable concrete PC brick</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><span style="font-size: 10pt">A porous sound-absorbing and noise-reducing PC brick</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><span style="font-size: 10pt">A production, processing, positioning and cutting device for PC bricks</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><span style="font-size: 10pt">A weather-resistant PC brick</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><span style="font-size: 10pt">A permeable PC brick surface layer and chamfer grinding device</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><span style="font-size: 10pt">A self-compensating shrink PC brick</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-size: 10pt">Year 2022</span>&#160;<span style="font-size: 10pt">&#160;&#160;</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="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">A squirrel cage concrete product turning machine</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><span style="font-size: 10pt">An extra-thick surface layer bulk concrete product forming device</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><span style="font-size: 10pt">A control system and software for 3D printing V1.0</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">REITRT10 Series equipment</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-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gravity separator for iron mine</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"><b>Sources of Raw Materials </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; text-indent: 0.5in">Our primary raw materials
are steel for our manufacturing equipment and iron tailings, fly-ash and cement for our construction materials. We purchase from a variety
of suppliers and believe these raw materials are widely available.</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; text-indent: 0.5in">We have efficient access
to all of the raw materials necessary for the production of our manufacturing equipment and construction materials. We believe our relationships
with the suppliers of these raw materials are strong. We do not expect the prices of such raw materials to vary greatly from their current
prices, as there has traditionally been little price volatility for such materials.</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; text-indent: 0.5in">For the years ended December
31, 2022, 2021, and 2020, the Company purchased approximately 19%, 53%, and 43%, respectively, of its raw materials from one major supplier.
If we are unable to purchase from this supplier, we do not expect we would face difficulties in locating other suppliers at substantially
the same prices because alternative suppliers are readily available on the market.</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"><b>Intellectual Property </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; text-indent: 0.5in">We regard our patents, copyrights,
trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our businesses, and we
rely on patent, copyrights, trademark and trade secret law and confidentiality, invention assignment and non-compete agreements with
our employees and others to protect our proprietary rights. However, we do not believe that our business, as a whole, is dependent on,
or that its profitability would be materially affected by the revocation, termination, expiration or infringement upon any particular
patent. We own an aggregate of 123 PRC patents (ten of which are owned jointly&#160;with Luoyang Water-Conservancy Surveying &amp; Design
Co., Ltd. (&#8220;Luoyang&#8221;), an independent third party), including 31 design patents, 82 utility model patents and ten invention
patents. Three of our patents were awarded Gold and Silver Prize of International Exhibition of Inventions of Geneva. In addition, we
own 25 software copyrights 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; text-indent: 0.5in">Pursuant to Article 15 of
Patent Law of China if there is any agreement between the joint owners of the right to apply for a patent or a patent right regarding
the exercise of the relevant right, the agreement shall be followed. If there is no such agreement, any of the joint owners may exploit
the patent independently or license others to exploit the patent by means of ordinary license. In the case of licensing to others to
exploit the patent, royalties charged shall be distributed among the joint owners.</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">In order to minimize our
liabilities or loss from the seven joint patents referenced above, Beijing REIT entered into an agreement with Luoyang on January 7,
2017, regarding the use, licensing, and transfer rights for the joint patents. The agreement, among other terms, provides Beijing REIT
with sole use and exclusive right of licensing of the joint patents and prohibits Luoyang and Beijing REIT from transferring the joint
patents to any other third parties without each parties&#8217; consent. Subsidiaries of Beijing REIT also have the right to use the joint
patents under the agreement. In addition, the parties will share any fees generated from any licensing of the joint patents.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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>
    </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: center"><b>REGULATION </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"><b>Regulations Relating to the Manufacturing 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; text-indent: 0.5in">Our manufacturing activities
are regulated by the Law of China on Work Safety, or the Work Safety Law, which was adopted in 2002 and latest amended in 2021. The State
Administration of Work Safety is responsible for the supervision and administration of work safety nationwide. Pursuant to the Work Safety
Law, production units which are engaged in producing and operating activities in China shall meet the conditions of work safety stipulated
by relative law and regulations or national standards or industry standards; otherwise, those production units are not allowed to undertake
manufacturing activities in 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">Our major products are regulated
by the Law of China on Product Quality, which was promulgated in 1993 and latest amended in 2018, which require our products to comply
with national standards and industry standards during the process of manufacturing and selling. Our products will be defined as defective
products if they fail to comply with such standards. Meanwhile if our products cause personal injuries or other product damages, we shall
be responsible for applicable compensation. The statute of limitation of legal proceedings for injuries or damages caused by defective
products will be two years, commencing from the date of awareness of injuries or damages. Our products are mainly divided into two categories,
which are eco-friendly construction materials and equipment used to produce construction materials, respectively. Under the Law of China
on Product Quality, our products manufacturing shall be in compliance with five national standards and four industry standards, including
but not limited to the GB/T 8533-2008 (national standard) and the JC/T 920-2011 (industry standard) for our manufacturing equipment,
and the GB/T 21144-2007 (national standard) and the NY/T 1253-2006 (industry standard) for our construction materials.&#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"><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"><b><i>The Foreign Investment Law</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; text-indent: 0.5in">On March 15, 2019, the National
People&#8217;s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced three existing laws on
foreign investments in China, namely, the PRC Sino-foreign Equity Joint Venture Law, the PRC Sino-foreign Cooperative Joint Venture Law
and the PRC Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations. On December 26,
2019, the Regulation on the Implementation of the Foreign Investment Law of the People&#8217;s Republic of China, was issued by the State
Council and came into force on January 1, 2020. The organization form, organization and activities of foreign-invested enterprises shall
be governed, among others, by the PRC Company Law and the PRC Partnership Enterprise Law. Foreign-invested enterprises established before
the implementation of this Law may retain the original business organization and so on within five years after the implementation of
this Law. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime
in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign
and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework for the access to, and the promotion,
protection and administration of foreign investments in view of investment protection and fair competition.</p><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; text-indent: 0.5in">According to the Foreign
Investment Law, &#8220;foreign investment&#8221; refers to investment activities directly or indirectly conducted by one or more natural
persons, business entities, or otherwise organizations of a foreign country (collectively referred to as &#8220;foreign investor&#8221;)
within China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with
other investors establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares,
shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively
with other investors, invests and establishes new projects within China; and (iv) a foreign investor invests through other approaches
as stipulated by laws, administrative regulations, or otherwise regulated by the State Council.</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">According to the Foreign
Investment Law, the State Council will publish or approve to publish the &#8220;negative list&#8221; for special administrative measures
concerning foreign investment. The Foreign Investment Law grants national treatment to foreign-invested entities, or FIEs, except for
those FIEs that operate in industries deemed to be either &#8220;restricted&#8221; or &#8220;prohibited&#8221; in the &#8220;negative
list&#8221;. The Foreign Investment Law provides that FIEs operating in foreign restricted or prohibited industries will require market
entry clearance and other approvals from relevant PRC governmental authorities. If a foreign investor is found to invest in any prohibited
industry in the &#8220;negative list&#8221;, such foreign investor may be required to, among other aspects, cease its investment activities,
dispose of its equity interests or assets within a prescribed time limit and have its income confiscated. If the investment activity
of a foreign investor is in breach of any special administrative measure for restrictive access provided for in the &#8220;negative list&#8221;,
the relevant competent department shall order the foreign investor to make corrections and take necessary measures to meet the requirements
of the special administrative measure for restrictive access. On December 27, 2021, MOFCOM and NDRC jointly issued the latest version
of Negative List (Edition 2021). See &#8220;<i>Item 4. Information on the Company &#8211; B. Business Overview</i> &#8211; <i>Regulation
&#8212; Regulations relating to Foreign Investment &#8212; The Guidance Catalogue of Industries for Foreign Investment</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; text-indent: 0.5in"></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: 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">Besides, the PRC government
will establish a foreign investment information reporting system, according to which foreign investors or foreign-invested enterprises
shall submit investment information to the competent department for commerce concerned through the enterprise registration system and
the enterprise credit information publicity system, and a security review system under which the security review shall be conducted for
foreign investment affecting or likely affecting the state security.</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">Furthermore, the Foreign
Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may
maintain their structure and corporate governance within five&#160;years after the implementing of the Foreign Investment Law.</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">In addition, the Foreign
Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including,
among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions,
profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully
acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign
investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance
with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access
restrictions and exit conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances,
in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation
or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.</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"><b><i>The Guidance Catalogue of Industries for
Foreign Investment</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; text-indent: 0.5in">Investment activities in
the PRC by foreign investors are subject to the Catalogue for the Guidance of Foreign Investment Industry, or the Catalogue, which was
promulgated and is amended from time to time by the MOFCOM and the NDRC. The Foreign Investment Catalogue which was promulgated jointly
by MOFCOM and the NDRC, on June 28, 2017 and became effective on July 28, 2017, classifies industries into three categories with regard
to foreign investment: (1) &#8220;encouraged&#8221;, (2) &#8220;restricted&#8221;, and (3) &#8220;prohibited&#8221;. The latter two categories
are included in a negative list, which was first introduced into the Foreign Investment Catalog in 2017 and specified the restrictive
measures for the entry of foreign investment.</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">On June 28, 2018, MOFCOM
and NDRC jointly promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access, or the Negative List
(Edition 2018), which replaced the negative list attached to the Foreign Investment Catalogue in 2017. On June 30, 2019, MOFCOM and NDRC
jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Access, or the Negative List (Edition 2019),
which replaced the Negative List (Edition 2018), and the Catalogue of Industries for Encouraging Foreign Investment (Edition 2019), or
the Encouraging Catalogue (Edition 2019), which replaced the encouraged list attached to the Foreign Investment Catalogue in 2017. On
June 23, 2020, MOFCOM and NDRC jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Access, or the
Negative List (Edition 2020), which replaced the Negative List (Edition 2019). On December 27, 2021, MOFCOM and NDRC jointly issued the
Special Administrative Measures (Negative List) for Foreign Investment Access, or the Negative List (Edition 2021), which replaced the
Negative List (Edition 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><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">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the Negative
List (Edition 2021) effective on January 1, 2022, any industry that is not listed in any of the restricted or prohibited categories is
classified as a permitted industry for foreign investment. Establishment of wholly foreign-owned enterprises is generally allowed for
industries outside of the Negative List. For the restricted industries within the Negative List, some are limited to equity or contractual
joint ventures, while in some cases PRC partners are required to hold the majority interests in such joint ventures. In addition, restricted
category projects are subject to higher-level government approvals and certain special requirements. Foreign investors are not allowed
to invest in industries in the prohibited category. Industries not listed in the Negative List are generally open to foreign investment
unless specifically restricted by other PRC regulations.</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">The Encouraging Catalogue
(Edition 2022) effective on January 1, 2023, is divided into two parts, namely the Nationwide Catalogue of Encouraged Industries for
Foreign Investment and the Catalogue of Priority Industries for Foreign Investment in Central and Western China. The Nationwide Catalogue
of Encouraged Industries for Foreign Investment lists a total of 519 industry sectors that encourage foreign investments; the Catalogue
of Priority Industries for Foreign Investment in Central and Western China lists industry sectors that each province and city wish to
introduce.</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">In October 2016, the MOFCOM
issued the Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises or FIE Record-filing
Interim Measures, which was revised in June 2018. Pursuant to FIE Record-filing Interim Measures, the establishment and change of FIE
are subject to record-filing procedures, instead of prior approval requirements, provided that the establishment or change does not involve
special entry administration measures. If the establishment or change of FIE matters involves the special entry administration measures,
the approval of the MOFCOM or its local counterparts is still required. Pursuant to the Announcement [2016] No. 22 of the NDRC and the
MOFCOM dated October 8, 2016, the special entry administration measures for foreign investment apply to restricted and prohibited categories
specified in the Catalogue, and the encouraged categories are subject to certain requirements relating to equity ownership and senior
management under the special entry administration measures.</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">On January 1, 2020, the Foreign-invested
Information Reporting Measures or FIE Reporting Measures came into force which replaced the FIE Record-filing Interim Measures. Pursuant
to FIE Reporting Measures, foreign investors or FIEs are required to submit initial report, change report, deregistration report and
annual report through enterprises registration system.</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">Currently, our business falls
within the permitted category.</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"><b><i>Company Law</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; text-indent: 0.5in">Pursuant to the PRC Company
Law, promulgated by the SCNPC on December 29, 1993, effective as of July 1, 1994, and as revised on December 25, 1999, August 28, 2004,
October 27, 2005, December 28, 2013 and October 26, 2018, the establishment, operation and management of corporate entities in the PRC
are governed by the PRC Company Law. The PRC Company Law defines two types of companies: limited liability companies and companies limited
by 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; text-indent: 0.5in">Each of our PRC subsidiaries
is a limited liability company. Unless otherwise stipulated in the related laws on foreign investment, foreign invested companies are
also required to comply with the provisions of the PRC Company Law.</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"><b>Regulations on 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; text-indent: 0.5in">See &#8220;<i>Item 10. Additional
Information &#8212;E. Taxation&#8212;People&#8217;s Republic of China Taxation.&#8221;</i></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"><b>Regulation of Foreign Currency Exchange and
Dividend Distribution</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; text-indent: 0.5in"><b><i>Foreign Currency Exchange.</i></b>&#160;The
principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended
on August&#160;5, 2008, the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) and the Measures on Administration
of Foreign Debts Registration (2013). Under these regulations, Renminbi are freely convertible for current account items, including the
distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for most capital account
items, such as direct investment, loans, repatriation of investment and investment in securities outside China, unless the prior approval
of SAFE or its local counterparts is obtained. In addition, any loans to an operating subsidiary in China that is a foreign invested
enterprise, cannot, in the aggregate, exceed the difference between its respective approved total investment amount and its respective
approved registered capital amount or 2.5 times of its net assets, at the discretion of such company.</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; text-indent: 0.5in">Any increase in the amount
of the total investment and registered capital must be reported to and filed with the China Ministry of Commerce or its local counterpart
and SAMS or its local counterparts. We may not be able to report to or file with these government authorities on a timely basis, if at
all, which could result in a delay in the process of making these loans.</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">Pursuant to the Circular
of the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration
Policies, or the SAFE Notice 13, which was promulgated on February 13, 2015 and with effect from June 1, 2015, the foreign exchange registration
under domestic direct investment and the foreign exchange registration under overseas direct investment is directly reviewed and handled
by banks in accordance with the SAFE Notice 13, and the SAFE and its branches shall perform indirect regulation over the foreign exchange
registration via banks.</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"><b><i>Dividend Distribution.</i></b>&#160;According
to the PRC Company Law and Foreign Investment Law, enterprises in China may pay dividends only out of their retained profits, if any,
determined in accordance with PRC accounting standards and regulations. In addition, enterprises in China are required to allocate at
least 10% of their respective retained 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, and an enterprise is not permitted
to distribute any profits until losses from prior fiscal years have been offset. Furthermore, under the Enterprise Income Tax Law, or
the EIT Law, which became effective in January 2008 and latest amended in 2018, the maximum tax rate for the withholding tax imposed
on dividend payments from PRC foreign invested companies to their overseas investors that are not regarded as &#8220;resident&#8221;
for tax purposes is 20%. The rate was reduced to 10% under the Implementing Regulations for the EIT Law issued by the State Council.
However, a lower withholding tax rate might be applied if there is a tax treaty between China and the jurisdiction of the foreign holding
companies, such as tax rate of 5% in the case of Hong Kong companies that holds at least 25% of the equity interests in the foreign-invested
enterprise, and certain requirements specified by PRC tax authorities are satisfied.</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"><b><i>Circular 37.</i></b>&#160;On
July&#160;4, 2014, SAFE issued Notice on Relevant Issues concerning Foreign Exchange Administration for Domestic Residents Engaging in
Overseas Financing and Investing through Round-Trip Investment via Special Purpose Companies, or Circular 37, which became effective
as of July&#160;4, 2014. According to Circular 37, PRC residents shall apply to SAFE and its branches for going through the procedures
for foreign exchange registration of overseas investments before contributing the domestic assets or interests to a SPV. An amendment
to registration or filing with the local SAFE branch by such PRC resident is also required if the registered overseas SPV&#8217;s basic
information such as domestic individual resident shareholder, name, operating period, or major events such as domestic individual resident
capital increase, capital reduction, share transfer or exchange, merger or division has changed. Although the change of overseas funds
raised by overseas SPV, overseas investment exercised by overseas SPV and non-cross-border capital flow are not included in Circular
37, we may be required to make foreign exchange registration if required by SAFE and its branches.</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">Moreover, Circular 37 applies
retroactively. As a result, PRC residents who have contributed domestic assets or interests to a SPV, but failed to complete foreign
exchange registration of overseas investments as required prior to implementation of Circular 37, are required to send a letter to SAFE
and its branches for explanation. Under the relevant rules, failure to comply with the registration procedures set forth in Circular&#160;37
may result in receiving a warning from SAFE and its branches, and may result in a fine of up to RMB 300,000 (approximately $46,000) for
an organization or up to RMB 50,000 (approximately $8,000) for an individual.</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">PRC residents who control
our Company are required to register with SAFE in connection with their investments in us. If we use our equity interest to purchase
the assets or equity interest of a PRC company owned by PRC residents in the future, such PRC residents will be subject to the registration
procedures described in Circular 37.</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"><b><i>Circular 19 &amp; Circular
16.</i></b>&#160;On March 30, 2015, SAFE issued the Circular Concerning the Reform of the Administration of the Settlement of Foreign
Currency Capital of Foreign-Invested Enterprises, or Circular 19, which became effective on June 1, 2015. Circular 19 regulates the conversion
of foreign currency capital funds into RMB by a foreign-invested enterprise, and limits how the converted RMB may be used.</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="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; 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">Furthermore, SAFE promulgated
a circular on June 9, 2016, Circular on Reforming and Regulating Policies on the Administration over Foreign Exchange Settlement under
Capital Accounts, or Circular 16, which further revises several clauses in Circular 19. Both Circular 19 and Circular 16 regulate that
foreign exchange incomes of a domestic enterprise under their capital account shall not be used in the ways stated 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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">For expenditures that are forbidden by relevant laws and regulations,
    or for purposes which are not included in the business scope approved by relevant government authority;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#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">For direct or indirect securities investments within China, or for
    any other kinds of investments except banks&#8217; principal-guaranteed wealth-management products, unless otherwise prescribed by
    other laws and regulations;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#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">For issuing RMB entrusted loans directly or indirectly (except those
    included in the business scope), or for repaying inter-enterprise loans (including advances by the third party), or for repaying
    bank loans which has been lent to third parties;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#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">For issuing RMB loans to non-affiliated enterprises, unless expressly
    permitted in the business scope;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#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">For purchasing or constructing real estate which is not for personal
    use, in addition to those real estate enterprises.</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; text-indent: 0.5in">In addition, SAFE supervises
the flow and use of those RMB capital converted from foreign currency capital funds of a foreign-invested company by further focusing
on ex post facto supervisions and violations, and the use of the net proceeds from our initial public offering to invest in or acquire
any other PRC companies in China is subject to the provisions under both Circular 19 and Circular 16.</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"><b>M&amp;A Regulations and Overseas Listings
</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; text-indent: 0.5in">On August&#160;8, 2006, six
PRC regulatory agencies, including the MOFCOM, the State Assets Supervision and Administration Commission, the State Administration for
Taxation, the State Administration for Industry and Commerce, CSRC and SAFE, jointly issued the Regulations on Mergers and Acquisitions
of Domestic Enterprises by Foreign Investors, or the New M&amp;A Rule, which became effective on September&#160;8, 2006 and was amended
on June&#160;22, 2009. This New M&amp;A Rule, among other things, includes provisions that purport to require that an offshore special
purpose vehicle formed for purposes of overseas listing of equity interests in PRC companies and controlled directly or indirectly by
PRC companies or individuals should obtain the approval of CSRC prior to the listing and trading of such special purpose vehicle&#8217;s
securities on an overseas stock exchange.</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">On September&#160;21, 2006,
CSRC published on its official website the Provisions on Indirect Issuance of Securities Overseas by a Domestic Enterprise or Overseas
Listing of Its Securities for Trading, which specify procedures regarding CSRC&#8217;s approval for overseas listings by special purpose
vehicles. The CSRC approval procedures require the filing of a number of documents with the CSRC and it would take several months to
complete the approval process. The application of this new PRC regulation remains unclear with no consensus currently existing among
leading PRC law firms regarding the scope of the applicability of the CSRC approval requirement.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 which became effective 30 days thereafter, the Rules on Implementation
of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by the MOFCOM on August
25, 2011 and which 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 the 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; 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>

</div><!-- Field: Page; Sequence: 74; 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 -->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; 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">On July 6, 2021, the State
Council and General Office of the CPC Central Committee issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance
with the Law. The opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision
on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant
regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.<i>&#160;</i></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2019, the newly
revised Securities Law of the PRC clarified that direct and indirect overseas issuances and listings should comply with the relevant regulations
of the State Council.</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">On February 17, 2023, the
CSRC published the Tentative Measures and five supporting guidelines, which became effective on March 31, 2023. The Tentative Measures
lay out the filing regulation arrangement for both direct and indirect overseas listing, and clarify the determination criteria for indirect
overseas listing in overseas markets. Among other things, if a domestic enterprise intends to indirectly offer and list securities in
an overseas market, the record-filing obligation is with a major operating entity incorporated in mainland China which appointed by the
issuer and such filing obligation shall be completed within three business days after the overseas listing application is submitted. The
required filing materials for an initial public offering and stock exchange listing shall include, but are not limited to: record-filing
report and related undertakings; regulatory opinions, record-filing, approval and other documents issued by competent regulatory authorities
of relevant industries (if applicable); security assessment opinion issued by relevant regulatory authorities (if applicable); PRC legal
opinion; and prospectus. In addition, an overseas offering and listing is prohibited under any of the following circumstances: (1) if
the intended securities offering and listing is specifically prohibited by national laws and regulations and relevant provisions; (2)
if the intended securities offering and listing may constitute a threat to or endangers national security as reviewed and determined by
competent authorities under the State Council in accordance with law; (3) if, in the past three years, the domestic enterprise or its
controlling shareholders or actual controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other
criminal offenses disruptive to the order of the socialist market economy, or are currently under judicial investigation for suspicion
of criminal offenses, or are under investigation for suspicion of major violations; (4) if, the domestic enterprise is being investigated
according to law due to suspected crimes or major violations of laws and regulations, and there is no clear conclusion; or (5) if there
are material ownership disputes over the equity of the controlling shareholder or shareholders controlled by controlling shareholders
and actual controllers. The Tentative Measures provide directional guidance to the PRC&#8217;s reform plan for the supervision of overseas listings.
The Tentative Measures adopt an &#8220;ex-post filing mechanism&#8221; where the filer completes its filing obligation within three business
days after it submits its listing application to the regulator in the place of intended listing. With respect to the domestic enterprises,
non-compliance with the Tentative Measures or an overseas listing completed in breach of it may result in a warning or a fine ranging
from RMB 1 million to RMB10 million. Furthermore, the directly responsible executives and other directly responsible personnel of the
domestic enterprises may be warned, or fined between RMB 500,000 and RMB 5 million and the controlling shareholder, actual controllers,
and other legally appointed persons of the domestic enterprises may be warned, or fined between RMB 1 million and RMB 10 million. If,
during the filing process, the domestic enterprises conceal important factors or the content is materially false, and securities are not
issued, they are subject to a fine of RMB1 million to RMB10 million. With respect to the directly responsible executives and other directly
responsible personnel of the domestic enterprises, they are subject to a warning and fine between RMB 500,000 and RMB 5 million, and with
respect to the controlling shareholder, actual controllers, and other legally appointed persons of the domestic enterprises, they are
subject to a warning and fine between RMB 1 million and RMB 10 million.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 24, 2023, the
CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering
and Listing by Domestic Enterprises, or the Confidentiality and Archives Administration, and, which became effective on March 31, 2023.
The Confidentiality and Archives Administration requires that, in the process of overseas issuance and listing of securities by domestic
entities, the domestic entities, and securities companies and securities service institutions that provide relevant securities service
shall strictly implement the provisions of relevant laws and regulations and the requirements of these provisions, establish and improve
rules on confidentiality and archives administration. Where the domestic entities provide with or publicly disclose documents, materials
or other items related to the state secrets and government work secrets to the relevant securities companies, securities service institutions,
overseas regulatory authorities, or other entities or individuals, the companies shall apply for approval of competent departments with
the authority of examination and approval in accordance with law and report the matter to the secrecy administrative departments at the
same level for record filing. Where there is unclear or controversial whether or not the concerned materials are related to state secrets,
the materials shall be reported to the relevant secrecy administrative departments for determination.</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>

</div><!-- Field: Page; Sequence: 75; 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 -->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; 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>Regulations on Offshore Parent Holding Companies&#8217;
Direct Investment in and Loans to Their PRC Subsidiaries</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; text-indent: 0.5in">An offshore company may invest
equity in a PRC company, which will become the PRC subsidiary of the offshore holding company after investment. Such equity investment
is subject to a series of laws and regulations generally applicable to any foreign-invested enterprise in China, which include Foreign
Investment Law of the People&#8217;s Republic of China, Implementation Regulations for the Foreign Investment Law of the People&#8217;s
Republic of China, the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors; and the Notice
of the State Administration on Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct
Investment.</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">Under the aforesaid laws and
regulations, the increase of the registered capital of a foreign-invested enterprise is subject to prior approval by or filing with the
original approval authority of its establishment. In addition, the increase of registered capital and total investment amount shall both
be registered with SAMS or its local counterpart, report to Ministry of Commerce and a local bank authorized by the SAFE.</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">Shareholder loans made by
offshore parent holding companies to their PRC subsidiaries are regarded as foreign debts in China for regulatory purpose, which is subject
to a number of PRC laws and regulations, including the PRC Foreign Exchange Administration Regulations, Measures on Administration on
Foreign Debts, the Tentative Provisions on the Statistics Monitoring of Foreign Debts and its implementation rules, and the Administration
Rules on the Settlement, Sale and Payment of Foreign Exchange.</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">Under these regulations, the
shareholder loans made by offshore parent holding companies to their PRC subsidiaries shall be registered with a local bank authorized
by the SAFE. Furthermore, the total amount of foreign debts that can be borrowed by such PRC subsidiaries, including any shareholder loans,
shall not exceed the difference between the total investment amount and the registered capital amount of the PRC subsidiaries, both of
which are subject to the governmental approval or 2.5 times of the net assets of such subsidiary.</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"><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; text-align: justify; text-indent: 0.5in"><i>Patent.</i>&#160;Patents
in China are principally protected under the Patent Law of China, which was promulgated by the SCNPC in 1984 and latest amended on October
17, 2020. The duration of a patent right is either 10&#160;years (utility model), 15 years (design) or 20&#160;years (invention) from
the date of application, depending on the type of patent right.</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"><i>Copyright</i>. Copyright
in China, including software copyright, is principally protected under the Copyright Law of China which was issued by the Standing Committee
of the NPC in 1990 and latest amended on November 11, 2020, and its related rules and regulations. Under the Copyright Law, for a company,
the term of protection for copyright is 50&#160;years from the first publication of its work.&#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; text-indent: 0.5in"><i>Trademark.</i>&#160;Registered
trademarks are protected under the Trademark Law of China promulgated by the Standing Committee of the NPC in 1982 and latest amended
on April 23, 2019, and its related rules and regulations. Trademarks are registered with the Trademark Office of the State Administration
for Industry and Commerce. Where registration is sought for a trademark that is identical or similar to another trademark that has already
been registered or given preliminary examination and approval for use in the same or similar category of commodities or services, the
application for registration of such trademark could be rejected. Trademark registrations are effective for a renewable ten-year period,
unless otherwise revoked.</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"><i>Domain names.</i>&#160;&#160;Domain
names are protected under the Administrative Measures on the Internet Domain Names promulgated by the MIIT on April 24, 2017 (effective
as of November 1, 2017) and the Registration Implementing Measures on the Domain Names promulgated by the CNNIC. The MIIT is the major
regulatory body responsible for the administration of the PRC Internet domain names, under supervision of which the CNNIC is responsible
for the daily administration of .cn domain names and PRC domain names. MIIT adopts the &#8220;first to file&#8221; principle with respect
to the registration of domain names.</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>

</div><!-- Field: Page; Sequence: 76; 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 -->70<!-- 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; 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>Employee Stock Option Plans</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; text-indent: 0.5in">In February 2012, SAFE promulgated
the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of
Overseas Publicly-Listed Company, replacing earlier rules promulgated in March 2007, to regulate the foreign exchange administration of
PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year, with a few exceptions, who participate
in stock incentive plans of overseas publicly-listed companies. Pursuant to these rules, these individuals who participate in any stock
incentive plan of an overseas publicly-listed company, are required to register with SAFE through a domestic qualified agent, which could
be the PRC subsidiaries of such overseas listed company, and complete certain other procedures.</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"><b>Regulations Relating to Labor</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; text-indent: 0.5in">Pursuant to the China Labor
Law, which first took effect on January 1, 1995 and was most recently amended on December 29, 2018, and the China Labor Contract Law,
which became effective on January 1, 2008 and amended in 2012, a written labor contract is required when an employment relationship is
established between an employer and an employee. The China Labor Law stipulates the maximum number of working hours per day and per week
while other labor-related regulations and rules of China stipulate the minimum wages. An employer is required to set up occupational safety
and sanitation systems, implement the national occupational safety and sanitation rules and standards, educate employees on occupational
safety and sanitation, prevent accidents at work and reduce occupational hazards.</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">An employer is obligated to
sign an indefinite term labor contract with an employee if the employer continues to employ the employee after two consecutive fixed-term
labor contracts, with certain exceptions. The employer also has to pay compensation to the employee if the employer terminates an indefinite
term labor contract, with certain exceptions. Except where the employer proposes to renew a labor contract by maintaining or raising the
conditions of the labor contract and the employee is not agreeable to the renewal, an employer is required to compensate the employee
when a definite term labor contract expires. Furthermore, under the Regulations on Paid Annual Leave for Employees issued by the State
Council in December 2007 and effective as of January 2008, an employee who has served an employer for more than one year and less than
ten years is entitled to a 5-day paid vacation, those whose service period ranges from 10 to 20&#160;years are entitled to a 10-day paid
vacation, and those who have served for more than 20&#160;years are entitled to a 15-day paid vacation. An employee who does not use such
vacation time at the request of the employer must be compensated at three times their normal daily salaries for each waived vacation day.</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 Relating to Environmental 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; text-indent: 0.5in">The Environmental Protection
Law, which was adopted in 1989 and amended in 2015, effectively established the legal framework for environment protection in China. The
Environmental Protection Law requires the Ministry of Environmental Protection (the &#8220;MEP&#8221;), to implement uniform supervision
and administration of environmental protection work nationwide and establishes national environmental quality standards and pollutants
discharge standards. Enterprises producing environmental contamination and other public hazards must incorporate environmental protection
work into their planning and establish environmental protection systems.</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">Through the adoption of the
Environmental Impact Assessment Law of China in 2003 and last amended in 2018 and the Classification Lists for Environmental Impact Assessment
of Construction Projects (latest 2021 Version), the PRC government established a system to appraise the environmental impact of construction
projects and classify the appraisal based on the degree of environmental impact caused by the construction project.</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">Pursuant to the Order on Ecosystem
by The Ministry of Ecology and Environment, which was issued on July 28, 2017 and most recently amended on December 20, 2019, The Ministry
of Ecology and Environment implements a classification-based management on the environmental impact assessment, or EIA, of pollutants
according to pollutant amount and the impact of the pollutants on the environment as below:&#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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">For those pollutant discharge
units with large amount of pollutants and significant environmental impacts, the key management on a pollutant discharge permit is required;</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><!-- Field: Page; Sequence: 77; 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 -->71<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; 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; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">For those pollutant discharge
units with small amount of pollutants and small environmental impacts, the simplified management on a pollutant discharge permit is required;
and</span></td>
</tr></table><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">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; 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; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">For those pollutant discharge
units with very small amount of pollutants and very small environmental impacts, the pollutant discharge registration form is required.</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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
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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; text-indent: 0.5in">Please refer to &#8220;<i>Item
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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;&#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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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-size: 10pt">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our headquarters is located
at X-702, Runfengdeshangyuan, 60 Anli Road, Chaoyang District, Beijing City, People&#8217;s Republic of China. We own and lease properties
for our operations in China. We believe our facilities are adequate for our current needs and we do not believe we will encounter any
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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>

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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">94.95</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td>&#160;</td><td>&#160;</td>
    <td style="vertical-align: bottom; text-align: center">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><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">Room 309, 3rd Floor, No. 211 Guoyao Road, Pudong New Area, Shanghai City</td><td>&#160;</td>
    <td style="vertical-align: bottom; text-align: center">February 2022-August 2023</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td>&#160;</td><td>&#160;</td>
    <td style="vertical-align: bottom; text-align: center">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">601, 3rd Floor, Building 216, Datunli, Chaoyang District, Beijing City</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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</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><div><a id="a_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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 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; text-indent: 0.5in"><i>The following discussion
and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements
and related notes that appear in this annual report. In addition to historical consolidated financial information, the following discussion
contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below
and elsewhere in this annual report, particularly in &#8220;Risk Factors.&#8221;</i></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>

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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>Overview</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; text-indent: 0.5in">Our business consists of four
business segments, including machinery and equipment sales, construction materials sales, municipal construction projects and technological
consulting and other services, which accounted for 67%, 12%, 8% and 13% of our total revenue from our continuing operations for the year
ended December 31, 2022, respectively, for 50%, 46%, 4% and 0% of our total revenue from our continuing operations for the year ended
December 31, 2021, respectively, and 77%, 21%, 1% and 0% of our total revenue from our continuing operations for the year ended December
31, 2020, respectively. Our technological consulting and other services include the RSA services and software development services conducted
by REIT Mingde which was acquired by us in December 2021.</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">Our domestic customers are
throughout China and our international customers are mainly located in Asia, the Middle East, North Africa and North America. Sales to
customers in China and internationally from our continuing operations accounted for approximately 91% and 9%, respectively, of our total
sales for the year ended December 31, 2022, approximately 84% and 16%, respectively, of our total sales for the year ended December31,
2021, and approximately 67% and 33%, respectively, of our total sales for the year ended December 31, 2020. As of December 31, 2022, our
equipment and machinery were sold in five countries.</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"><b>Impact of COVID-19</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; text-indent: 0.5in">The Company&#8217;s operations
are affected by the recent and ongoing outbreak and spread of the COVID-19 which was declared a pandemic by the World Health Organization
in March 2020. The COVID-19 pandemic is causing lockdowns, travel restrictions, and closures of businesses in China and globally. Our
business has been, and may continue to be, materially adversely impacted by the COVID-19 pandemic.&#160;</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-indent: 0.5in"></p><div>

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</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; text-indent: 0.5in">From late January 2020 through
March 2020, the Company had to temporarily suspend the manufacturing activities due to government restrictions. During the temporary business
closure period, employees had very limited access to our manufacturing facilities and the shipping services were not available and as
a result, the Company experienced difficulty in delivering the products to customers on a timely basis. In addition, due to the COVID-19,
some of the Company&#8217;s customers or suppliers experienced financial distress, delayed or defaulted on their payments, reduced the
scale of their business, or suffered disruptions in their business. Our production and sales activities returned to normal after the spread
of COVID-19 had been substantially controlled in China in late 2020. However, since 2021, there has been a resurgence of COVID-19 cases
caused by new variants such as Delta and Omicron in multiple cities in China, as well as across the world. Restrictions have been re-imposed
in certain cities to combat such outbreaks and emerging variants of the virus. The COVID-19 pandemic has had a significant impact on the
construction sector, which is sensitive to economic cycles. The nature of the impacts and extent of the ramifications are in large part
dependent upon the location of the underlying projects. Direct impacts have ranged from a slowdown of available materials and labor to
suspensions and, in some instances, deferral and suspension of entire projects.</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">On December 7, 2022, China
announced new rules that constitute a relaxation of almost all of its stringent COVID-19 pandemic control measures. Subsequently, local
governments also lifted additional mobility restrictions. &#160; While such measures have effectively reopened business within China,
COVID-19&#8217;s continued existence may have significant impacts on our industry. The impact of the COVID-19 pandemic on the Company&#8217;s
future financial results will depend on various factors, such as the length and severity of the crisis, potential resurgences, future
government responses and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among others, all of which
remain highly uncertain and unpredictable. Therefore, 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.</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">Despite the on-going impact
of COVID-19, our revenue increased by 80%, or approximately $2.9 million, from approximately $3.6 million for the year ended December
31, 2021 to approximately $6.5 million for the year ended December 31, 2022 due to higher machinery and equipment sales resulted from
large contracts for gravity separators and revenue from RSA services and software development services which were acquired in December
2021.</p><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"><b>Results of Operations from Our Continuing Operations</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>Comparison of Operation Results for the
Years Ended December 31, 2022, 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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table summarizes
the results of our continuing operations&#160;during the fiscal years ended December 31, 2022, 2021 and 2020, and provides information
regarding the dollar and percentage increase or (decrease) during such years.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">(All amounts, other than percentages,
in thousands of U.S. dollars)</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><span style="font-size: 5pt">&#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">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2,250</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">(4,344</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">
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">(236</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="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">(333</td><td style="padding-bottom: 1.5pt; text-align: left">)%</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(103</td><td style="text-align: left">)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(219</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">211</td><td style="text-align: left">%</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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    <td style="text-align: left">&#160;</td><td style="text-align: right">3</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(27</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(1</td><td style="text-align: left">)%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">205</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(759</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">(1,909</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">53</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,441</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(76</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">6,293</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(100</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">8</td><td style="text-align: left">%</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">508</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="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">(4</td><td style="padding-bottom: 1.5pt; text-align: left">)%</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; 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="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">(606</td><td style="padding-bottom: 1.5pt; text-align: left">)%</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</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: 0in; white-space: nowrap; text-align: center">&#160;</td><td style="white-space: nowrap; text-align: center; font-weight: bold; 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)">
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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>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#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>
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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">910</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,340</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">2,267</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">27</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,077</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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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(12,001</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">(333</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="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">(79</td><td style="padding-bottom: 1.5pt; text-align: left">)%</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; 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>
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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">(103</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(3</td><td style="text-align: left">)%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(858</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(10</td><td style="text-align: left">)%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">754</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(88</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</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1</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">(27</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(1</td><td style="text-align: left">)%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">480</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">6</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(507</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(106</td><td style="text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: 0in; text-align: left">change in fair value in convertible debt</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,909</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(53</td><td style="text-align: left">)%</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,909</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: 0in; text-align: left">Loss from disposal of REIT Changjiang</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(6,293</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(175</td><td style="text-align: left">)%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(6,293</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: 0in; text-align: left">Gain from disposal of Gu&#8217;an REIT</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2,231</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">27</td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(2,231</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(100</td><td style="text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: 0in; text-align: left; padding-bottom: 1.5pt">Share of losses in equity method investments</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">(143</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">(4</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="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">-</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">(143</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">-</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">(235</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="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">22</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="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">(557</td><td style="padding-bottom: 1.5pt; 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">(4,718</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(57</td><td style="text-align: left">)%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(15,756</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">334</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">7</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">(567</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">(99</td><td style="padding-bottom: 1.5pt; text-align: left">)%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: 0in; font-weight: bold; text-align: left">Net loss from continuing operations</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(20,478</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(569</td><td style="text-align: left">)%</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(5,288</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(63</td><td style="text-align: left">)%</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(15,190</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">287</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt; text-align: right">(613</td><td style="padding-bottom: 4pt; text-align: left">)%</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; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">(All amounts, other than percentages,
in thousands of U.S. dollars)</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Revenues</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; text-indent: 0.5in">Our total revenues from continuing
operations increased by approximately $2.9 million, or 80%, to approximately $6.5 million for the year ended December 31, 2022 from approximately
$3.6 million for the year ended December 31, 2021. Among our total revenue, revenue from third party customers increased by approximately
$2.9 million or 86% from approximately $3.3 million for the year ended December 31, 2021 to approximately $6.2 million for the year ended
December 31, 2022, while revenue from related party customers increased by $23,091 or 8% from $281,784 for the year ended December 31,
2021 to $304,875 for the year ended December 31, 2022. The significant increase in our total revenue  in the
year ended December 31 2022 compared to the year ended December 31, 2021 was mainly due to higher machinery and equipment sales resulted
from large contracts for gravity separators and revenue from RSA services and software development services which were acquired in December
2021.</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">Our total revenues  decreased by approximately $4.7 million, or 57%, to approximately $3.6 million for the year ended December 31, 2021 from approximately
$8.3 million for the year ended December 31, 2020. Among our total revenue, revenue from third party customers decreased by approximately
$4.8 million or 59% from approximately $8.1 million in 2020 to approximately $3.3 million in 2021, while revenue from related party customers
increased by $52,970 or 23% from $228,814 in 2020 to $281,784 in 2021. The significant decrease in our total revenue in fiscal 2021 as compared to fiscal 2020 was mainly due to slowdown of construction industry due to financial tightness. Real estate
companies in China faced challenges rolling over their debts and some went bankrupt. Construction investments were cut or delayed due
to financial tightness and market pessimism. Continuous impact of COVID-19 also caused disruption in our supply chains and less demand
for our products. However, we believe our eco-friendly construction materials will be in greater demand than traditional construction
materials as the PRC construction market continues to grow and the PRC government increases its focus on reducing the environmental impact
of construction activities, which includes, among other things, recent environmental initiatives.</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">The following table summarizes
the results of revenues from our continuing operations by business segments for the fiscal 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"><b>&#160;</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(All amounts, other than percentages, in thousands
of U.S. dollars)</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Decrease)</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>(Decrease)</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)">
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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: center">&#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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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Decrease)</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>(Decrease)</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)">
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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; text-indent: 0.5in"><b><i>Machinery and Equipment</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; text-indent: 0.5in">Revenue from machinery
and equipment sales increased by approximately $2.5 million, or 139%, from approximately $1.8 million for the year ended December
31, 2021 to approximately $4.3 million for the year ended December 31, 2022. The increase is mainly due to increased sales from
large contracts for gravity separators.</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">Revenue from machinery and
equipment sales in our continuing operations decreased by approximately $4.7 million, or 72%, from approximately $6.5 million for the
year ended December 31, 2020 to approximately $1.8 million for the year ended December 31, 2021. The decrease is mainly due to slowdown
of the construction industry disruption in our supply chains and less demand for our products.&#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; text-indent: 0.5in"><b><i>Construction Materials</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; text-indent: 0.5in">Sales of our environmental-friendly
construction materials decreased by approximately $0.9 million or 51% to approximately $0.8 million for the
year ended December 31, 2022 as compared to the year ended December 31, 2021 due to the decrease in demand resulting from the downturn
of the national construction market under the impact of COVID-19.</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>

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construction materials in our continuing operations decreased by approximately $0.1 million or 7% for the year ended December 31, 2021
as 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; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>Municipal Construction</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; text-indent: 0.5in">Municipal construction includes
such projects known as sponge city projects. Our environmental-friendly construction materials such as brick and block may be used in
these municipal construction projects as required by local governments. Revenue from municipal construction projects in our continuing
operations increased by approximately $0.4 million or 271% in the year ended December 31, 2022 as compared to the year ended December
31 2021. The increase is due to overall economy recover in 2022. Revenue from municipal construction projects in our continuing operations
increased by approximately $35,000 in the year ended December 31 2021 as compared to the year ended December 31 2020<span style="background-color: lightgrey">.</span></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"><b><i>Technological Consulting
and Other Services</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>

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consulting and other services was approximately $0.8 million for the year ended December 31, 2022, which was generated by our newly acquired
subsidiary, Hainan Yile IoT Technology Co., Ltd, a PRC limited liability company&#160;(&#8220;Hainan Yile IoT&#8221;).&#160;<span style="background-color: white">Hainan
Yile IoT provides RSA services to drivers within Hainan Province, China, through our network of RSA services providers of tow providers
and automotive repair services. Through Hainan Yile IoT, we are also engaged in the design, development and sales of customized software
solutions based on the client specifications.</span></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"><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; text-indent: 0.5in">Our total cost of revenues
increased by approximately $2.5 million or 76% to approximately $5.7 million for the year ended December
31, 2022 from approximately $3.2 million for the year ended December 31, 2021. Cost of revenues from third party customers increased by
approximately $2.2 million or 71% from approximately $3.0 million in the year ended December 31, 2021 to approximately $5.2 million in
the year ended December 31, 2022, while cost of revenues from related party customers increased by approximately $0.3 million or 170%
from approximately $0.2 million in the year ended December 31, 2021 to approximately $0.5 million in the year ended December 31, 2022.
The increase in our total cost of revenue was in line with the increase in revenue. As a percentage of revenues, the cost of revenues
decreased to 88% in the year ended December 31, 2022 from 89% in the year ended December 31, 2021.</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>

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revenues decreased by approximately $3.1 million or 49% to approximately $3.2 million for the year ended December 31, 2021 from
approximately $6.3 million for the year ended December 31, 2020. Cost of revenues from third party customers decreased by
approximately $3.2 million or 51% from approximately $6.2 million in the year ended December 31, 2020 to approximately $3.0 million
in the year ended December 31, 2021, while cost of revenues from related party customers increased by $27,019 or 18% from $148,034
in the year ended December 31, 2020 to $175,053 in the year ended December 31, 2021. The decrease in our total cost of revenue was
in line with the decrease in revenue. As a percentage of revenues, the cost of revenues increased to 89% in the year ended December
31, 2021 from 76% in the year ended December 31, 2020 due to increase in purchase price of raw materials and labor costs.&#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; text-indent: 0.5in"></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 -->77<!-- 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: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(All amounts, other than percentages, in thousands
of U.S. dollars)</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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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; 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%">
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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><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"><span style="background-color: white"><b><i>Machinery and Equipment</i></b></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; text-indent: 0.5in"><span style="background-color: white">Cost
of revenues for machinery and equipment sales increased by approximately $2.4 million, or 162%, from approximately $1.5 million for the
year ended December 31, 2021 to approximately $3.9 million for the year ended December 31, 2022. The increase was primarily due to the
increase in production volume, as well as increase in costs of raw materials and labor in 2022.</span></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; text-indent: 0.5in"><span style="background-color: white">Cost
of revenues for machinery and equipment sales decreased by approximately $2.9 million, or 66%, from approximately $4.4 million for the
year ended December 31, 2020 to approximately $1.5 million for the year ended </span>December 31, 2021. The decrease was primarily due
to the decrease in <span style="background-color: white">production volume</span>.</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>Construction Materials</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; text-indent: 0.5in">Cost of <span style="background-color: white">revenues
for</span> sales of our environmental-friendly construction materials decreased by approximately $0.7 million, or 42%, from approximately
$1.6 million for the year ended December 31, 2021 to approximately $0.9 million for the year ended December 31, 2022. The decrease was
due to decrease in sales volume for construction materials sold in the downturn of the national construction market. Since we had fixed
costs which did not change as a result of the change in sales, the decrease in our cost of revenues is not as significant as the decrease
in the sales of construction materials.</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; text-indent: 0.5in">Cost of <span style="background-color: white">revenues
for</span> sales of our environmental-friendly construction materials decreased by approximately $0.3 million, or 18%, from approximately
$1.9 million for the year ended December 31, 2020 to approximately $1.6 million for the year ended December 31, 2021. The decrease was
due to decrease in sales volume for construction materials sold in downturn of the national construction market.</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"><b><i>Municipal Construction</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; text-indent: 0.5in">Cost of <span style="background-color: white">revenues
for</span> sales of municipal construction projects increased by approximately $0.3 million, or 224%, from approximately $0.2 million
for the year ended December 31, 2021 to approximately $0.5 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; 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; text-indent: 0.5in">Cost of <span style="background-color: white">revenues
for</span> sales of municipal construction projects in our continuing operations amounted to approximately $150,000 and approximately
$11,000 for the years ended December 31, 2021 and 2020, respectively.&#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>Technological Consulting and Other 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; text-indent: 0.5in">Cost of revenues for technological
consulting and other services amounted to approximately $0.3 million for the year ended December 31, 2022. There was no cost of technological
consulting and other services for the years ended December 31, 2021 and 2020.</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"><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; text-indent: 0.5in">Our gross profit increased by approximately $0.4 million, or 109%, to approximately $0.8 million for the year ended December 31,
2022 from approximately $0.4 million for the year ended December 31, 2021. Gross profit margin for our continuing operations was 12% for
the year ended December 31, 2022, as compared with 11% 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; 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">Our gross profit
decreased by approximately $1.6 million, or 81%, to approximately $0.4 million for the year ended December 31, 2021 from
approximately $2.0 million for the year ended December 31, 2020. Gross profit margin for our continuing operations was 11% for
fiscal 2021, as compared with 24% for fiscal 2020. The decrease in gross profit margin from our continuing operations was primarily
attributable to significant decrease in gross profit in machinery and equipment segment due to the challenging market environment
resulting from the COVID-19 pandemic which resulted in financial tightness and slowdown of the construction industry and thereby
reduced demand for our products. We had to offer more competitive prices to maintain and win new customers/projects. In addition,
the COVID-19 pandemic caused disruption in our supply chain, impacted our ability to timely fulfill our customer orders and led to
higher fulfilment expenses.</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">Our gross profit and gross
margin by segments are as follows:</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: center">(All amounts, other than percentages, in thousands
of U.S. dollars)</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Profit</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td><td style="white-space: nowrap; font-weight: bold; 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>Profit<br/>
</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Increase<br/>
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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: center">&#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"></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><i>Machinery and Equipment</i></b></p><div>

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

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machinery and equipment products increased by approximately $70,000 to approximately $0.4 million for the
year ended December 31, 2022 as compared to approximately $0.3 million for the year ended December 31, 2021. Gross profit margin for this
segment was 9% and 17%, respectively, for the years ended December 31, 2022 and 2021. The decrease in gross profit margin was mainly due
to the fact that we had to offer more competitive prices for our products in the challenging market environment resulting from the COVID-19
pandemic which resulted in financial tightness and slowdown of the construction industry and thereby reduced demand for our products.
In addition, the COVID-19 pandemic caused disruption in our supply chain, impacted our ability to timely fulfill our customer orders and
led to higher fulfilment expenses.</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">Gross profit for machinery
and equipment products decreased by approximately $1.7 million to approximately $0.3 million for the year
ended December 31, 2021 as compared to $2.0 million for the year ended December 31, 2020. Gross profit margin for this segment was 17%
and 31%, respectively, for the years ended December 31, 2021 and 2020. The decrease in gross profit margin was mainly due to the fact
that we had to offer more competitive prices for our products in the challenging market environment resulting from the COVID-19 pandemic
which resulted in financial tightness and slowdown of the construction industry and thereby reduced demand for our products. In addition,
the COVID-19 pandemic caused disruption in our supply chain, impacted our ability to timely fulfill our customer orders and led to higher
fulfilment expenses.</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"><b><i>Construction Materials</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>

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materials was approximately $0.1 million for the year ended December 31, 2022 compared to a gross profit
of approximately $0.1 million for the year ended December 31, 2021. The gross profit (loss) margin for this segment was approximately
(12)% for the year ended December 31, 2022 as compared to 6% for the year ended December 31, 2021.We had fixed costs which did not decrease
proportionately with the revenue decrease, and thus resulted in a gross loss.&#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; text-indent: 0.5in">Gross profit for construction
materials was approximately $0.1 million for the year ended December 31, 2021 compared to a gross loss of
approximately $0.1 million for the year ended December 31, 2020. The gross profit margin for this segment was approximately 6% for the
year ended December 31, 2021 as compared to (7%) for the year ended December 31, 2020. The increase in gross margin was mainly due to
the reverse of approximately $0.1 million in inventory valuation, which caused decrease in our cost of revenue.</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"><b><i>Municipal Construction</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; text-indent: 0.5in">Gross profit (loss) for the
municipal construction project segment was approximately $0.04 million, $(0.01) million and $0.1million
for the years 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; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Technological Consulting and Other Services</i></b></p><div>

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

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consulting and other services was approximately $0.5 million for the year ended December 31, 2022. The gross profit margin for this segment
was approximately 59% for the year ended December 31, 2022. There was no technological consulting and other services offered during the
years ended December 31, 2021 and 2020.</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"><b><i>Selling Expenses</i></b></p><div>

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

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31, 2022, our selling expenses were approximately $3.8 million, representing a 357% increase from approximately
$0.8 million in the year ended December 31, 2021. As a percentage of sales, our selling expenses were 58% and 23% for the years ended
December 31, 2022 and 2021, respectively. The increase was mainly due to more marketing activities and shipping and handling fees associated
with increased sales in the year ended 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><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; text-indent: 0.5in">For fiscal 2021, our selling
expenses were approximately $0.8 million, representing a 24% decrease from approximately $1.1 million in
the year ended December 31, 2020. As a percentage of sales, our selling expenses were 23% and 13% for the years ended December 31, 2021
and 2020, respectively. The decrease was mainly due to fewer marketing activities and shipping and handling fees associated with decreased
sales in the year ended December 31, 2021.</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"><b><i>General and Administrative 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; text-indent: 0.5in">For the year ended December
31, 2022, our general and administrative expenses were approximately $8.6 million, representing an increase of approximately $4.0 million
compared to approximately $4.6 million in the year ended December 31, 2021. The increase in general and administrative expenses was mainly
due to an increase of share-based compensation for services and consulting and professional fees of $4.0 million. As a percentage of revenues,
general and administrative expenses were 133% and 129% of our total revenues 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; 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">For the year ended December
31, 2021, our general and administrative expenses were approximately $4.6 million, representing an increase of approximately $0.7 million
compared to approximately $4.0 million in the year ended December 31, 2020. The increase in general and administrative expenses was mainly
due to an increase of share-based compensation for services and consulting and professional fees of $1.9 million, offset by decreases
in other general administrative expenses. As a percentage of revenues, general and administrative expenses were 129% and 48% of our total
revenues 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; 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>Bad Debt Expenses</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; text-indent: 0.5in">For the year ended December
31, 2022, our bad debt expenses were approximately $1.7 million, representing a decrease of approximately
$0.5 million as compared to approximately $2.3 million in the year ended December 31, 2021. We incurred significant bad debt expenses
on uncollectible accounts receivable and advance payments for fiscal 2022 and 2021, however, in fiscal 2022, the impact of COVID-19 on
our customers alleviated. As a percentage of revenues, bad debt expenses were 26% and 63% of our total revenues for the years ended December
31, 2022 and 2021, respectively.&#160;</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; text-indent: 0.5in">For the year ended December
31, 2021, our bad debt expenses were approximately $2.3 million, representing an increase of approximately
$1.4 million as compared to approximately $0.9 million in the year ended December 31, 2020. We incurred significant bad debt expenses
on uncollectible accounts receivable and advance payments due to slower or delayed payments from customers and delayed fulfillment of
suppliers who were adversely affected by the COVID-19 pandemic and faced shortage in working capital. As a percentage of revenues, bad
debt expenses were 63% and 11% of our total revenues 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; 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>Research and Development 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; text-indent: 0.5in">Our research and development
(&#8220;R&amp;D&#8221;) expenses were approximately $1.0 million, $0.3 million and $0.3 million for the
years ended December 31, 2022, 2021 and 2020, respectively. The increase in R&amp;D expenses in the year ended December 31, 2022 was due
to more R&amp;D projects conducted by Beijing REIT.</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"><b><i>Impairment of Long-lived 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; text-indent: 0.5in">During the years ended December
31, 2022, 2021 and 2020, due to the Company&#8217;s reoccurring loss, the Company further assessed that the expected future cash flows
may not cover the carrying value of the Company&#8217;s fixed asset equipment and machinery. As a result, the Company recorded an additional
impairment of approximately $nil, $4.3 million and $2.3 million on its fixed assets for the 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; 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"><b><i>Impairment of Goodwill</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; text-indent: 0.5in">For the year ended December
31, 2022, due to the slow development of REIT Mingde and its subsidiaries, the Company performed the two-step test for the REIT Mingde
and its subsidiaries. In accordance with ASC 350-20, the Company recorded an impairment loss of $1,018,870 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; 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>Interest Expense</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; text-indent: 0.5in">Our interest expenses were approximately $0.3 million, $0.1 million and $0.9 million for the years ended December 31, 2022, 2021 and
2020, respectively. The increase in interest expenses for fiscal 2022 as compared to fiscal 2021 was because of a higher loan balance
in 2022 as compared to that in 2021. <span style="background-color: white">The decrease in interest expenses for </span>the year ended
December 31, <span style="background-color: white">2021 as compared to </span>the year ended December 31, <span style="background-color: white">2020
was because of a lower loan balance in 2021 as compared to that in 2020.</span></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"><b><i>Other Income (Expense) </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; text-indent: 0.5in">Other income amounted to approximately
$0.2 million in the year ended December 31, 2022, mainly representing government subsidy. We had other <span style="background-color: white">expense</span>
of approximately $26,991 in the year ended December 31, 2021, mainly representing acquired inventory loss
related to Hainan Yile IoT. We had other income of approximately $0.5 million from our continuing operations in fiscal 2020, mainly due
to approximately $0.3 million in government subsidy and recognition of certain balances over three years in customer advance as other
income.</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"><b><i>Change in Fair Value in Convertible Debt&#160;</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; text-indent: 0.5in">During the years ended December
31, 2022 and 2021, change in fair value in convertible debt amounted to approximately $0.5 million and $1.9 million, respectively. <span style="background-color: white">There
was no change in fair value of convertible debt in year ended December 31, 2020.</span></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"><b><i>Share of Losses in Equity Method Investments</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; text-indent: 0.5in">For the years ended December
31, 2022 and 2021, share of losses in equity method investments for Shexian Ruibo amounted to approximately $0.05 million and $0.1 million,
respectively. <span style="background-color: white">There was no </span>share of losses in equity method investments <span style="background-color: white">in
the year ended December 31, 2020.</span></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"><b><i>Gain (loss) from Disposal and Dissolution
of Subsidiaries</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; text-indent: 0.5in"><span style="background-color: white">The
Company recognized a gain from dissolving subsidiaries of approximately $0.5 million in the year ended December 31, 2022. The Company
recognized a loss from disposal of REIT Changjiang of approximately $6.3 million in the year ended December 31, 2021. The Company recognized
a gain from disposal of </span>Gu&#8217;an REIT <span style="background-color: white">of approximately $2.2 million in the year ended
December 31, 2020.</span></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>Loss 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; text-indent: 0.5in">Our loss before income taxes
was approximately $15.4 million for the year ended December 31, 2022, a decrease of approximately $5.1
million as compared to loss before income taxes of approximately $20.5 million for the year ended December 31, 2021. The decrease in our
loss before income taxes for the fiscal year 2022 was primarily attributable to the increase in revenues and decrease in other expenses,
partially offset by increased costs and operating expenses as discussed 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; text-indent: 0.75in">Our loss before income taxes
was approximately $20.5 million for the year ended December 31, 2021, an increase of approximately $15.8
million as compared to loss before income taxes of approximately $4.7 million for the year ended December 31, 2020. The increase in our
loss before income taxes for the year ended December 31, 2021 was primarily attributable to the significant decrease in revenues and
increased costs and expenses as discussed 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; text-indent: 0.5in"></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 -->82<!-- 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: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Provision for 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; text-indent: 35.4pt">The Company&#8217;s PRC subsidiaries
are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. Under the EIT Law, the corporate
income tax rate applicable to all companies, including both domestic and foreign-invested companies, is 25%. However, each of Beijing
REIT and Hainan Yile IoT is recognized as a HNTE by PRC government and subject to a favorable income tax rate of 15%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 35.4pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table reconciles
the income tax expense by statutory rate to the Company&#8217;s actual income tax expense from our continuing operations:</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>&#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>&#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>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left">Income tax expense computed based on PRC statutory income tax rate</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(3,849,305</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(5,118,519</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">(1,179,508</td><td style="width: 1%; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Effect of favorable income tax rate in certain entity in PRC</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">181,088</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">889,716</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(164,071</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Non-PRC entities not subject to PRC tax</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,749,333</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,564,644</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">401,488</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Research &amp; Development (&#8220;R&amp;D&#8221;) tax credit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(240,150</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(260,213</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(251,178</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Non-deductible expenses - permanent difference</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">171,393</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">588,191</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">826,034</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">1,970,079</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">2,339,650</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">937,209</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">Income tax expenses</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">(17,562</td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">3,469</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">569,974</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Net Loss</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; text-indent: 0.5in">Our net loss from continuing
operations amounted to approximately $15.4 million, $20.5 million and $5.3 million for the years ended December 31, 2022, 2021 and 2020,
respectively. Our net loss from discontinued operations amounted to approximately $nil, $1.6 million and $7.6 million for the years ended
December 31, 2022, 2021 and 2020, respectively. Total net loss amounted to approximately $15.4 million, $22.1 million and $12.9 million
for the years 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; text-indent: 0.5in">&#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"><b>B.</b></span></td>
    <td><span style="font-size: 10pt"><b>Liquidity and Going Concern</b></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; text-indent: 0.5in">We are a holding company incorporated
in the British Virgin Islands. REIT Holdings, our wholly owned subsidiary established in Hong Kong, directly owns Beijing REIT, REIT Technology
and REIT Technology, which in turn own our assets through their respective subsidiaries in China, India and the United States. We may
need dividends and other distributions in equity from our subsidiaries, including our PRC subsidiaries to satisfy our liquidity requirements.
Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in
accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of
their 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 subsidiaries may also allocate a portion of their after-tax profits based on PRC accounting
standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. We have primarily
relied on direct payments of expenses by our subsidiaries (which generate revenues), to meet our obligations to date.</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">Substantially all of our operations
are conducted in China and are denominated in RMB, which is subject to the exchange control regulation in China, and, as a result, we
may have difficulty distributing any dividends outside of China due to PRC exchange control regulations that restrict the ability to convert
RMB into U.S. Dollars.&#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; text-indent: 0.5in">Under applicable PRC regulations,
foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC
accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its
after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reaches
50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise
has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity
owners except in the event of liquidation. Under PRC law, RMB is currently convertible into U.S. Dollars under a company&#8217;s &#8220;current
account,&#8221; which includes dividends, trade and service-related foreign exchange transactions, without prior approval of the SAFE,
not from a company&#8217;s &#8220;capital account,&#8221; which includes foreign direct investments and loans, without the prior approval
of the SAFE.</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; text-indent: 0.5in">We have historically funded
our working capital needs from operations, advance payments from customers, bank borrowings, equity and debt offering, capital contributions
from shareholders and related-party loans. Presently, our principal sources of liquidity are generated from our operations, proceeds from
our shareholders&#8217; contributions, and loans and notes from commercial banks. Our working capital requirements are influenced by the
level of our operations, the numerical volume and dollar value of our sales contracts, the progress of execution on our customer contracts,
and the timing of accounts receivable collections.&#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; text-indent: 0.5in">As reflected in the Company&#8217;s
consolidated financial statements for the year ended December 31, 2022, the Company reported a net
loss of approximately $15.4 million. As of December 31, 2022, the Company had a working capital deficit
of approximately of $10.1 million.</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">As of December 31, 2022, the
Company had outstanding bank loans of approximately $1.3 million from a PRC bank. If the Company cannot renew existing loans or borrow
additional loans from banks, the Company&#8217;s working capital may be further negatively impacted.</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">As of December 31, 2022, the
Company had cash of approximately $0.1 million. In addition, the Company had outstanding accounts receivable of approximately $2.2 million
(including accounts receivable from third-party customers of $2.1 million and accounts receivable from related party customers of approximately
$0.1 million), of which approximately $0.3 million, or 7.7%, had been subsequently collected between January and April 2022, and became
available for use as working capital. As of December 31, 2022, the Company had outstanding bank loans of approximately $1.3 million from
a PRC bank.</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">Management expects that it
would be able to renew all of its existing bank loans upon their maturity based on past experience and the Company&#8217;s good credit
history. Currently, the Company is working to improve its liquidity and capital source mainly through cash flow from its operations, renewal
of bank borrowings, and borrowing from related parties. In order to fully implement its business plan and sustain continued growth, the
Company may also seek equity financing from outside investors. At the present time, however, the Company does not have commitments of
funds from any potential investors. No assurance can be given that additional financing, if required, would be available on favorable
terms or at all.</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">Based on the reasons above,
there is a substantial doubt about the Company&#8217;s ability to continue as a going concern for the next 12 months from the issuance
of the consolidated financial statements.&#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"><b><i>Cash Flows for Years Ended December 31, 2022, 2021 and 2020</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-indent: 0.5in">The following table sets forth summary of our cash
flows for the periods indicated:</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; text-indent: -100pt">(All amounts in thousands
of U.S. dollars)</p><div>

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

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

</div><!-- Field: Page; Sequence: 90; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->84<!-- 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: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>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; text-indent: 0.5in">Net cash used in operating
activities was approximately $10.0 million in the year ended December 31, 2022. Net cash used in operating activities in the year ended
December 31, 2022 mainly consisted of net loss from continuing operation of approximately $15.4 million, adjustments of non-cash items
of approximately $8.3 million, an increase of approximately $2.7 million in accounts receivable, a decrease of approximately $0.1 million
in inventories, an increase of approximately $0.7 million in advance from customers, an increase of approximately $0.7 million in accounts
payable, a decrease of approximately $0.2 million in accrued expenses and other liabilities, and a decrease of approximately $0.6 million
in taxes payable.&#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; text-indent: 0.5in">Net cash used in operating
activities was approximately $2.8 million in the year ended December 31, 2021. Net cash provided by operating activities in the year ended
December 31, 2021 mainly consisted of net loss from continuing operation of approximately $20.5 million, adjustments of non-cash items
of approximately $18.2 million, a decrease of approximately $0.7 million in accounts receivable, a decrease of approximately $1.2 million
in advance to suppliers, a decrease of approximately $1.4 million in advance from customers, an increase of approximately $1.1 million
in accounts payable, an increase of approximately $1.0 million in accrued expenses and other liabilities, and a decrease of approximately
$0.2 million in deferred grants.&#160; Net cash provided by discontinued operating activities was approximately $2.7 million.</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">Net cash provided by operating
activities was approximately $0.2 million in the year ended December 31, 2020. Net cash provided by operating activities in the year ended
December 31, 2020 mainly consisted of net loss of approximately $5.3 million, adjustments of non-cash items of approximately $3.0 million,
a decrease of approximately $3.9 million in accounts receivable, an increase of approximately $0.4 million in advance from customers,
an increase of approximately $1.1 million in accrued expenses and other liabilities, an increase of approximately $0.7 million in tax
payable, offset by an increase of approximately $1.2 million in advance to suppliers, a decrease of approximately $1.8 million in accounts
payable and, and an increase of approximately $0.7 million in prepayments and other assets. Net cash provided by discontinued operating
activities was $6,990.</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"><b><i>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; text-indent: 0.5in">Net cash provided by investing
activities was approximately $4.2 million for the year ended December 31, 2022. During the year ended December 31, 2022, the Company paid
approximately $1.3 million on software and received proceeds from disposal of subsidiaries of approximately $5.7 million.</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">Net cash used in investing
activities was approximately $1.7 million for the year ended December 31, 2021. During the year ended December 31, 2021, the Company paid
approximately $2.6 million on the construction in progress (&#8220;CIP&#8221;) and received proceeds from disposal of subsidiaries of
approximately $2.6 million. Net cash used in discontinued investing activities was approximately $1.8 million.</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">Net cash provided by investing
activities was approximately $0.9 million for the year ended December 31, 2020. During the year ended December 31, 2020, we paid approximately
$2.6 million for the acquisition of a 41.67% ownership interest in Shexian Ruibo and received approximately $3.8 million for disposition
of Gu&#8217;an REIT.&#160;Net cash used in discontinued investing activities was approximately $0.2 million.</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"><b><i>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; text-indent: 0.5in">Net cash provided by financing
activities was approximately $4.8 million for the year ended December 31, 2022, including proceeds from bank loans of approximately $0.7
million, proceeds of approximately $3.0 million from issuance of a convertible note, proceeds from third-party loans of approximately
$1.8 million, proceeds received from share issuance of approximately $3.6 million, offset by repayment of bank loans of approximately
$1.5 million, net loan payment to related parties of approximately $1.3 million, payments to non-controlling shareholders of approximately
$1.9 million for purchasing non-controlling interest of a subsidiary, and repayment of third-party loans of approximately $1.0 million.</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>

</div><!-- Field: Page; Sequence: 91; Value: 1 --><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; text-indent: 0.5in">Net cash provided by financing
activities was approximately $4.0 million for the year ended December 31, 2021, including proceeds from bank loans of approximately $2.3
million and proceeds of approximately $3.7 million from issuing convertible loans, proceeds from third party loans of approximately $0.8
million, offset by repayment of bank loans of approximately $7.2 million and net loan payment to related parties of approximately $0.3
million. &#160;&#160;&#160;Net cash provided by discontinued financing activities was approximately $4.7 million.</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">Net cash used in financing
activities was approximately $1.9 million for the year ended December 31, 2020, including proceeds from bank loans of approximately $11.0
million, offset by repayment of bank loans of approximately $13.2 million and net repayment to related parties of $38,835. Net cash provided
by discontinued financing activities was approximately $0.4 million.&#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"><b>Statutory Reserves</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; text-indent: 0.5in">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 10% of the after-tax net income determined in accordance with PRC GAAP until
the reserve is equal to 50% of the entity&#8217;s registered capital. Appropriations to the discretionary surplus reserve are made at
the discretion of the Board of Directors. The restricted amounts as determined pursuant to PRC statutory laws totaled $1,066,554 and $1,230,387
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; text-indent: 0.5in">&#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; text-indent: 0.5in">We had capital expenditures
of approximately $1.5 million, $2.6 million, and $0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, for
purchases of equipment and intangible assets in connection with our business activities.</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"><b>Recent Accounting Pronouncements&#160;</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; text-indent: 0.5in">A list of recent relevant
accounting pronouncements is included in Note 2 &#8220;Summary of Principal Accounting Policies&#8221; of our consolidated financial statements
included elsewhere in 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: center">&#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: 24px; text-align: justify"><span style="font-size: 10pt"><b>C.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Research and Development, Patent and Licenses, etc.</b></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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Please
refer to &#8220;<i>Item 4. Information on the Company&#8212;B. Business Overview&#8212;Research and Development&#8221; and &#8220;&#8212;Intellectual
Property.&#8221;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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: 24px; text-align: justify"><span style="font-size: 10pt"><b>D.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Trend Information.</b></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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Other
than as disclosed 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 effect on our net revenues, income from continuing operations, profitability, liquidity or capital
resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial
condition.</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><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: 24px"><span style="font-size: 10pt"><b>E.</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Critical Accounting Estimates.</b></span></td></tr>
  </table><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; text-indent: 0.5in; background-color: white">We
prepare our financial statements in conformity with accounting principles generally accepted by the United States of America (&#8220;U.S.
GAAP&#8221;), which requires us to make judgments, estimates and assumptions that affect our reported amount of assets, liabilities, revenue,
costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions
in the past years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical
experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral
component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.</p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us
to make significant accounting estimates. Accordingly, these are the policies we believe are the most critical to understanding and evaluating
our consolidated financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Accounts Receivable,
Net</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; text-indent: 0.5in; background-color: white">Accounts
receivable is recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually
grants credit to customers with good credit standing with a maximum of 180 days and determines the adequacy of reserves for doubtful accounts
based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when
there is objective evidence that the Company may not be able to collect amounts due. 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. Based on the assessment
of customers&#8217; credit and ongoing relationships, the Company&#8217;s payment terms typically range from 90 days to 1 year. The provision
is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive
income. Actual amounts received may differ from management&#8217;s estimate of credit worthiness and the economic environment. Delinquent
account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection
is not probable. As affected by the ongoing COVID-19 pandemic and spread, the Company&#8217;s accounts receivable collection was negatively
affected. Based on subsequent collection analysis, the Company accrued increased bad debt reserve for the outstanding accounts receivable
as of December 31, 2021. As a result, allowance for uncollectible balances amounted to $1,771,761 and&#160;$904,052 as of December 31,
2022 and 2021, respectively.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Impairment of Long-lived
Assets</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; text-indent: 0.5in; background-color: white">The
Company reviews long-lived assets, including definitive-lived intangible assets, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual
disposition are below the asset&#8217;s carrying value, then the asset is deemed to be impaired and written down to its fair value. During
the year ended December 31, 2019, the Company disposed of approximately $0.2 million of outdated and fully depreciated equipment and machinery.
Given the Company&#8217;s net loss position in fiscal 2022, 2021 and 2020, the Company further assessed that the expected future cash
flow generated from its machinery, equipment, and other long-lived assets would not recover their carrying value and as a result, the
Company recorded an impairment of approximately $nil, $4.3 million and $2.3 million on these fixed assets for the year ended December
31, 2022, 2021 and 2020, respectively, based on the fair value assessment provided by the third party valuation firm using the significant
unobservable inputs.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Revenue Recognition&#160;</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; text-indent: 0.5in; background-color: white">The
Company adopted ASC Topic 606 Revenue from Contracts with Customers (&#8220;ASC 606&#8221;) on January 1, 2018 using the modified retrospective
approach. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company&#8217;s customers
in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">To
determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract with
the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration
to the extent that it is probable that a significant future reversal will&#160;not&#160;occur, (iv) allocate the transaction price to
the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
Company&#8217;s revenues are primarily derived from the following sources:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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: 0.5in">&#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">Revenue from machinery and equipment sales</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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
Company recognizes revenue when the machinery and equipment is delivered and control is transferred. The Company generally provide a warranty
for a period of 12 months after the customers receive the equipment. The Company determines that such product warranty is not a separated
performance obligation because the nature of warranty is to provide assurance that a product will function as expected and in accordance
with customer&#8217;s specification and the Company has not sold the warranty separately. From its past experience, the Company has not
experienced any material warranty costs and, therefore, the Company does not believe an accrual for warranty cost is necessary 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; text-align: justify; text-indent: 0.5in; background-color: white">&#160;</p><div>

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

</div><!-- Field: Page; Sequence: 93; Value: 1 --><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; 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: 0.5in">&#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">Revenue from construction materials sales</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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
Company recognizes revenue, net of sales taxes and estimated sales returns, when the construction materials are shipped to, delivered
to or picked up by customers and control is transferred.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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: 0.5in">&#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">Revenue from municipal construction projects</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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
Company provides municipal construction services, also known as sponge city projects. The Company recognizes revenue associated with these
contracts over time as service is performed and the transfer of control occurs, based on a percentage-of-completion method using cost-to-cost
input methods as a measure of progress. When the percentage-of-completion method is used, the Company estimates the costs to complete
individual contracts and records as revenue that portion of the total contract price that is considered complete based on the relationship
of costs incurred to date to total anticipated costs (the cost-to-cost approach).&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Under
the cost-to-cost approach, the use of estimated costs to complete each contract is a significant variable in the process of determining
recognized revenue, requires judgment and can change throughout the duration of a contract due to contract modifications and other factors
impacting job completion. The costs of earned revenue include all direct material and labor costs and those indirect costs related to
contract performance, such as indirect labor, supplies, tools and repairs. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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: 0.5in">&#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">Revenue from technological consulting and other services</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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
Company recognizes revenue when technological consulting and other services are rendered and accepted by the customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; 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"><b><i>Contract Assets
and Liabilities</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; text-indent: 0.5in; background-color: white">Payment
terms are established on the Company&#8217;s pre-established credit requirements based upon an evaluation of customers&#8217; credit quality.
Contact assets are recognized for in related accounts receivable. Contract liabilities are recognized for contracts where payment has
been received in advance of delivery. The contract liability balance can vary significantly depending on the timing of when an order is
placed and when shipment or delivery occurs.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">As
of December 31, 2022 and 2021, other than accounts receivable and advances from customers, the Company had no other material contract
assets, contract liabilities or deferred contract costs recorded on its consolidated balance sheet. Costs of fulfilling customers&#8217;
purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in selling, general
and administrative expense when incurred.</p><div>

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

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

</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; text-indent: 0.5in; background-color: white">The
Company accounts for share-based compensation in accordance with ASC 718, Compensation &#8212; Stock Compensation (&#8220;ASC 718&#8221;).
In accordance with ASC 718, the Company determines whether an award should be classified and accounted for as a liability award or an
equity award. All the Company&#8217;s share-based awards were classified as equity awards and are recognized in the consolidated financial
statements based on their grant date fair values.</p><div>

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

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

</div><!-- Field: Page; Sequence: 94; Value: 1 --><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; background-color: white">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
Company has elected to recognize share-based compensation using the straight-line method for all share-based awards granted with graded
vesting based on service conditions. The Company uses the accelerated method for all awards granted with graded vesting. The Company accounts
for forfeitures as they occur in accordance with ASU No. 2016-09, Compensation &#8212; Stock Compensation (Topic 718): Improvement to
Employee Share-based Payment Accounting. The Company, with the assistance of an independent third-party valuation firm, determined the
fair value of the stock options granted to employees. The binomial option pricing model and Black-Scholes Model were applied in determining
the estimated fair value of the options granted to employees and non-employees.</p><div>

</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"><b><i>Income Taxes</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; text-indent: 0.5in; background-color: white">The
Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax
bases.&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">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.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
provisions of ASC 740-10-25, &#8220;Accounting for Uncertainty in Income Taxes,&#8221; prescribe a more-likely-than-not threshold for
consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation
also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets
and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company records a liability
for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">To
the extent applicable, the Company records interest and penalties as a general and administrative expense. The Company&#8217;s subsidiaries
in China and Hong Kong are subject to the income tax laws of the PRC and Hong Kong. No significant taxable income was generated outside
the PRC for the years ended December 31, 2022, 2021 and 2020. As of December 31, 2022, the tax years ended December 31, 2018 through December
31, 2022 for the Company&#8217;s PRC subsidiaries remain open for statutory examination by PRC tax authorities.</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_010"></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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b><i>A.</i></b></span></td>
    <td><span style="font-size: 10pt"><b><i>Directors and senior management.</i></b></span></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-indent: 0.5in">The following table sets forth information regarding
directors and our executive officers as of the date of this annual report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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"><span style="font-size: 10pt"><b>Name </b><sup>(1)</sup></span></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>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-size: 10pt">Guangfeng Dai&#160;<sup>(2)</sup></span></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">62</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">President, Chief Operating Officer and Director</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-size: 10pt">Zhizhong Hu&#160;<sup>(2)</sup></span></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">60</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Chief Technology Officer and Director</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Degang Hou</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">61</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">Chief Internal Control Officer</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Yue Hu</td><td>&#160;</td>
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    <td style="text-align: left">Chief Financial Officer</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-size: 10pt">Tonglong Liu <sup>(3)&#160;(5)&#160;(6) (7)</sup></span></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">59</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>Director</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">Baoqing Sun <sup>(3)&#160;(5) (6) (7)</sup></span></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">60</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>Director</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-size: 10pt">Lidong Liu <sup>(4)</sup>&#160;<sup>(5)</sup></span></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">51</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>Director</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-size: 10pt">Austin Huang&#160;<sup>(4)&#160;(6) (7)</sup></span></td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: center">65</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td>Director</td></tr>
  </table><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-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.35in; text-align: left"><span style="font-size: 10pt"><sup>(1)</sup></span></td><td style="text-align: justify">Each individual&#8217;s business address is c/o Beijing REIT
Technology Development Co., Ltd., Building X-702, 60 Anli Road, Chaoyang District, Beijing China.</td>
</tr></table><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-indent: 0.5in"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.35in; text-align: left"><span style="font-size: 10pt"><sup>(2)</sup></span></td><td style="text-align: justify"><span style="font-size: 10pt">Class C director, whose term
will expire at the 2025 annual meeting of shareholders.</span></td>
</tr></table><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-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->89<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><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; text-align: justify">
<td style="width: 0.35in; text-align: left"><span style="font-size: 10pt"><sup>(3)</sup></span></td><td style="text-align: justify"><span style="font-size: 10pt">Class B director, whose term
will expire at the 2024 annual meeting of shareholders.</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; text-align: justify">
<td style="width: 0.35in; text-align: left"><span style="font-size: 10pt"><sup>(4)</sup></span></td><td style="text-align: justify"><span style="font-size: 10pt">Class A director, whose term
will expire at the 2023 annual meeting of shareholders.</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; text-align: justify">
<td style="width: 0.35in; text-align: left"><span style="font-size: 10pt"><sup>(5)</sup></span></td><td style="text-align: justify"><span style="font-size: 10pt">Member of audit committee.</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; text-align: justify">
<td style="width: 0.35in; text-align: left"><span style="font-size: 10pt"><sup>(6)</sup></span></td><td style="text-align: justify"><span style="font-size: 10pt">Member of compensation committee.</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; text-align: justify">
<td style="width: 0.35in; text-align: left"><span style="font-size: 10pt"><sup>(7)</sup></span></td><td style="text-align: justify"><span style="font-size: 10pt">Member of nominating committee.</span></td>
</tr></table><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; text-indent: 0.5in"><b>Hengfang Li. </b>Mr.&#160;Li
has served as the Chief Executive Officer and Chairman of ReTo since April 2016. Mr.&#160;Li founded Beijing REIT in 1999 and has served
as Beijing REIT&#8217;s Chief Executive Officer and Chairman since 1999. Mr. Li served as the chief representative in China of the German
Hess Group from 1995 until 1999. From 1988 through 1995, Mr. Li was an engineer, senior engineer and then branch director at China North
Vehicle Engine Research Center. Mr.&#160;Li holds a Master degree in Engine Studies from Beijing Institute of Technology.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>Guangfeng Dai. </b>Mr.
Dai became the President of ReTo in 2020. Previously Mr.&#160;Dai served as the Chief Operating Officer and of ReTo and has served
as a Director since November 2016. Mr.&#160;Dai has served as Beijing REIT&#8217;s Chief Operating Officer and Director since 2000.
Mr. Dai served as the deputy representative in China for Hess Mechanical Engineering Co., Ltd. of Germany from 1997 until 2000. From
1995 through 1997, Mr. Dai was a senior engineer at Yanxing Corporation of China. From 1992 through 1994, Mr. Dai was a senior
engineer at China North Industries Group Corporation. Mr.&#160;Dai received his Master degree in Automobile Engineering from Beijing
Institute of Technology.</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"><b>Zhizhong Hu.</b> Mr.
Hu has served as the Chief Technology Officer and Director of ReTo since November 2016. Mr. Hu has served as Beijing REIT&#8217;s Chief
Technology Officer and Director since 2000. Mr. Hu served as the general manager and executive director of Yichang Hayes Building Materials
Co., Ltd. from 1997 through 2000. From 1996 through 1997, Mr. Hu served as the business representative for Hayes Mechanical Engineering
Co., Ltd. of Germany. Mr.&#160;Hu received his Bachelor&#8217;s Degree in Mechanical Engineering from Nanjing University of Science and
Technology.</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"><b>Degang Hou. </b>Mr.
Hou has served as the Chief Internal Control Officer of ReTo since February 2020. From 1983 through 1999, he was an engineer and
senior engineer of North Vehicle Research Institute, State Weaponry Equipment Corporation. From 1999 through 2020 he was the deputy
general manager for Beijing REIT. &#160;He graduated in Ship&#160;Internal&#160;Combustion&#160;Engine&#160;Direction from Dalian
University of Technology in 1983.</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"><b>Yue Hu. </b>Ms.
Hu has served as Chief Financial Officer of ReTo since August&#160;2022. She has worked in Beijing REIT Technology Development Co., Ltd.,
a wholly owned subsidiary of ReTo, as an assistant to the management since May&#160;2019, and has assisted with preparation and filing
of periodic reports of the Company to the Securities and Exchange Commission. From March&#160;2015 to December&#160;2016, Ms. Hu worked
in Gu&#8217;an REIT Machinery Manufacturing Co., Ltd., a former wholly owned subsidiary of the Company, as a procurement specialist, in
charge of purchasing accessories needed for production and processing. Ms. Hu received her Bachelor&#8217;s degree in Accounting from
Xi&#8217;an Siyuan University.</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; text-indent: 0.5in"><b>Tonglong Liu. </b>Mr.&#160;Liu
has served as an independent director of the Company since November&#160;2022. Mr.&#160;Liu has also served as the Chief Executive Officer
and Chairman of Beike Huizhi Software Technology Co., Ltd., a private company, since June&#160;2018. From December&#160;2012 to June&#160;2018,
he served as the Vice President of Great China of Dassault Syst&#232;mes S.A., a software solutions provider. Mr.&#160;Liu was with
PTC, Inc. (formerly Parametric Technology Corporation) (China), a computer software and services company, from March&#160;1993 to November&#160;2012,
where he served as the Application Engineer from March&#160;1993 to March&#160;1995, Sale Representative from March&#160;1995 to September&#160;1996,
District Manager of North China from September&#160;1996 to September&#160;1999, Reginal Director of North China from September&#160;1999
to September&#160;2002, Senior Regional Director of North China from September&#160;2002 to September&#160;2005, Area Vice President of
China from September&#160;2005 to September&#160;2008, and Senior Vice President of China from September&#160;2008 to September&#160;2012.
Prior to that, Mr.&#160;Liu worked at Computer Application Research Institute, NORICO Group from February&#160;1988 to February&#160;1993
where, he served as Engineer from February&#160;1988 to February&#160;1990 and as the Deputy Director of Computer Aided Design software
research division from February&#160;1990 to February&#160;1993. Mr.&#160;Liu received his master&#8217;s degree and bachelor&#8217;s
degree from the Department of Vehicle Engineering of Beijing Institute of Technology.</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"><b>Baoqing Sun.	</b>Mr.&#160;Sun
has served as an independent director of the Company since November&#160;2022. Before retiring in 2014, Mr.&#160;Sun served as the Deputy
Director of Gu&#8217;an County Transportation Bureau from March&#160;2003 to April&#160;2014, where he was responsible for political and
administration affairs, matters regarding transportation technology, transportation combat readiness, and highway stations. He was also
responsible for construction and maintenance of national and provincial main lines and local highways. Prior to that, Mr.&#160;Sun served
as the Director of Economic Commission, Deputy Secretary of the Committee, Secretary of the Disciplinary Committee, and Deputy Mayor of
Gu&#8217;an Town, Gu&#8217;an County, from March&#160;2001 to March&#160;2003, from June&#160;2000 to March&#160;2001, from December&#160;1999
to June&#160;2000, and from December&#160;1999 to April&#160;1995, respectively, where he was mainly handling town affairs such as town
enterprises, taxation, or market development. From April&#160;1995 to May&#160;1996, he was the Deputy General Manager of Langfang Sanhe
Food Co., Ltd. Mr.&#160;Sun served as the Clerk of Gu&#8217;an County Labor and Personnel Bureau from June&#160;1984 to April&#160;1995
and worked in Gu&#8217;an County Transportation Bureau Second Automobile Team Overhaul Workshop from July&#160;1983 to June&#160;1984.
Mr.&#160;Sun obtained a bachelor&#8217;s degree in mechanical engineering automotive from Hebei Institute of Technology.</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"><b>Lidong Liu. </b>Ms. Liu
has served as the Chief Financial Officer since November 2015 for Jilin Yiyatong Deep Supply Chain Management Co., Ltd, a supply chain
management company. From January 2011 to September 2015, she served as the Chief Financial Officer for Sinopharm Holding (Jilin) Co.,
Ltd, a pharmaceuticals company. In addition, between January 2002 and December 2010, Ms. Liu was the Chief Financial Officer for Changchun
Yongxin Dirui Pharmaceutical Co., Ltd., a pharmaceuticals company. Ms. Liu is a member of China Certified Public Accountants and a seasoned
executive with professional experience in auditing and financial reporting. Ms. Liu holds a bachelor&#8217;s degree in Accounting from
Ji Lin University of Finance and Economics, and an MBA from Changchun University of Science and Technology.</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; text-indent: 0.5in"><b>Austin Huang.</b>&#160;&#160;Dr.
Huang has served as an independent director of ReTo since November 2016. Dr. Huang has served as the President and Principal Engineer
for Merit Engineering, Inc., a geotechnical, environmental, and civil engineering services company, since 1993. Among other awards, Mr.
Huang has received the Diplomat of Geotechnical Engineering by the Academy of Geoprofessionals in 2011 and named a Fellow, ACCE (American
Society of Civil engineering) in 2007. Dr. Huang served&#160; as an expert witness on geo-retaining wall design issues. In addition, he
has presented two papers in the area of slope stability and pile foundations with socket in bedrock in international conferences. He holds
19 research publications including six in leading research journals. Dr. Huang holds a Master&#8217;s Degree and Ph.D. in Geotechnical
Engineering from University of Wisconsin.</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="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->91<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Family Relationship </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; text-indent: 0.5in">There are no family relations
among any of our officers or directors, except that Yue Hu is Zhizhong Hu&#8217;s daughter. There are no other arrangements or understandings
pursuant to which our directors are selected or nominated.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The table below provides certain information regarding
the diversity of our board of directors as of the date of this 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">
    <td colspan="5" style="border: black 1pt solid; padding-top: 1pt; padding-right: 1pt; padding-left: 1pt; text-align: center"><span style="font-size: 10pt"><b>Board Diversity Matrix</b>&#160;</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: 0.5pt; padding-right: 1pt; padding-left: 1pt"><span style="font-size: 10pt">Country of Principal Executive Offices:</span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt">China</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: 0.5pt; padding-right: 1pt; padding-left: 1pt"><span style="font-size: 10pt">Foreign Private Issuer</span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt">Yes</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: 0.5pt; padding-right: 1pt; padding-left: 1pt"><span style="font-size: 10pt">Disclosure Prohibited under Home Country Law</span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt">No</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: 0.5pt; padding-right: 1pt; padding-left: 1pt"><span style="font-size: 10pt">Total Number of Directors</span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt">7</span></td></tr>
  <tr style="vertical-align: top">
    <td style="border-right: black 1pt solid; width: 53%; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 1pt">&#160;</td>
    <td style="border-right: black 1pt solid; width: 10%; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt"><b>Female</b></span></td>
    <td style="border-right: black 1pt solid; width: 10%; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt"><b>Male</b></span></td>
    <td style="border-right: black 1pt solid; width: 12%; border-bottom: black 1pt solid; padding: 0.5pt 1pt 1pt 0.5pt">
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Non-</b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Binary</b></p></td>
    <td style="border-right: black 1pt solid; width: 15%; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt">
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Did Not</b></p>
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  <tr style="vertical-align: top">
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 1pt"><span style="font-size: 10pt"><b>Part I: Gender Identity</b></span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt">&#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: 0.5pt; padding-right: 1pt; padding-left: 1pt"><span style="font-size: 10pt">Directors</span></td>
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt">1</span></td>
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt">6</span></td>
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt">0</span></td>
    <td style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; 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: 0.5pt; padding-right: 1pt; padding-left: 1pt"><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: 0.5pt; padding-right: 1pt; padding-left: 0.5pt">&#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: 0.5pt; padding-right: 1pt; padding-left: 1pt"><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: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; 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: 0.5pt; padding-right: 1pt; padding-left: 1pt"><span style="font-size: 10pt">LGBTQ+</span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; 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: 0.5pt; padding-right: 1pt; padding-left: 1pt"><span style="font-size: 10pt">Did Not Disclose Demographic Background</span></td>
    <td colspan="4" style="border-right: black 1pt solid; border-bottom: black 1pt solid; padding-top: 0.5pt; padding-right: 1pt; padding-left: 0.5pt; text-align: center"><span style="font-size: 10pt">0</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>B.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Compensation.</i></b></span></td></tr>
  </table><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: center"><b>Executive Compensation</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: justify; text-indent: 0.5in">Our board of directors has
not adopted or established a formal policy or procedure for determining the amount of compensation paid to our executive officers. Currently,
our board of directors determines the compensation to be paid to our executive officers based on our financial and operating performance
and prospects, and contributions made by the officers to our success. Each of our named executive officers is measured by a series of
performance criteria by the board of directors, or the compensation committee on a yearly basis. Such criteria are set forth based on
certain objective parameters such as job characteristics, required professionalism, management skills, interpersonal skills, related experience,
personal performance and overall corporate performance. The board of directors will make an independent evaluation of appropriate compensation
to key employees, with input from management. The board of directors has oversight of executive compensation plans, policies and programs.</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">In 2022, we expensed an
aggregate of approximately $479,235 as salaries to our senior officers named in this annual report. Other than
salaries, fees and share incentives, we do not otherwise provide pension, retirement or similar benefits to our officers and
directors.</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: center"><b>Employment Agreements</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Employment Agreement of Hengfang Li</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; text-indent: 0.5in">The Company entered into an
employment agreement&#160;with Mr. Li on December 31, 2021 (the &#8220;Li Employment Agreement&#8221;), pursuant to which Mr. Li serves
as Chairman and Chief Executive Officer of the Company and Beijing REIT for a term from January 1, 2022 and shall terminate on December
31, 2023. Pursuant to the Li Employment Agreement, Mr. Li is entitled to an annual compensation of RMB 800,000 (approximately $117,000)
and social insurance and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance
with PRC law and the Company&#8217;s policies.</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"><b>Employment Agreement of Guangfeng Dai</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; text-indent: 0.5in">The Company entered into an
employment agreement with Mr. Dai on December 31, 2021, (the &#8220;Dai Employment Agreement&#8221;) pursuant to which Mr. Dai serves
as the President of the Company and Beijing REIT for a term from January 1, 2022 and shall terminate on December 31, 2023. Pursuant to
the Dai Employment Agreement, Mr. Dai is entitled to annual compensation of RMB 750,000 (approximately $109,000) and social insurance
and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance with PRC law and the
Company&#8217;s policy.</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>

</div><!-- Field: Page; Sequence: 98; 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 -->92<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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>Employment Agreement of Zhizhong Hu</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; text-indent: 0.5in">The Company entered into an
employment agreement with Mr. Hu on December 31, 2021 (the &#8220;Hu Employment Agreement&#8221;), pursuant to which Mr. Hu serves as
the Chief Technology Officer of the Company and Beijing REIT for a term from January 1, 2022 and shall terminate on December 31, 2023.
Pursuant to the Hu Employment Agreement, Mr. Hu is entitled to annual compensation of RMB 700,000 (approximately $102,000) and social
insurance and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance with PRC law
and the Company&#8217;s policy.&#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"><b>Employment Agreement of Degang Hou</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; text-indent: 0.5in">The Company entered into an
employment agreement with Mr. Hou on December 31, 2021 (the &#8220;Hou Employment Agreement&#8221;), pursuant to which Mr. Hou serves
as the Chief Internal Control Officer of the Company and Beijing REIT for a term from January 1, 2022 and shall terminate on December
31, 2023. Pursuant to the Hou Employment Agreement, Mr. Hou is entitled to annual compensation of RMB 700,000 (approximately $102,000)
and social insurance and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance
with PRC law and the Company&#8217;s policy.</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"><b>Employment Agreement with Yue Hu</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; text-indent: 0.5in">The Company entered into an
employment agreement with Ms. Hu on August&#160;15, 2022 providing for Ms. Hu to serve as the Company&#8217;s Chief Financial Officer
(the &#8220;Hu Employment Agreement&#8221;) for a term from August&#160;15, 2022 to August&#160;14, 2025. Pursuant to the terms of the
Hu Employment Agreement, Ms. Hu will be entitled to an annual compensation of RMB180,000 (approximately $26,500) and social insurance
and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance with laws in the People&#8217;s
Republic of China and the Company&#8217;s policy. The Hu Employment Agreement may be terminated in accordance with the PRC Labor Contract
Law and relevant local regulations in Beijing.</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: center"><b>Director Compensation</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: justify; text-indent: 0.5in">Officers are elected by and
serve at the discretion of the Board of Directors. Employee directors do not receive any compensation for their services on the Board
of Directors. Non-employee directors are entitled to receive $10,000 per year for serving as directors and may receive stock grants pursuant
to our share incentive plans. &#160;In addition, non-employee directors are entitled to receive compensation for their actual travel expenses
for each Board of Directors meeting attended, up to a maximum of $2,000 per meeting and $4,000 per year.</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; text-indent: 0.5in">During the fiscal year ended
December 31, 2022, <span style="background-color: white">1,025,000</span>&#160;Common Shares were issued pursuant to the 2018 Share Incentive
Plan, and <span style="background-color: white">3,000,000</span> Common Shares were issued pursuant to the 2021 Share Incentive Plan.</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; text-indent: 0.5in">See Item 6.E for a description
of our 2018 Share Incentive Plan, 2021 Share Incentive Plan and the 2022 Share Incentive Plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>C.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Board Practices.</i></b></span></td></tr>
  </table><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-indent: 0.5in">See information provided in response to Item 6.A.
above as to the current directors.</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"><b>Composition of Board</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; text-indent: 0.5in">Our board of directors currently
consists of seven directors. The directors are divided into three classes, as nearly equal in number as the then total number of directors
permits. All directors hold office until the next annual meeting of shareholders at which their respective class of directors is re-elected
and until their successors have been duly elected and qualified. Officers are elected by and serve at the discretion of the board of directors.
Class A directors shall face re-election at our 2023 annual general meeting of shareholders and shall face reelection every three years
thereafter. Class B directors faced re-election at our 2024 annual general meeting of shareholders and every three years thereafter. Class
C directors shall face re-election at our 2025 annual general meeting of shareholders and every three years thereafter.</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; text-indent: 0.5in">If the number of directors
changes, any increase or decrease will be apportioned among the classes so as to maintain the number of directors in each class as nearly
as possible. Any additional director of a class elected to fill a vacancy resulting from an increase in such class will hold office for
a term that coincides with the remaining term of that class. Decreases in the number of directors will not shorten the term of any incumbent
director. These board provisions could make it more difficult for third parties to gain control of our Company by making it difficult
to replace members of the board of directors.</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">There are no membership qualifications
for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting.</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">The board of directors maintains
a majority of independent directors who are deemed to be independent under the definition of independence under Rule 5605(c)(2) of the
Nasdaq Stock Market Rules and meet the independence standards under Rule 10A-3 under the Exchange Act, as amended. Baoqing Sun, Tonglong
Liu, Lidong Liu and Austin Huang are our independent directors.</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">There are no other arrangements
or understandings pursuant to which our directors are selected or nominated. We do not have any service contacts with our directors that
provide benefits upon termination of employment.</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">Our board of directors plays
a significant role in our risk oversight. The board of directors makes all relevant company decisions. As such, it is important for us
to have both our Chief Executive Officer and President to serve on the Board as they play key roles in the risk oversight or the Company.
As a smaller reporting company with a small board of directors, we believe it is appropriate to have the involvement and input of all
of our directors in risk oversight matters.</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"><b>Committees of the Board of Directors</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; text-indent: 0.5in">Currently, three committees
have been established under the board: the audit committee, the compensation committee and the nominating committee. The audit committee
is responsible for overseeing the accounting and financial reporting processes of the Company and audits of the financial statements of
the Company, including the appointment, compensation and oversight of the work of our independent auditors. The compensation committee
of the board of directors reviews and makes recommendations to the board regarding our compensation policies for our officers and all
forms of compensation, and also administers our incentive compensation plans and equity-based plans (but our board retains the authority
to interpret those plans). The nominating committee of the board of directors is responsible for the assessment of the performance of
the board, considering and making recommendations to the board with respect to the nominations or elections of directors and other governance
issues. The nominating committee considers diversity of opinion and experience when nominating directors.</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">Baoqing Sun and Tonglong Liu
serve on all three Committees, Austin Huang serves on the Nominating Committee and Compensation Committee, Lidong Liu serves on the Audit
Committee. Austin Huang chairs the Nominating Committee and the Compensation Committee and Lidong Liu chairs the Audit Committee. Lidong
Liu qualifies as an &#8220;audit committee financial expert&#8221; as that term is defined by the applicable SEC regulations and Nasdaq
Capital Market corporate governance requirements.</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"><b>Duties of Directors</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; text-indent: 0.5in">Under BVI law, our directors
have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care,
diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to
us, our directors must ensure compliance with our M&amp;A. Shareholders shall have the right to seek damages if a duty owed by our directors
is breached.</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">The functions and powers of
our board of directors include, among others:&#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><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; text-align: justify">&#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;&#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; text-align: justify">&#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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 100; 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 -->94<!-- 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><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; text-align: justify">&#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: 0.5in; 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">exercising all powers of the Company to incur indebtedness, liabilities or obligations and to secure indebtedness, liabilities or obligations whether of the Company or of any third party;</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="width: 0.5in; text-align: justify">&#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: 0.5in; 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">executing checks, promissory notes, drafts, bills of exchange and other negotiable instruments on behalf of the Company; 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%">
  <tr style="vertical-align: top">
    <td style="width: 0.5in; 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">determining that any sale, transfer, lease, exchange, or other disposition is in the usual or regular course of the business carried on by the Company and such determination is, in the absence of fraud, conclusive.</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"><b>Interested Transactions</b></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; text-indent: 0.5in">A director may vote, attend
a board meeting or sign a document on our behalf with respect to any contract or transaction in which he or she is interested. A director
must promptly disclose the interest to all other directors after becoming aware of the fact that he or she is interested in a transaction
we have entered into or are to enter into. A general notice or disclosure to the board or otherwise contained in the minutes of a meeting
or a written resolution of the board or any committee of the board that a director is a shareholder, director, officer or trustee of any
specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure,
and, after such general notice, it will not be necessary to give special notice relating to any particular transaction. A director may
be counted for a quorum upon a motion in respect of any contract or arrangement which he shall make with our Company, or in which he is
so interested and may vote on such motion.</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"><b>Remuneration and Borrowing</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; text-indent: 0.5in">The directors may receive
such remuneration as our board of directors may determine from time to time. Each director is entitled to be repaid or prepaid for all
traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our board of directors
or committees of our board of directors or shareholder meetings or otherwise in connection with the discharge of his or her duties as
a director. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors.</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">Our board of directors may
exercise all the powers of the Company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to
issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation
of the Company or of any third party.</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"><b>Qualification</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-indent: 0.5in">A director is not required to hold shares as a
qualification to office.</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"><b>Limitation on Liability and Other Indemnification Matters</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; text-indent: 0.5in">Under British Virgin Islands
law, each of our directors and officers, in performing his or her functions, is required to act honestly and in good faith with a view
to our best interests. Our M&amp;A provide that, to the fullest extent permitted by British Virgin Islands law or any other applicable
laws, our directors will not be personally liable to us or our shareholders for any acts or omissions in the performance of their duties.
Such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission. These provisions
will not limit the liability of directors under United States federal securities 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; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 101; 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 -->95<!-- 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; 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">We may indemnify any of our
directors or anyone serving at our request as a director of another entity against all expenses, including legal fees, and against all
judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings.
We may only indemnify a director if he or she acted honestly and in good faith with the view to our best interests and, in the case of
criminal proceedings, the director had no reasonable cause to believe that his or her conduct was unlawful. The decision of our board
of directors as to whether the director acted honestly and in good faith with a view to our best interests and as to whether the director
had no reasonable cause to believe that his or her conduct was unlawful, is in the absence of fraud sufficient for the purposes of indemnification,
unless a question of law is involved. The termination of any proceedings by any judgment, order, settlement, conviction or the entry of
no plea does not, by itself, create a presumption that a director did not act honestly and in good faith and with a view to our best interests
or that the director had reasonable cause to believe that his or her conduct was unlawful. If a director to be indemnified has been successful
in defense of any proceedings referred to above, the director is entitled to be indemnified against all expenses, including legal fees,
and against all judgments, fines and amounts paid in settlement and reasonably incurred by the director or officer in connection with
the proceedings.</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">We may purchase and maintain
insurance in relation to any of our directors or officers against any liability asserted against the directors or officers and incurred
by the directors or officers in that capacity, whether or not we have or would have had the power to indemnify the directors or officers
against the liability as provided in our M&amp;A.</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">Insofar as indemnification
for liabilities arising under the Securities Act may be permitted for our directors or officers under the foregoing provisions, we have
been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable as a matter of United States law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>D.&#160;</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Employees.&#160;</i></b></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; text-indent: 0.5in">As of December 31, 2022, we
had a total of 116 full-time employees. Among these employees, we had 35 employees in management, 22 employees in sales and marketing,
41 employees in research and development, 14 employees in manufacturing and installation and four employees in administration. All of
these employees were located at our facilities in Beijing, Hainan and Xinyi, China. We had a total of 115 and 139 full-time employees
as of December 31, 2021 and 2020, respectively. We did not hire any part-time employees during the fiscal years ended December 31, 2022,
2021 and 2020. Our employees are not represented by a labor organization or covered by a collective bargaining agreement. <span style="font-family: Times New Roman, Times, Serif">&#160;</span></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; text-indent: 0.5in">We participate in various
employee social security plans that are organized by municipal and provincial governments, including housing, pension, medical insurance
and unemployment insurance, as required by laws and regulations in China. We are required under PRC law to make contributions to employee
benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified
by the local government from time to time.</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; text-indent: 0.5in">We typically enter into standard
labor contracts with our employees. We also enter into standard confidentiality and non-compete agreements with our senior management
and research and development personnel. These contracts involve a covenant that prohibits them from engaging in any activities that compete
with our business within certain agreed period after the termination of their employment with us, and during such non-competition period.
We believe we maintain a good working relationship with our employees, and we have not experienced any material labor disputes or any
difficulty in recruiting staff for our operations.</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%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>E.&#160;</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Share ownership.</i></b></span></td></tr>
  </table><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-indent: 0.5in">The following tables set forth certain information
with respect to the beneficial ownership of our Common Shares as of April 28, 2023, for:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">each of our directors and named executive officers; and&#160;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">all of our directors and executive officers as a group.&#160;</span></td></tr>
  </table><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; text-indent: 0.5in">We have determined beneficial
ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished
to us, that the persons and entities named in the table below have sole voting and investment power or the power to receive the economic
benefit with respect to all Common Shares that they beneficially own, subject to applicable community property laws.</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-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 102; 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 -->96<!-- 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-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">Applicable percentage ownership
prior is based on 53,787,689 Common Shares outstanding as of the date of this annual report. Unless otherwise indicated, the address of
each beneficial owner listed in the table below is&#160;c/o ReTo Eco-Solutions, Inc., Building X-702, 60 Anli Road, Beijing, People&#8217;s
Republic of China 100101.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Beneficial Ownership</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; 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-align: left">Tonglong Liu</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Lidong Liu<sup>(5)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">10,000</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="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">6,853,161</td><td style="font-weight: bold; text-align: left">&#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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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#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-align: left">REIT International Development (Group) Co., Limited</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,903,161</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-indent: 0.5in">&#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>
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  </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; text-align: justify"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Represents (i) approximately 1,561,264 Common Shares held through REIT International Development (Group) Co, a Hong Kong limited liability company (&#8220;REIT International&#8221;). Mr. Li holds a 40% ownership of REIT International and has the voting and investment power with respect to 40% of the 3,903,161 Common Shares held by REIT International; (ii) 10,000 Common Shares held through Soothie Holdings Limited, a British Virgin Islands company, controlled by Mr. Li; (iii) 225,000 Common Shares held by Mr. Li directly; (iv) 600,000 Common Shares granted to Mr. Li under the 2021 Share Incentive Plan; and (v) 250,000 shares granted to Mr. Li under the 2022 Share Incentive Plan.</span></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; text-align: justify"><span style="font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Represents (i) approximately 780,632 Common Shares held through REIT International. Mr. Dai holds a 20% ownership of REIT International and has the voting and investment power with respect to 20% of the 3,903,161 Common Shares held by REIT International; (ii) 150,000 Common Shares held by Mr. Dai directly; (iii) 440,000 Common Shares granted to Mr. Dai under the 2021 Share Incentive Plan; and (iv) 250,000 shares granted to Mr. Dai under the 2022 Share Incentive Plan.</span></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">
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    <td style="text-align: justify"><span style="font-size: 10pt">Represents (i) approximately 780,632 Common Shares held through REIT International. Mr. Hu holds a 20% ownership of REIT International and has the voting and investment power with respect to 20% of the 3,903,161 Common Shares held by REIT International; (ii) 125,000 Common Shares held by Mr. Hu directly; (iii) 300,000 Common Shares granted to Mr. Hu under the 2021 Share Incentive Plan; and (iv) 150,000 Common Shares granted to Mr. Hu under the 2022 Share Incentive Plan.</span></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; text-align: justify"><span style="font-size: 10pt">(4)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Represents (i) approximately 780,632 Common Shares held through REIT International. Mr. Hou holds a 20% ownership of REIT International and has the voting and investment power with respect to 20% of the 3,903,161 Common Shares held by REIT International; (ii) 125,000 Common Shares held by Mr. Hou directly; and (iii) 200,000 Common Shares granted to Mr. Hou under the 2021 Share Incentive Plan; and (iv) 50,000 Common Shares granted to Mr. Hou under the 2022 Share Incentive Plan.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">Represents (i) 30,000 Common Shares held by Mr. Huang directly; and (ii) 10,000 Common Shares granted to Mr. Huang under the 2022 Share Incentive Plan. </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"></p><div>

</div><!-- Field: Page; Sequence: 103; 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 -->97<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>2018 Share Incentive Plan</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 6, 2018, the Company&#8217;s
shareholders approved the 2018 Share Incentive Plan, which allows for issuance of up to 2,000,000 Common Shares to employees, non-employee
directors, officers and consultants for services rendered to the Company.</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">On April 22, 2022, the Company&#8217;s
board of directors approved the issuance of an aggregate of 1,025,000 Common Shares to its employees for their services.&#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; text-indent: 0.5in">The Company issued an aggregate of 975,000 Common Shares under the
2018 Share Incentive Plan as of December 31, 2021. The Company issued an aggregate of 2,000,000 Common Shares under the 2018 Share Incentive
Plan as of December 31, 2022. As of April 28, 2023, there were no shares available for issuance under the 2018 Incentive Plan.</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">The following is a summary
of the principal terms of the 2018 Share Incentive Plan.</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>Administration</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; text-indent: 0.5in">The 2018 Share Incentive Plan
is administered by the Compensation Committee of the Board of Directors. The 2018 Share Incentive Plan provides the Compensation Committee
with flexibility to design compensatory awards that are responsive to the company&#8217;s needs. Subject to the terms of the 2018 Share
Incentive Plan, the Compensation Committee has the discretion to determine the terms of each award.</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>Amount of Awards</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; text-indent: 0.5in">The maximum number of Common
Shares as to which awards may be granted under the 2018 Share Incentive Plan is 2,000,000 shares.</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>Types of Awards</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; text-indent: 0.5in">Awards under the 2018 Share
Incentive Plan may be in the form of incentive stock options, non-statutory stock options or restricted stock awards. An option is the
right to purchase shares of Common Shares at a price and on a schedule set by the Compensation Committee. The option price will be no
less than the fair market value of the shares on the option grant date.</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"><b><i>Participants </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; text-indent: 0.5in">Employees of the Company,
executive officers, employee and non-employee directors, consultants, independent contractors and advisors may all be selected by the
Compensation Committee to receive awards under the 2018 Share Incentive Plan. The benefits or amounts that may be received by or allocated
to participants under the 2018 Share Incentive Plan will be determined at the discretion of the Compensation Committee and are not presently
determinable.</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>Termination and Amendment</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; text-indent: 0.5in">The Compensation Committee
may terminate the 2018 Share Incentive Plan at any time. If not sooner terminated by the Board of Directors, the 2018 Share Incentive
Plan will terminate on the tenth anniversary of its effective date.</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">The 2018 Share Incentive Plan
may be amended by the Board of Directors, but without further approval by the shareholders of the Company, the Board shall not amend the
2018 Share Incentive Plan in any manner that requires shareholder approval. The Board may condition any amendment on the approval of the
shareholders if such approval is necessary or deemed advisable with respect to the applicable listing or other requirements of a national
securities exchange or other applicable laws, policies or regulations.</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>

</div><!-- Field: Page; Sequence: 104; 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 -->98<!-- 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: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>2021 Share Incentive Plan</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 24, 2021, the
Company&#8217;s shareholders approved the 2021 Share Incentive Plan, which allows for issuance of up to 3,000,000 Common Shares to employees,
non-employee directors, officers and consultants for services rendered to the Company.</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">The Company did not issue any Common Shares under the 2021 Share Incentive
Plan as of December 31, 2021. On April 22, 2022, the Company&#8217;s board of directors approved the issuance of an aggregate of 3,000,000
Common Shares to its employees, officers and directors for their services. The Company issued an aggregate of 3,000,000 Common Shares
under the 2021 Share Incentive Plan as of December 31, 2022. As of April 28, 2023, there were no shares available for issuance under the
2021 Incentive Plan.</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-indent: 0.5in">The following is a summary of the principal terms
of the 2021 Share Incentive Plan.</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>Administration</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; text-indent: 0.5in">The 2021 Share Incentive Plan
is administered by the Compensation Committee of the Board of Directors. The 2021 Share Incentive Plan provides the Compensation Committee
with flexibility to design compensatory awards that are responsive to the company&#8217;s needs. Subject to the terms of the 2021 Share
Incentive Plan, the Compensation Committee has the discretion to determine the terms of each award.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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>Amount of Awards</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; text-indent: 0.5in">The maximum number of Common
Shares as to which awards may be granted under the 2021 Share Incentive Plan was 3,000,000 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"><b><i>Types of Awards</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; text-indent: 0.5in">Awards under the 2021 Share
Incentive Plan may be in the form of incentive stock options, non-statutory stock options or restricted stock awards. An option is the
right to purchase shares of Common Shares at a price and on a schedule set by the Compensation Committee. The option price will be no
less than the fair market value of the shares on the option grant date.</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"><b><i>Participants</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; text-indent: 0.5in">Employees of the Company,
executive officers, employee and non-employee directors, consultants, independent contractors and advisors may all be selected by the
Compensation Committee to receive awards under the 2021 Share Incentive Plan. The benefits or amounts that may be received by or allocated
to participants under the 2021 Share Incentive Plan will be determined at the discretion of the Compensation Committee and are not presently
determinable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Termination and Amendment</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; text-indent: 0.5in">The Compensation Committee
may terminate the 2021 Share Incentive Plan at any time. If not sooner terminated by the Board of Directors, the 2021 Share Incentive
Plan will terminate on the tenth anniversary of its effective date.</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">The 2021 Share Incentive Plan
may be amended by the Board of Directors, but without further approval by the shareholders of the Company, the Board shall not amend the
2021 Share Incentive Plan in any manner that requires shareholder approval. The Board may condition any amendment on the approval of the
shareholders if such approval is necessary or deemed advisable with respect to the applicable listing or other requirements of a national
securities exchange or other applicable laws, policies or regulations.&#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"><b>2022 Share Incentive Plan</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; text-indent: 0.5in">On December 6, 2022, the Company&#8217;s
shareholders approved the 2022 Share Incentive Plan, which initially allowed for issuance of up to 5,000,000 Common Shares to employees,
non-employee directors, officers and consultants for services rendered to the Company, with an automatic share reserve increase by a number
equal to the lesser of (i) 5% of the total number of Common Shares issued and outstanding on December 31 of the calendar year immediately
preceding the date of such increase and (ii) a number of = Common Shares determined by the Compensation Committee.</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>

</div><!-- Field: Page; Sequence: 105; Value: 1 --><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; text-indent: 0.5in">The Company did not issue
any Common Shares under the 2022 Share Incentive Plan as of December 31, 2022. On March 8, 2023, the Company&#8217;s board of directors
approved the issuance of an aggregate of 5,000,000 Common Shares to its employees, officers and directors for their services. As of April
28, 2023, there were 2,169,944 shares available for issuance under the 2022 Incentive Plan.</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-indent: 0.5in">The following is a summary of the principal terms
of the 2022 Share Incentive Plan.</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>Administration</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; text-indent: 0.5in">The 2022 Share Incentive Plan
is administered by the Compensation Committee of the Board of Directors. The 2022 Share Incentive Plan provides the Compensation Committee
with flexibility to design compensatory awards that are responsive to the company&#8217;s needs. Subject to the terms of the 2022 Share
Incentive Plan, the Compensation Committee has the discretion to determine the terms of each award.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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>Amount of Awards</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; text-indent: 0.5in">The maximum number of Common
Shares as to which awards may be granted under the 2022 Share Incentive Plan is 5,000,000 shares. The 2022 Share Incentive Plan provides
for an automatic share reserve increase feature, whereby the share reserve will be increased automatically on the first&#160;day of each
fiscal year beginning with the 2023 fiscal year, in an amount equal to the lesser of (i)&#160;a number equal to 5% of the aggregate number
of Common Shares outstanding on the last&#160;day of the immediately preceding fiscal year and (ii)&#160;such smaller number of shares
as is determined by the compensation committee. The automatic share reserve feature and any provisions that are or would create a &#8220;formula&#8221;
plan for purposes of Nasdaq listing requirements will operate only until the ten-year&#160;anniversary of the earlier of the initial adoption
of the 2022 Share Incentive Plan by the Board or the approval of the 2022 Share Incentive Plan by our shareholders, and therefore no automatic
share reserve increase will be added after the increase on the first&#160;day of our 2032 fiscal 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"><b><i>Types of Awards</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; text-indent: 0.5in">Awards under the 2022 Share
Incentive Plan may be in the form of incentive stock options, non-statutory stock options or restricted stock awards. An option is the
right to purchase shares of the Company&#8217;s Common Shares at a price and on a schedule set by the Compensation Committee. The option
price will be no less than the fair market value of the shares on the option grant date.</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"><b><i>Participants</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; text-indent: 0.5in">Employees of the Company,
executive officers, non-employee directors and consultants may all be selected by the Compensation Committee to receive awards under the
2022 Share Incentive Plan. The benefits or amounts that may be received by or allocated to participants under the 2022 Share Incentive
Plan will be determined at the discretion of the Compensation Committee and are not presently determinable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Termination and Amendment</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; text-indent: 0.5in">The Compensation Committee
may terminate the 2022 Share Incentive Plan at any time. If not sooner terminated by the Board of Directors, the 2022 Share Incentive
Plan will terminate on the tenth anniversary of its effective date.</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">The 2022 Share Incentive Plan
may be amended by the Board of Directors, but without further approval by the shareholders of the Company, the Board shall not amend the
2022 Share Incentive Plan in any manner that requires shareholder approval. The Board may condition any amendment on the approval of the
shareholders if such approval is necessary or deemed advisable with respect to the applicable listing or other requirements of a national
securities exchange or other applicable laws, policies or regulations.&#160;</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-indent: 0.5in"></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>
    </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><div><a id="a_011"></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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>A.&#160;</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Major shareholders.&#160;</i></b></span></td></tr>
  </table><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-indent: 0.5in">Please refer to &#8220;<i>Item 6. Directors, Senior
Management and Employees&#8212;E. Share Ownership</i>.&#8221;</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%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>B.&#160;</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Related party transactions.</i></b>&#160;</span></td></tr>
  </table><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-indent: 0.5in">The related party transactions for the years ended
December 31, 2022, 2021 and 2020 are identified as follows:&#160;&#160;</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in; text-align: left"><b>(1)</b></td><td style="text-align: justify"><b>Related parties relationships</b></td>
</tr></table><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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: bottom">
    <td style="border-bottom: black 1.5pt solid; text-align: left; width: 45%; vertical-align: top"><span style="font-size: 10pt"><b>Name of Related Party</b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; width: 54%; text-align: center"><span style="font-size: 10pt"><b>Relationship to the Company</b></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="text-align: left; vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Mr. Hengfang Li</span></td>
    <td style="vertical-align: bottom">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td>&#160;</td>
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  <tr style="background-color: rgb(204,238,255)">
    <td style="text-align: left; vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Shexian Ruibo</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-size: 10pt">The Company owns 41.67% ownership interest in Shexian Ruibo</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt; text-indent: -9pt; vertical-align: top"><span style="font-size: 10pt">Zhongrong Honghe Eco Construction Materials Co., Ltd</span></td>
    <td>&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-size: 10pt">An entity controlled by Ms. Hong Ma</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt; text-indent: -9pt; vertical-align: top"><span style="font-size: 10pt">Hunyuan Baiyang Food Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-size: 10pt">An entity controlled by Mr. Hengfang Li</span></td></tr>
  <tr style="background-color: White">
    <td style="text-align: left; vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Bei Qi Yin Jian Yi Le (Haikou) Smart Move Science Technology Co., Ltd.</span></td>
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  <tr style="background-color: rgb(204,238,255)">
    <td style="text-align: left; vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Zhongtou REIT Information Service (Beijing) Co., Ltd</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: justify"><span style="font-size: 10pt">An entity controlled by Mr. Xinyang Li and Ms. Xinran Li, children of Mr. Hengfang Li</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt; text-indent: -9pt; vertical-align: top"><span style="font-size: 10pt">Handan Ruisheng Construction Material Technology Co., Ltd.</span></td>
    <td>&#160;</td>
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  </table><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-indent: 0.5in">&#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"><b>(2)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Due to related parties</b></span></td></tr>
  </table><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-indent: 0.5in">The balance of due to related parties were as follows:&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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="white-space: nowrap">&#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>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>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%; text-align: left; padding-bottom: 1.5pt">Mr. Hengfang Li</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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"><b>(3)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Accounts receivable from related parties</b></span></td></tr>
  </table><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-indent: 0.5in">Accounts receivable from related parties consisted
of the following:&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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="white-space: nowrap">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>Accounts receivable &#8211; related party</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; width: 64%; text-align: left">REIT International Trading Co. Ltd</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">-</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">199,999</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-align: left">Q Green Techcon Private Limited</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,981</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">Hunyuan Baiyang Food Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">37,048</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">40,088</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="padding-left: 0.125in; text-align: left">Bei Qi Yin Jian Yi Le (Haikou) Smart Move Science Technology Co., Ltd.</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">46,688</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">50,520</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-left: 0.125in; text-align: left">Total accounts receivable from related party</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><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; text-indent: 0.5in">The Company fully collected
the accounts receivable as of December 31, 2022 from related parties as of the date of this annual report.&#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"></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 -->101<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><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"><b>(4)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Advance to suppliers, related party</b></span></td></tr>
  </table><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-indent: 0.5in">Advance to suppliers, related party, consisted
of the following:&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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>&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center"><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="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#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: 64%; text-align: left">Q Green Techcon Private Limited</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">15,310</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">174,099</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">162,014</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Shexian Ruibo Environmental Science and Technology Co., Ltd.*</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,769,138</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,656,118</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,872,110</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Handan Ruisheng Construction Material Technology Co., Ltd.</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,588</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">12,403</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">3,787,036</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">$</td><td style="border-bottom: Black 4pt double; text-align: right">3,832,421</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">4,034,124</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; text-indent: 0.5in">&#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">The balance represents the Company&#8217;s purchase advances for eco-friendly materials and equipment supplied by Shexian Ruibo.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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"><b>(5)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Accounts payable to related parties</b></span></td></tr>
  </table><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-indent: 0.5in">Accounts payables to related parties consisted
of the following:&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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="white-space: nowrap">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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    <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>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>
    <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>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">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#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="padding-left: 0.125in; width: 64%; text-align: left">Shexian Ruibo Environmental Science and Technology Co., Ltd.</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">&#8239;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</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">$</td><td style="width: 9%; text-align: right">153,344</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">Zhongtou REIT Information Service (Beijing) Co., Ltd</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">10,199</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">-</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">$</td><td style="border-bottom: Black 4pt double; text-align: right">10,199</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">153,344</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; text-indent: 0.5in">&#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"><b>(6)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Sales to related parties</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">Sales to related parties consisted of the following:</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>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</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>&#160;</td><td>&#160;</td>
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    <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">$</td><td style="width: 9%; text-align: right">215,693</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">-</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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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">82,453</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">61,177</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">228,814</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">Q Green Techcon Private Limited</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">6,729</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">220,607</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: White">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">304,875</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">281,784</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">228,814</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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cost of revenue associated with the sales to these
related parties amounted to $471,849, $175,053 and $148,034 for the years ended December 31, 2022, 2021 and 2020, respectively.</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-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 108; 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-indent: 0.5in">&#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"><b>(7)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Purchases from related parties</b></span></td></tr>
  </table><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-indent: 0.5in">Purchases from related parties consisted of the
following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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: bottom">
    <td>&#160;</td>
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    <td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
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    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <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>
    <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: #CCEEFF">
    <td style="width: 67%; padding-left: 10pt"><span style="font-size: 10pt">Q Green Techcon Private Limited</span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%"><span style="font-size: 10pt">$</span></td>
    <td style="width: 8%; text-align: right"><span style="font-size: 10pt">266,544</span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%"><span style="font-size: 10pt">$</span></td>
    <td style="width: 8%; text-align: right"><span style="font-size: 10pt">228,838</span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%"><span style="font-size: 10pt">$</span></td>
    <td style="width: 8%; text-align: right"><span style="font-size: 10pt">1,039,152</span></td>
    <td style="width: 1%">&#160;</td></tr>
  <tr>
    <td style="vertical-align: bottom; padding-bottom: 1.5pt; padding-left: 8.1pt"><span style="font-size: 10pt">&#160;Shexian Ruibo</span></td>
    <td style="vertical-align: bottom; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right"><span style="font-size: 10pt">1,141,377 </span></td>
    <td style="vertical-align: bottom; padding-bottom: 1.5pt">&#160;</td>
    <td style="vertical-align: bottom; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right"><span style="font-size: 10pt">235,946</span></td>
    <td style="vertical-align: bottom; padding-bottom: 1.5pt">&#160;</td>
    <td style="vertical-align: bottom; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right"><span style="font-size: 10pt">1,837,841</span></td>
    <td style="vertical-align: bottom; padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="background-color: #CCEEFF">
    <td style="vertical-align: bottom; padding-bottom: 4pt"><span style="font-size: 10pt">Total</span></td>
    <td style="vertical-align: bottom; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: black 4.5pt double; vertical-align: bottom"><span style="font-size: 10pt">$</span></td>
    <td style="border-bottom: black 4.5pt double; vertical-align: top; text-align: right"><span style="font-size: 10pt">1,407,921 </span></td>
    <td style="vertical-align: bottom; padding-bottom: 4pt">&#160;</td>
    <td style="vertical-align: bottom; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: black 4.5pt double; vertical-align: bottom"><span style="font-size: 10pt">$</span></td>
    <td style="border-bottom: black 4.5pt double; vertical-align: bottom; text-align: right"><span style="font-size: 10pt">464,784</span></td>
    <td style="vertical-align: bottom; padding-bottom: 4pt">&#160;</td>
    <td style="vertical-align: bottom; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: black 4.5pt double; vertical-align: bottom"><span style="font-size: 10pt">$</span></td>
    <td style="border-bottom: black 4.5pt double; vertical-align: bottom; text-align: right"><span style="font-size: 10pt">2,876,993</span></td>
    <td style="vertical-align: bottom; padding-bottom: 4pt">&#160;</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#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: 0px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt"><b>(8)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Other related party transactions</b></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; text-indent: 0.5in">On September 7, 2020, Beijing
REIT entered into a share transfer agreement with the original shareholder of Shexian Ruibo for the acquisition of a 41.67% ownership
interest in Shexian Ruibo for a total consideration of $3.6 million (RMB 25 million), including a cash payment of $2.8 million (RMB 18.5
million) and a non-cash contribution of six patents valued at $0.9 million (RMB 6.5 million). The cash consideration was fully paid for
the year ended December 31, 2020.</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; text-indent: 0.5in">&#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"><b>C.&#160;</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Interests of Experts and Counsel&#160;</i></b></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; text-indent: 0.5in">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_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>A.&#160;</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Consolidated Statements and Other Financial Information.&#160;</i></b></span></td></tr>
  </table><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-indent: 0.5in">The financial statements required by this item
may be found at the end of this report on 20-F, beginning on page F-1.&#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>Legal and Administrative Proceedings&#160;</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; text-indent: 0.5in">In the ordinary course of
business, the Company is from time to time involved in legal proceedings and litigation that are generally contractual in nature.</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: 36pt">In 2018, a financial intermediary
and Xinyi REIT began negotiations towards a potential cooperation where the financial intermediary would introduce potential investors
to facilitate investment in Xinyi REIT&#8217;s business. In December 2018, an investor invested RMB 1,000,000 (approximately $0.15 million)
in Xinyi REIT through this financial intermediary. Xinyi REIT rejected this investment and returned the total investment funds it received
to the investor and informed the financial intermediary to cease facilitating investments from other investors. In addition, despite there
not being a final mutual agreement between the parties, it appears the financial intermediary may have acquired investment funds in the
aggregate amount of RMB 15,450,000 (approximately $2.15 million) from certain investors, and Xinyi REIT did not receive any funds from
these investments.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Mr.
Hengfang Li, the Company&#8217;s Chief Executive Officer and Chairman, has agreed to assume full responsibility for liabilities, if any,
and assume the creditor&#8217;s rights for these claims on behalf of the Company for any legal claims or lawsuits against the Company
due to these investments. In May 2020, Mr. Li paid RMB 300,000 (approximately $44,000) to an investor in a lawsuit against Xinyi REIT
to return the investment funds. In 2022 and 2023, a few other investors brought legal actions against Xinyi REIT for the same claim and
judgments were rendered in their favor. Subsequently, Xinyi REIT appealed these judgments, and the appeals are still pending in higher
courts as of the date of this annual report. The Company does not believes that any liability resulting from the outcome of such proceedings,
if any, will have a material adverse effect on the Company&#8217;s consolidated financial position or results of operations or liquidity.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On April 8, 2022,
Beijing REIT reached a settlement with the minority shareholder of Xinyi REIT for the lawsuit filed by the minority shareholder of
Xinyi REIT in respect of the buy-back of the 30% equity interest of Xinyi REIT held by the minority shareholder. Pursuant to the
settlement, Beijing REIT agreed to pay an aggregate amount of RMB18 million to purchase the 30% equity interest. The purchase price
is payable in four installments of RMB 4 million, RMB 4 million, RMB 5 million, and RMB 5 million, due by April 19, 2022, June 30,
2022, September 30, 2022, and December 31, 2022, respectively. <span style="background-color: white">The Company had paid
RMB&#160;13&#160;million (approximately $1.9&#160;million) as of December 31, 2022. As of December 31, 2022, the balance amounted to
RMB&#160;5&#160;million (approximately $0.7&#160;million)</span>. <span style="background-color: white">The Company further paid
RMB&#160;3&#160;million (approximately $0.4&#160;million) in 2023.</span> However, as of the date of this annual report, the
remaining balance of RMB 2 million (<span style="background-color: white">approximately $0.3 million</span>) is due by Beijing
REIT.&#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>

</div><!-- Field: Page; Sequence: 109; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->103<!-- Field: /Sequence --></p></div><div>
    </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; text-indent: 0.5in"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">On
April 11, 2023, a local court order was issued to Beijing REIT and its legal representative to restrict them from frivolous
spending. We are actively negotiating the settlement with the party who initiated the court order and we do not believe
this matter will have a material adverse effect on the Company&#8217;s consolidated financial position or results of operations.</span>&#160;</p><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; text-indent: 0.5in">Except as disclosed above,
we are currently not a party to any material legal or administrative proceedings and we are not aware of any material legal or administrative
proceedings threatened against us. We may from time to time be subject to various legal or administrative proceedings arising in the ordinary
course of business.</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"><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; text-indent: 0.5in">We have never declared or
paid any cash dividends on our Common Shares. We anticipate that we will retain any earnings to support operations and to finance the
growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination
relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including
future earnings, capital requirements, financial conditions and future prospects and other factors the board of directors may deem relevant.</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">Under British Virgin Islands
law, we may only pay dividends from surplus (the excess, if any, at the time of the determination of the total assets of our company over
the sum of our liabilities, as shown in our books of account, plus our capital), and we must be solvent before and after the dividend
payment in the sense that we will be able to satisfy our liabilities as they become due in the ordinary course of business; and the realizable
value of assets of our company will not be less than the sum of our total liabilities, other than deferred taxes as shown on our books
of account, and our capital.</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">If we determine to pay dividends
on any of our Common Shares in the future, as a holding company, we will be dependent on receipt of funds from our PRC subsidiaries. Current
PRC regulations permit our PRC subsidiaries to pay dividends to REIT Holdings only out of their accumulated profits, if any, determined
in accordance with PRC accounting standards and regulations. Further, loan governing part of the current debts incurred by Beijing REIT
has restrictions on its ability to pay dividends, and any future financing arrangements may impose such restrictions as well. In addition,
each of our subsidiaries 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. Our PRC subsidiaries are also required to further set aside a portion
of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion
of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate
future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except
in the event of liquidation. Our subsidiaries in China are required to set aside statutory reserves and have done so.</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">In addition, pursuant to the
EIT Law and its implementation rules, dividends generated after January 1, 2008 and distributed to us by Beijing REIT, REIT Technology
and REIT Ordos are subject to withholding tax at a rate of 10% unless otherwise exempted or reduced according to treaties or arrangements
between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.</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">Under existing PRC foreign
exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related
foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange,
or SAFE, by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval
of SAFE, cash generated from the operations in China may be used to pay dividends to our company. See <i>&#8220;Item 4. Information on
the Company &#8211; B. Business Overview &#8211; Regulation &#8211; Regulation of Foreign Currency Exchange and Dividend Distribution.&#8221;</i></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-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 110; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->104<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>B.</b>&#160;</span></td>
    <td><span style="font-size: 10pt"><b><i>Significant Changes.&#160;</i></b></span></td></tr>
  </table><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; text-indent: 0.5in">Except as otherwise disclosed
in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements
included herein.&#160;</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="a_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>A.</b>&#160;</span></td>
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  </table><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; text-indent: 0.5in">Our Common Shares have been
listed on the Nasdaq Capital Market since November 29, 2017 under the symbol &#8220;RETO.&#8221; &#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>B.</b>&#160;</span></td>
    <td><span style="font-size: 10pt"><b><i>Plan of distribution.</i></b>&#160;</span></td></tr>
  </table><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-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>C.</b>&#160;</span></td>
    <td><span style="font-size: 10pt"><b><i>Markets.</i></b>&#160;</span></td></tr>
  </table><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; text-indent: 0.5in">Our Common Shares are listed
on the Nasdaq Capital Market under the symbol &#8220;RETO.&#8221;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>D.</b>&#160;</span></td>
    <td><span style="font-size: 10pt"><b><i>Selling shareholders.</i></b>&#160;</span></td></tr>
  </table><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-indent: 0.5in">Not applicable.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>E.</b>&#160;</span></td>
    <td><span style="font-size: 10pt"><b><i>Dilution.</i></b>&#160;</span></td></tr>
  </table><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-indent: 0.5in">Not applicable.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>F.</b>&#160;</span></td>
    <td><span style="font-size: 10pt"><b><i>Expenses of the issue.</i></b>&#160;</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-indent: 0.5in">Not applicable.</p><div>

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

</div><div><a id="a_014"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>A.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Share capital.</i></b></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; text-indent: 0.5in">Not applicable.<b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>B.</b>&#160;</span></td>
    <td><span style="font-size: 10pt"><b><i>Memorandum and articles of association.</i></b>&#160;</span></td></tr>
  </table><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; text-indent: 0.5in">We incorporate by reference
the description of our M&amp;A, as currently in effect in the British Virgin Islands, set forth in our registration statement on Form
F-1, as amended, declared effective on November 28, 2017 (File No. 333-219709).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>C.</b>&#160;</span></td>
    <td><span style="font-size: 10pt"><b><i>Material contracts.</i></b></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"><i><span style="text-decoration:underline">Securities Purchase Agreement dated March
1, 2021</span></i></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">On March 1, 2021, the Company
entered into a securities purchase agreement with an accredited investor (the &#8220;Debenture Holder&#8221;) for the issuance of a Convertible
Debenture (the &#8220;March Debenture&#8221;) in the aggregate principal amount of up to $2,300,000 with a maturity date of twelve months
after the issuance thereof, provided that in case of an event of default, the March Debenture may become at the Debenture Holder&#8217;s
election immediately due and payable. In addition, the Company paid to an affiliate of the March Debenture Holder a fee equal to 3.5%
of the amount of the Debenture and a one-time due diligence and structuring fee of $10,000 at the closing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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 -->105<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Debenture Holder may convert
the March Debenture in its sole discretion to Company&#8217;s Common Shares at any time at the lower of $2.50 or 95% of the average of
the two lowest daily VWAPs during the ten consecutive trading days immediately preceding the conversion date, provided that the conversion
price may not be less than $0.50 (the &#8220;March Debenture Floor Price&#8221;). The Debenture Holder may not convert any portion of
a Debenture if such conversion would result in the Debenture Holder beneficially owning more than 4.99% of Company&#8217;s then issued
and Common Shares, provided that such limitation may be waived by the Debenture Holder with a 65 days&#8217; notice. Any time after the
issuance of the March Debenture that the daily VWAP is less than the March Debenture Floor Price for a period of 10 consecutive trading
days (each such occurrence, a &#8220;March Debenture Triggering Event&#8221;) and only for so long as such conditions exist after a March
Debenture Triggering Event, the Company shall make monthly payments beginning on the 30<sup>th</sup>&#160;day after the date of the March
Debenture Triggering Event. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of
the date of the March Debenture Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium
of 20% of such principal amount and (iii) accrued and unpaid interest hereunder as of each payment date.</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; text-indent: 0.5in">The Company has elected to
recognize the March Debenture at fair value and therefore there was no further evaluation of embedded features for bifurcation. The March
Debenture was fully converted into 2,369,501 Common Shares of the Company 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">&#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">Securities Purchase Agreement dated July
6, 2021</span></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; text-indent: 0.5in">On July 6, 2021, the Company
entered into another securities purchase with the Debenture Holder for the issuance of a Convertible Debenture (the &#8220;July Debenture&#8221;)
in the aggregate principal amount of up to $2,500,000 with a maturity date of twelve months after the issuance thereof, provided that
in case of an event of default, the July Debenture may become at the Debenture Holder&#8217;s election immediately due and payable. In
addition, the Company paid to an affiliate of the Debenture Holder a fee equal to 3.5% of the amount of the July Debenture and a one-time
due diligence and structuring fee of $5,000 at the closing.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Debenture Holder may convert
the July Debenture in its sole discretion to Company&#8217;s Common Shares at any time at the lower of $1.50 or 95% of the average of
the two lowest daily VWAPs during the ten consecutive trading days immediately preceding the conversion date, provided that the conversion
price may not be less than $0.50 (the &#8220;July Debenture Floor Price&#8221;). The Debenture Holder may not convert any portion of the
July Debenture if such conversion would result in the Debenture Holder beneficially owning more than 4.99% of Company&#8217;s then issued
and Common Shares, provided that such limitation may be waived by the Debenture Holder with a 65 days&#8217; notice. Any time after the
issuance of the July Debenture that the daily VWAP is less than the July Debenture Floor Price for a period of 10 consecutive trading
days (each such occurrence, a &#8220;July Debenture Triggering Event&#8221;) and only for so long as such conditions exist after a July
Debenture Triggering Event, the Company shall make monthly payments beginning on the 30th day after the date of the July Debenture Triggering
Event. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the July
Debenture Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of 20% of such principal
amount and (iii) accrued and unpaid interest hereunder as of each payment date. The principal balance of $1,130,000 of the July Debenture
was converted into 1,385,533 Common Shares of the Company for the year ended December 31, 2021. The remaining balance of $1,370,000 of
the July Debenture was converted into 1,068,078 Common Shares of the Company during the year ended December 31, 2022.&#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"><i><span style="text-decoration:underline">Securities Purchase Agreement dated March 10, 2022</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; text-indent: 0.5in">On March 10, 2022, ReTo entered
into a Securities Purchase Agreement pursuant to which ReTo issued Note to the Investor. The Note will mature 12 months after the purchase
price of the Note is delivered from the Investor to ReTo (the &#8220;Purchase Price Date&#8221;). The Note has an original principal amount
of $3,105,000 and Investor gave consideration of $3,000,000, reflecting an original issue discount of $90,000 and $15,000 for Investor&#8217;s
fees, costs and other transaction expenses incurred in connection with the purchase and sale of the Note. The transaction contemplated
under the Securities Purchase Agreement was closed on March 11, 2022 and the Company anticipates using the proceeds for general working
capital 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; text-indent: 0.5in">On March 28, 2022, ReTo and
Investor entered into an amendment to the Note, pursuant to which ReTo has agreed to satisfy any conversion request from Investor by making
a cash payment equal to 110% of any converted amount if, at the time of the conversion, the Floor Price (as defined in the Note) is higher
than the then current conversion price.</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>

</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 -->106<!-- 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; 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">On October 13, 2022, the Company
entered into a standstill agreement with the Investor. Pursuant to the standstill agreement, the Investor agreed not to seek to convert
any portion of the Note During the Standstill Period. Balance of the Note was increased by $310,500 as of the date of the standstill agreement.</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">The principal balance of $10,000
of the Note was converted into 290,773 Common Shares of the Company on December 20, 2022. Subsequently from February to April 2023, the
principal balance of $350,000 of the Note was converted into 1,388,804 Common Shares of the Company. The parties have agreed to extend the Note and are in the process of negotiating the terms of the extension 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; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i><span style="text-decoration:underline">Equity Transfer Agreement dated December 27, 2021</span></i></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For a description of the terms
of this agreement, see <i>&#8220;Item 4. Information on the Company&#8212;B. Business Overview&#8212;Recent Development &#8212;Acquisition
of REIT Mingde.&#8221;</i></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"><i><span style="text-decoration:underline">Consulting Agreement</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; text-indent: 0.5in">On April 21, 2021, the Company entered into that certain three-year
consulting agreement (the &#8220;Consulting Agreement&#8221;) with Geniusland International Capital Ltd. (the &#8220;Geniusland&#8221;)
in connection with Company&#8217;s corporate strategy on the Nasdaq Stock Market. Pursuant to the agreement, the Company issued an aggregate
of 1,000,000 Common Shares to Geniusland and its designees for services rendered. The Consulting Agreement was superseded by the Supplemental
Consulting Agreement described below.</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"><i><span style="text-decoration:underline">Supplemental Consulting Agreement </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; text-indent: 0.5in">On December 29, 2021, the
Company entered into a Supplemental Consulting Agreement with Geniusland (the &#8220;Supplemental Agreement&#8221;) which superseded the
Consulting Agreement. Pursuant to the Supplemental Agreement, Geniusland provided corporate strategies in connection with the Company&#8217;s
listing on the Nasdaq Stock Market for a term from December 29, 2021 to March 28, 2022. In consideration of the services rendered by Geniusland,
upon execution of the Supplemental Agreement, the Company issued 500,000 restricted Common Shares to Geniusland, in lieu of cash, valued
at 70% of the closing price on the day before the signing date of the Supplemental Agreement. Such shares are subject to a 6-month lock-up.</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"><span style="font-size: 10pt"><i><span style="text-decoration:underline">Lease Agreement</span></i>&#160;</span>&#160;<span style="font-size: 10pt">&#160;&#160;</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 25, 2021, REIT
Technology entered into a lease agreement (&#8220;Lease&#8221;) with Hainan Nuclear Power Co., Ltd. (&#8220;Hainan Nuclear Power&#8221;)
to lease an office space of 1,279.66 square meters, located at the 22nd Floor, Xinheng Building, No. 123-8, Binhai Avenue, Longhua District,
Haikou City, Hainan Province, China. The Lease has a term of three years from February 1, 2022 to January 31, 2025. If REIT Technology
intends to renew the Lease, REIT shall notify Hainan Nuclear Power two months earlier in writing. Hainan Nuclear Power shall notify REIT
Technology of its intention to sell the leased property at least 90 business days in advance, under which circumstances, REIT Technology
shall have the priority right to purchase the leased property, If Hainan Nuclear terminates the Lease earlier without cause, it shall
notify REIT Technology 60 days in advance and refund REIT Technology with the balance of the paid rent and security deposit and pay a
liquidated damage equal to 100% of the security deposit to REIT Technology. If REIT Technology terminates the Lease earlier, it shall
notify Hainan Nuclear Power at least 60 days in advance and forfeit the paid rent and the security deposit.</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><span style="text-decoration:underline">Settlement Agreement</span></i></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; text-align: justify; margin: 0pt 0; text-indent: 0.5in">For a description of the terms of this agreement,
see &#8220;<i>Item 8. Financial Information &#8211; A. Consolidated Statements and Other Financial Information &#8211; Legal and Administrative
Proceedings.</i>&#8221;</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-indent: 0.5in"></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 -->107<!-- Field: /Sequence --></p></div><div>
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</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"><i><span style="text-decoration:underline">Hainan Tashanshi Agreement</span></i></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; text-indent: 0.5in">On May&#160;25, 2022, the
Company entered into a securities purchase agreement with Hainan Tashanshi, pursuant to which the Company agreed to sell to Hainan Tashanshi
an aggregate of 5,970,000 Common Shares at $0.60 per share, for aggregate gross proceeds of $3,582,000. The transaction was closed on
May 25, 2022 and the Company issued 5,970,000 Common Shares to the designees of Hainan Tashanshi.</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"><i><span style="text-decoration:underline">2023 Consulting Agreements</span></i></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">On February 27, 2023, the
Company entered into a consulting service agreement with Express Transportation Ltd. (&#8220;ETL&#8221;). Pursuant to the agreement, ETL
has agreed to provide feasibility, analysis and risk management services on investment project in mainland China in exchange for 2,000,000
Common Shares, which were issued on March 8, 2023.</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">On February 27, 2023, the
Company entered into a consulting service agreement with Maxleed Investment Holding Ltd. (&#8220;MIHL&#8221;). Pursuant to the agreement,
MIHL has agreed to provide strategy, due diligence, business expansion and optimization services in exchange for 2,000,000 Common Shares,
which were issued on March 8, 2023.</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; text-indent: 0.5in">Other than those set forth
above and those described elsewhere in this annual report, we did not have any other material contracts.</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%">
  <tr style="vertical-align: top">
    <td style="width: 48px; font-size: 10pt">&#160;</td>
    <td style="width: 24px; font-size: 10pt"><span style="font-size: 10pt"><b>D.&#160;</b></span></td>
    <td style="font-size: 10pt"><span style="font-size: 10pt"><b><i>Exchange controls.&#160;</i></b></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"><b>Foreign Currency Exchange</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; text-indent: 0.5in">The principal regulations
governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended on August&#160;5,
2008, the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) and the Interim Measures on Administration
on Foreign Debts (2003), as amended on July 26, 2022. Under these regulations, 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 most
capital account items, such as direct investment, loans, repatriation of investment and investment in securities outside China, unless
the prior approval of SAFE or its local counterparts is obtained. In addition, any loans to an operating subsidiary in China that is a
foreign invested enterprise, cannot, in the aggregate, exceed the difference between its respective approved total investment amount and
its respective approved registered capital amount. Furthermore, any foreign loan must be registered with SAFE or its local counterparts
for the loan to be effective. Any increase in the amount of the total investment and registered capital must be approved by the MOFCOM
or its local counterpart. We may not be able to obtain these government approvals or registrations on a timely basis, if at all, which
could result in a delay in the process of making these loans.</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; text-indent: 0.5in">The dividends paid by the
subsidiary to its shareholder are deemed shareholder income and are taxable in mainland China. Pursuant to the Administration Rules of
the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in China may purchase or remit foreign exchange,
subject to a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE. Foreign exchange transactions
under the capital account are still subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC
governmental authorities.</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; text-indent: 0.5in">On August 29, 2008, SAFE issued
the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign
Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of
foreign currency-registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB
capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business
scope approved by the applicable government authority and may not be used for equity investments within China. SAFE also strengthened
its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises.
The use of such RMB capital may not be changed without SAFE&#8217;s approval, and such RMB capital may not in any case be used to repay
RMB loans if the proceeds of such loans have not been used. On March 30, 2015, SAFE issued SAFE Circular 19, which took effective and
replaced SAFE Circular 142 on June 1, 2015. Although SAFE Circular 19 allows for the use of RMB converted from the foreign currency-denominated
capital for equity investments in China, the restrictions continue to apply as to foreign-invested enterprises&#8217; use of the converted
RMB for purposes beyond the business scope, for entrusted loans or for inter-company RMB loans. 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 of the rules set forth in SAFE Circular 19, but changes the prohibition
against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted
loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 or SAFE
Circular 16 could result in administrative penalties.</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-indent: 0.5in"></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 -->108<!-- 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-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">On November 19, 2012, SAFE
promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment which
substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special
purpose foreign exchange accounts (e.g., pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts),
the reinvestment of lawful incomes derived by foreign investors in China (e.g. profit, proceeds of equity transfer, capital reduction,
liquidation and early repatriation of investment), and purchase and remittance of foreign exchange as a result of capital reduction, liquidation,
early repatriation or share transfer in a foreign-invested enterprise no longer require SAFE approval, and multiple capital accounts for
the same entity may be opened in different provinces, which was not possible before. In addition, SAFE promulgated the Circular on Printing
and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting
Documents in May 2013, which specifies that the administration by SAFE or its local departments over direct investment by foreign investors
in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment
in China based on the registration information provided by SAFE and its local departments.</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; text-indent: 0.5in">On February 13, 2015, SAFE
promulgated the Circular on Further Simplifying and Improving the Policies Concerning Foreign Exchange Control on Direct Investment, or
SAFE Circular 13, which took effect on June 1, 2015. SAFE Circular 13 delegates the authority to enforce the foreign exchange registration
in connection with the inbound and outbound direct investment under relevant SAFE rules to certain banks and therefore further simplifies
the foreign exchange registration procedures for inbound and outbound direct investment.</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"><b>Circular 37</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; text-indent: 0.5in">On July&#160;4, 2014, SAFE
issued Circular 37, which became effective as of July&#160;4, 2014. According to Circular 37, PRC residents shall apply to SAFE and its
branches for going through the procedures for foreign exchange registration of overseas investments before contributing the domestic assets
or interests to a SPV. An amendment to registration or filing with the local SAFE branch by such PRC resident is also required if the
registered overseas SPV&#8217;s basic information such as domestic individual resident shareholder, name, operating period, or major events
such as domestic individual resident capital increase, capital reduction, share transfer or exchange, merger or division has changed.
Although the change of overseas funds raised by overseas SPV, overseas investment exercised by overseas SPV and non-cross-border capital
flow are not included in Circular 37, we may be required to make foreign exchange registration if required by SAFE and its branches.</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; text-indent: 0.5in">Moreover, Circular 37 applies
retroactively. As a result, PRC residents who have contributed domestic assets or interests to a SPV, but failed to complete foreign exchange
registration of overseas investments as required prior to implementation of Circular 37, are required to send a letter to SAFE and its
branches for explanation. Under the relevant rules, failure to comply with the registration procedures set forth in Circular&#160;37 may
result in receiving a warning from SAFE and its branches, and may result in a fine of up to RMB 300,000 for an organization or up to RMB
50,000 for an individual. In the event of failing to register, if capital outflow occurred, a fine up to 30% of the illegal amount may
be assessed.</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; text-indent: 0.5in">PRC residents who control
our Company are required to register with SAFE in connection with their investments in us. If we use our equity interest to purchase the
assets or equity interest of a PRC company owned by PRC residents in the future, such PRC residents will be subject to the registration
procedures described in Circular 37.</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>Regulations on Offshore Parent Holding Companies&#8217; Direct Investment
in and Loans to Their PRC Subsidiaries</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; text-indent: 0.5in">According to the Interim Regulations
on Statistics and Supervision of Foreign Debt promulgated by the State Council and latest amended on November 29, 2020, and the Interim
Provisions on the Management of Foreign Debts promulgated by SAFE, the NDRC and the MOFCOM and effective from March 1, 2003 and latest
amended on July 26, 2022, loans by foreign companies to their subsidiaries in China, which accordingly are FIEs, are considered foreign
debt, and such loans must be registered with the local branches of the SAFE. Under the provisions, the total amount of accumulated medium-term
and long-term foreign debt and the balance of short-term debt borrowed by a FIE is limited to the difference between the total investment
and the registered capital of the foreign-invested enterprise.</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-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 115; 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-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">On January 12, 2017, the People&#8217;s
Bank of China promulgated the Circular of the People&#8217;s Bank of China on Matters relating to the Macro-prudential Management of Comprehensive
Cross-border Financing, or PBOC Circular 9, which took effect on the same date. The PBOC Circular 9 established a capital or net assets-based
constraint mechanism for cross-border financing. Under such mechanism, a company may carry out cross-border financing in Renminbi or foreign
currencies at their own discretion. The total cross-border financing of a company shall be calculated using a risk-weighted approach and
shall not exceed an upper limit. The upper limit is calculated as capital or assets multiplied by a cross-border financing leverage ratio
and multiplied by a macro-prudential regulation parameter.</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; text-indent: 0.5in">In addition, according to
PBOC Circular 9, as of the date of the promulgation of PBOC Circular 9, a transition period of one year is set for foreign-invested enterprises
and during such transition period, FIEs may apply either the current cross-border financing management mode, namely the mode provided
by Implementation Rules for the Provisional Regulations on Statistics and Supervision of Foreign Debt and the Interim Provisions on the
Management of Foreign Debts, or the mode in this PBOC Circular 9 at its sole discretion. After the end of the transition period, the cross-border
financing management mode for FIEs will be determined by the People&#8217;s Bank of China and SAFE after assessment based on the overall
implementation of this PBOC Circular 9.</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; text-indent: 0.5in">According to applicable PRC
regulations on FIEs, capital contributions from a foreign holding company to its PRC subsidiaries, which are considered FIEs, may only
be made when approval by or registration with the MOFCOM or its local counterpart is obtained.</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"><b>Regulation of Dividend Distribution</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; text-indent: 0.5in">The principal regulations
governing the distribution of dividends by foreign holding companies include the Company Law of China (1993), as amended in 2018.</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; text-indent: 0.5in">Under these regulations, enterprises
in China may pay dividends only out of their retained profits, if any, determined in accordance with PRC accounting standards and regulations.
In addition, enterprises in China are required to allocate at least 10% of their respective retained 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, and an enterprise is not permitted to distribute any profits until losses from prior fiscal years have been offset.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>E.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Taxation. </i></b></span></td></tr>
  </table><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; text-indent: 0.5in">The following sets forth the
material British Virgin Islands, PRC and U.S. federal income tax matters related to an investment in our Common Shares. It is directed
to U.S. Holders (as defined below) of our Common Shares and is based on 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 an investment in our Common Shares, such as the tax consequences under state, local and other tax laws.</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; text-indent: 0.5in">The following brief description
applies only to U.S. Holders (defined below) that hold Common Shares as capital assets and that have the U.S. dollar as their functional
currency. This brief description is based on the 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-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">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 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-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">an individual who is a citizen or resident of the United States;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">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;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">an estate whose income is subject to U.S. federal income taxation regardless of its source; or</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">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.</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"></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 -->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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b>WE URGE POTENTIAL PURCHASERS
OF OUR SHARES TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING,
OWNING AND DISPOSING OF OUR SHARES.</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"><b>PRC Enterprise Income Tax</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; text-indent: 0.5in">According to the EIT Law,
which was promulgated by the SCNPC on March 16, 2007 (effective as of January 1, 2008 and was last amended on February 24, 2017 (effective
on the same day) and on December 29, 2018 (effective on the same day), respectively. The income tax for both domestic and foreign-invested
enterprises on their global income is at a uniform rate of 25%, unless they qualify for certain exceptions. The Regulation on the Implementation
of Enterprise Income Tax Law of China (the &#8220;EIT Rules&#8221;) was promulgated by the State Council on December 6, 2007 and became
effective on January 1, 2008 and partly amended on April 23, 2019 further clarifies the calculation of the income tax on different types
of incomes and permit certain HNTEs strongly supported by the state&#8221; that independently own core intellectual property and meet
statutory criteria, to enjoy a reduced 15% enterprise income tax rate.</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; text-indent: 0.5in">On January 29, 2016, the PRC
Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation enacted the Administrative Measures for Certifying
High and New Technology Enterprises (2016 Version) (the &#8220;Certifying Measures&#8221;), which retroactively became effective on January
1, 2016. Under the EIT Law and the Certifying Measures, certain qualified high-tech companies may benefit from a preferential tax rate
of 15% if they own their core intellectual properties and are classified into certain industries strongly supported by the PRC government
and set forth by certain departments of the PRC State Council. Beijing REIT, Hainan Yile IoT and IoV Technology Research were granted
the HNTE qualifications valid until December 2025, October 2023 and October 2025, respectively. There can be no assurance, however, that
Beijing REIT and Hainan Yile IoT will continue to meet the qualifications for such a reduced tax rate. In addition, there can be no guaranty
that relevant governmental authorities will not revoke the &#8220;HNTE&#8221; status of Beijing REIT, Hainan Yile IoT or IoV Technology
Research in the future.&#160;</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; text-indent: 0.5in">Pursuant to Circular of the
State Administration of Taxation on Printing and Distributing the Implementing Measures for Special Tax Adjustments (for Trial Implementation),
effective on January 1, 2008, enterprises shall adopt a reasonable transfer pricing method when conducting transactions with their affiliates.
Tax authorities have the power to assess whether related transactions conform to the principle of equity and make adjustments accordingly.
Therefore, the invested enterprise should faithfully report relevant information of its related transactions. Pursuant to the Announcement
of the State Administration of Taxation on Issuing the Administrative Measures for Special Tax Adjustment and Investigation and Mutual
Consultation Procedures, effective on May 1, 2017, an enterprise may adjust and pay taxes at its own discretion when it receives a special
tax adjustment risk warning or identifies its own special tax adjustment risks, and the tax authorities may also carry out special tax
investigation and adjustment in accordance with the relevant provisions in regard to enterprises that adjust and pay taxes at their own
discretion.</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; text-indent: 0.5in">In January 2009, the SAT promulgated
the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, or the Non-resident
Enterprises Measures, which was repealed by Announcement of the State Administration of Taxation on Issues Relating to Withholding at
Source of Income Tax of Non-resident Enterprises in December 2017. According to the new announcement, it shall apply to handling of matters
relating to withholding at source of income tax of non-resident enterprises pursuant to the provisions of Article 37, Article 39 and Article
40 of the EIT Law. According to Article 37, Article 39 of the EIT Law, income tax over non-resident enterprise income pursuant to the
provisions of the third paragraph of Article 3 shall be subject to withholding at the source, where the payer shall act as the withholding
agent. The tax amount for each payment made or due shall be withheld by the withholding agent from the amount paid or payable. Where a
withholding agent fails to withhold tax or perform tax withholding obligations pursuant to the provisions of Article 37, the taxpayer
shall pay tax at the place where the income is derived. Where the taxpayer fails to pay tax pursuant to law, the tax authorities may demand
payment of the tax amount payable, from a payer of the taxpayer with payable tax amounts from other taxable income items in China.</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: 117; 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 -->111<!-- 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; text-indent: 0.5in">On April 30, 2009, the MOFCOM
and the SAT jointly issued the Circular on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business,
or Circular 59, which became effective retroactively as of January 1, 2008 and was partially revised on January 1, 2014. By promulgating
and implementing this circular, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests
in a PRC resident enterprise by a Non-resident Enterprise.</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">On February 3, 2015, the SAT
issued the Announcement of the State Administration of Taxation on Several Issues Relating to Enterprise Income Tax of Transfers of Assets
between Non-resident Enterprises, or SAT Bulletin 7, which was partially abolished on December 29, 2017. SAT Bulletin 7 extends its tax
jurisdiction to transactions involving transfer of immovable property in China and assets held under the establishment, and placement
in China, of a foreign company through the offshore transfer of a foreign intermediate holding company. SAT Bulletin 7 also addresses
transfer of the equity interest in a foreign intermediate holding company broadly. In addition, SAT Bulletin 7 introduces safe harbor
scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee
of the Indirect Transfer as they have to assess whether the transaction should be subject to PRC tax and to file or withhold the PRC tax
accordingly.</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">On October 17, 2017, the SAT
issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income
Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017 and was revised on June 15, 2018. The SAT Bulletin 37 further
clarifies the practice and procedure of withholding of non-resident enterprise income tax.</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">If non-resident investors
were involved in our private equity financing, if such transactions were determined by the tax authorities to lack reasonable commercial
purpose, we and our non-resident investors may be at risk of being required to file a return and be taxed under SAT Bulletin 7 and we
may be required to expend valuable resources to comply with SAT Bulletin 7 or to establish that we should not be held liable for any obligations
under SAT Bulletin&#160;7.</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">Uncertainties exist with respect
to how the EIT Law applies to the tax residence status of ReTo and our offshore subsidiaries. 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 PRC enterprise for enterprise income tax purposes. Although the EIT Rules define &#8220;de
facto management body&#8221; as a managing body that exercises substantive and overall management and control over the production and
business, personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available
is set forth in Circular 82 issued by the State Administration of Taxation, on April 22, 2009 which provides that a foreign enterprise
controlled by a PRC company or a PRC company group will be classified as a &#8220;resident enterprise&#8221; with its &#8220;de facto
management bodies&#8221; located within China if all of the following criteria are satisfied:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the place where the senior management and core management departments that are in charge of its daily operations perform their duties is mainly located in China;</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="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">its financial and human resources decisions are made by or are subject to approval by persons or bodies in China;</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="width: 48px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">its major assets, accounting books, company seals, and minutes and files of its board and shareholders&#8217; meetings are located or kept in China; 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%">
  <tr style="vertical-align: top">
    <td style="width: 48px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">half or more than half of the enterprise&#8217;s directors or senior management with voting rights frequently reside in China.</span></td></tr>
  </table><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; text-indent: 0.5in">We do not believe that we
meet the conditions outlined in the preceding paragraph since ReTo does not have a PRC enterprise or enterprise group as our primary controlling
shareholder. In addition, we are not aware of any offshore holding companies with a corporate structure similar to the Company that has
been deemed a China &#8220;resident enterprise&#8221; by the PRC tax authorities.</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">If we are deemed a China resident
enterprise, we may be subject to the EIT at the rate of 25% on our global income, except that the dividends we receive from our PRC subsidiaries
may be exempt from the EIT to the extent such dividends are deemed dividends among qualified resident enterprises. If we are considered
a resident enterprise and earn income other than dividends from our PRC subsidiaries, a 25% EIT on our global income could significantly
increase our tax burden and materially and adversely affect our cash flow and profitability.</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-indent: 0.5in"></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 -->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; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>PRC Value-Added Tax</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; text-indent: 0.5in">The Provisional Regulations
of the PRC on Value-added Tax were promulgated by the State Council on December 13, 1993 and came into effect on January 1, 1994, which
were subsequently amended on November 10, 2008 and came into effect on January 1, 2009 and most recently amended on November 19, 2017.
The Detailed Rules for the Implementation of the Provisional Regulations of the PRC on Value-added Tax was promulgated by the Ministry
of Finance on December 25, 1993 and subsequently amended on December 15, 2008 and October 28, 2011, or collectively, VAT Law. On November
19, 2017, the State Council promulgated the Decisions on Abolishing the Provisional Regulations of the PRC on Business Tax and Amending
the Provisional Regulations of the PRC on Value-added Tax, or Order 691. According to the VAT Law and Order 691, all enterprises and individuals
in China engaging in the sale of goods, the provision of processing, repair and assembly services, sales of services, intangible assets,
real property and the importation of goods within the territory of the PRC are the taxpayers of VAT. On April 4, 2018, Ministry of Finance
and State Administration of Taxation collectively promulgated the Circular of the Ministry of Finance and the State Administration of
Taxation on Adjusting Value-added Tax Rates, the implementation of which began on May 1, 2018, pursuant to which a taxpayer engaging in
a taxable sales activity for the value-added tax purpose or imports of goods, the previous applicable 17% and 11% tax rates are adjusted
to 16% and 10% respectively, and exported goods originally subject to 17% and 11% tax rates and export rebate rate, will be subject to
16% and 10% tax rate and export rebate rate. From April 1, 2019, the 16% and 10% tax rates were reduced to 13% and 9%, respectively. The
VAT tax rates generally applicable are simplified as 17%, 11%, 6% and 0%, and the VAT tax rate applicable to the small-scale taxpayers
is 3%. The amount of VAT payable is calculated as &#8220;output VAT&#8221; minus &#8220;input VAT&#8221; and the rate of VAT for the China
PRC subsidiaries ranges from 3% to 13%.</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>China Dividend Withholding Tax</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; text-indent: 0.5in">Under the PRC tax laws effective
prior to January 1, 2008, dividends paid to foreign investors by foreign-invested enterprises were exempt from PRC withholding tax. Pursuant
to the EIT Law and the Implementation Rules, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in
China to its foreign enterprise investors are subject to a 10% withholding tax, unless any such foreign investor&#8217;s jurisdiction
of incorporation has a tax treaty with China that provides for a different withholding arrangement.</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">Pursuant to an Arrangement
Between the Mainland of 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 came into effect on December 8, 2006, and other applicable PRC laws and regulations, if
a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements&#160;under&#160;such
Double Tax Avoidance Arrangement and other applicable laws and regulations, the 10% withholding tax on the dividends the Hong Kong resident
enterprise receives from a PRC resident enterprise may be reduced to 5%. According to the Announcement of the SAT on Issuing the Measures
for the Administration of Non-resident Taxpayers&#8217; Enjoyment of Treaty Benefits effective on January 1, 2020, non-resident taxpayers
can enjoy tax treaty benefits via the &#8220;self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection&#8221;
mechanism. Non-resident taxpayers who have self-assessed that they are eligible for the treaty benefits can claim such tax treaty benefits
accordingly provided that they have collected and retained relevant supporting documents for inspection by the tax authorities in their
post-filing administration process. Pursuant to the Announcement on Certain Issues with Respect to the &#8220;Beneficial Owner&#8221;
in Tax Treaties, issued by the SAT on February 3, 2018, and effective on April 1, 2018, when determining an applicant&#8217;s &#8220;beneficial
owner&#8221; status regarding tax treatments in connection with dividends, interests or royalties in tax treaties, several factors set
forth below will be taken into account, although the actual analysis will be fact-specific: (i) whether the applicant is obligated to
pay more than 50% of his or her income in 12 months to residents in a third country or region; (ii) whether the business operated by the
applicant constitutes a substantial business operation; and (iii) whether the counterparty country or region to the tax treaties does
not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate. The applicant must submit relevant documents
to the competent tax authorities to prove his or her &#8220;beneficial owner&#8221; status.</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-indent: 0.5in"></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-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>British Virgin Islands Taxation</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; text-indent: 0.5in">All dividends paid by ReTo
to holders of Common Shares who are not persons resident in the BVI are exempt from the provisions of the British Virgin Islands Income
Tax Act, and any capital gains realized with respect to any Common Shares by persons who are not persons resident in the BVI are exempt
from all forms of taxation in the BVI.</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">No estate, inheritance, succession,
or gift tax, rate, duty, levy, or other charge is payable by persons who are not persons resident in the BVI with respect to Common 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; text-indent: 0.5in">All instruments relating to
transfers of property (except in the case of real estate situated in the BVI) to or by ReTo and all instruments relating to transactions
in respect of Common Shares are exempt from the payment of stamp duty in the BVI.&#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; text-indent: 0.5in">There is no income tax treaty
or convention currently in effect between the United States and the British Virgin Islands or between China and the British Virgin Islands.</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"><b>Material United States Federal Income Tax Considerations</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; text-indent: 0.5in">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: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">a dealer in securities or currencies;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">a person whose &#8220;functional currency&#8221; is not the United States dollar;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">banks;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">financial institutions;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">insurance companies;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">regulated investment companies;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">real estate investment trusts;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">broker-dealers;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">traders that elect to mark-to-market;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">U.S. expatriates;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">tax-exempt entities;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">persons liable for alternative minimum tax;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">persons holding our Common Shares as part of a straddle, hedging, conversion or integrated transaction;</span></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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">&#9679;</span></td>
    <td><span style="font-size: 10pt">persons that actually or constructively own 10% or more of our voting shares;</span></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%">
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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%">
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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%">
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</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; text-indent: 0.5in">Prospective purchasers are
urged to consult their tax advisors about the application of the U.S. Federal 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 Common Shares.</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-indent: 0.5in"></p><div>

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</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-indent: 0.5in"><b><i>Taxation of Dividends and Other Distributions
on our Common Shares</i></b></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; text-indent: 0.5in">Subject to the passive foreign
investment company rules discussed below, the gross amount of distributions made by us to you with respect to the Common 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). The dividends will not be eligible for the dividends-received deduction allowed to corporations in
respect of dividends received from other U.S. corporations.</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; text-indent: 0.5in">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 Common Shares are readily tradable on an established securities market in the United States, or in the event
we are deemed to be a PRC &#8220;resident enterprise&#8221; under the China tax law, 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 passive foreign investment
company (as discussed 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. Under U.S. Internal Revenue Service authority, Common 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 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 Common
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-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">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 Common 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; text-indent: 0.5in">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 Common Shares, and to the extent the amount of the distribution
exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal
income tax principles. Therefore, a U.S. Holder should expect that a distribution 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-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>Taxation of Dispositions of Common Shares</i></b></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; text-indent: 0.5in">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
Common Shares. The gain or loss will generally be capital gain or loss. Capital gains are generally subject to United States federal income
tax at the same rate as ordinary income, except that non-corporate U.S. Holders who have held Common Shares for more than one year may
be eligible for reduced rates of taxation. 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.</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-indent: 0.5in"></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 -->115<!-- 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-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><b><i>Passive Foreign Investment Company</i></b>&#160;</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; text-indent: 0.5in">Based on our current and anticipated
operations and the composition of our income and assets, we do not expect to be a passive foreign investment company, or PFIC, for U.S.
federal income tax purposes for our current taxable year ending December 31, 2023. Our actual PFIC status for the current taxable years
ending December 31, 2023 will not be determinable until after the close of such taxable years and, accordingly, there is no guarantee
that we will not be a PFIC for the current taxable year. &#160;PFIC status is a factual determination for each taxable year which cannot
be made until the close of the taxable year. A non-U.S. corporation is considered a PFIC 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: 0.5in">&#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: 48px">&#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: 48px">&#160;</td>
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    <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: 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">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.</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">We must make a separate determination
each year as to whether we are a PFIC. As a result, our PFIC status may change. In particular, because the value of our assets for purposes
of the asset test will generally be determined based on the market price of our Common Shares, our PFIC status will depend in large part
on the market price of our Common Shares. Accordingly, fluctuations in the market price of the Common 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 raised in our IPO. If we are a PFIC for any year during which you
hold Common Shares, we will continue to be treated as a PFIC for all succeeding years during which you hold Common Shares. However, if
we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a &#8220;deemed sale&#8221; election with
respect to the Common 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; text-indent: 0.5in">If we are a PFIC for any taxable
year during which you hold Common 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 Common 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 Common
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%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 24px; text-align: justify"><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 Common Shares;</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="width: 48px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and</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 style="vertical-align: top">
    <td style="width: 48px">&#160;</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>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 or other disposition of the Common Shares cannot be treated as capital,
even if you hold the Common 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; text-indent: 0.5in">A U.S. Holder of &#8220;marketable
stock&#8221; (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed
above. If you make a mark-to-market election for the Common Shares, you will include in ordinary income each year an amount equal to the
excess, if any, of the fair market value of the Common Shares as of the close of your taxable year over your adjusted tax basis in such
Common Shares. You are allowed a deduction for the excess, if any, of the adjusted tax basis of the Common Shares over their fair market
value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the
Common 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 Common Shares, are treated as ordinary income. Ordinary loss treatment also applies
to the deductible portion of any mark-to-market loss on the Common Shares, as well as to any loss realized on the actual sale or disposition
of the Common Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for
such Common Shares. Your tax basis in the Common 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 <i>&#8220;&#8212;Taxation
of Dividends and Other Distributions on our Common Shares</i>&#8221; generally would not apply.</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; text-indent: 0.5in">The mark-to-market election
is available only for &#8220;marketable stock&#8221;, which is stock that is traded in other than&#160;<i>de minimis</i>&#160;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 Common Shares are regularly traded on the Nasdaq
Capital Market and if you are a holder of Common 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; 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">Alternatively, a U.S. Holder
of stock in a PFIC may make a &#8220;qualified electing fund&#8221; election 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. However,
the qualified electing fund election 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 Common Shares in any year in which we are a PFIC, you will generally
be required to file U.S. Internal Revenue Service Form 8621 to report your ownership of our Common Shares as well as distributions received
on the Common Shares, any gain realized on the disposition of the Common Shares, any PFIC elections you would like to make in regard to
the Common Shares, and any information required to be reported pursuant to such an election.</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">You are urged to consult your
tax advisors regarding the application of the PFIC rules to your investment in our Common 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-indent: 0.5in"><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-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">Dividend payments with respect
to our Common Shares and proceeds from the sale, exchange or redemption of our Common Shares may be subject to information reporting to
the U.S. Internal Revenue Service and possible U.S. backup withholding at a current 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">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.</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">Under the Hiring Incentives
to Restore Employment Act of 2010, certain United States Holders are required to report information relating to Common Shares, subject
to certain exceptions (including an exception for 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 shares. U.S. Holders are urged to consult their own 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-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">A Non-U.S. Holder generally
may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status to the
payor, under penalties of perjury, on the applicable IRS Form W-8BEN.</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-indent: 0.5in"></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 -->117<!-- 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-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>F.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Dividends and paying agents.</i></b>&#160;</span></td></tr>
  </table><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-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>G.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Statement by experts.</i></b></span></td></tr>
  </table><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-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>H.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Documents on display.</i></b></span></td></tr>
  </table><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; text-indent: 0.5in">We are subject to periodic
reporting and other informational requirements of the&#160;Exchange Act&#160;as applicable to foreign private issuers, and are required
to file reports and other information with the SEC. Specifically, we are required to file annually an annual report on Form 20-F within
four months after the end of each fiscal year, which is December 31. All information filed with the SEC can be obtained over the internet
at the SEC&#8217;s website at&#160;www.sec.gov. As a foreign private issuer, we are exempt from the rules under the&#160;Exchange Act&#160;prescribing
the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.</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">In accordance with Nasdaq
Stock Market Rule&#160;5250(d), we will post this annual report on Form&#160;20-F on our website at www.retoeco.com. In addition, we will
provide hard copies of our annual report free of charge to shareholders upon request.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt"><b>I.</b></span></td>
    <td><span style="font-size: 10pt"><b><i>Subsidiary information.</i></b></span></td></tr>
  </table><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-indent: 0.5in">Not applicable.</p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 48px"></td><td style="width: 24px; text-align: left"><b>J.</b></td><td style="text-align: justify"><b>Annual Report to Security Holders.</b></td>
</tr></table><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-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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 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"><b>Interest Rate 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; text-indent: 0.5in">Our main interest rate exposure
relates to bank borrowings. We manage our interest rate exposure with a focus on reducing our overall cost of debt and exposure to changes
in interest rates.</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">As of December 31, 2022, we
had $1.3 million in outstanding debt borrowings, with effective interest rates between 5.50% and 7.3590%. As of December 31, 2021, we
had $2.4 million in outstanding debt borrowings, with effective interest rates between 4.55% and 8.5%. As of December 31, 2020, we had
$15.9 million in outstanding debt borrowings, with effective interest rates ranging from 5.0025% to 19.2%.</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">As of December 31, 2022,
if interest rates change by 1%, with all other variables having remained constant, and assuming the amount of bank borrowings outstanding
at the end of the year was outstanding for the entire year, profit attributable to equity owners of our Company would have been RMB51,603
($7,668) lower/higher, respectively, mainly as a result of higher/lower interest expenses incurred on the outstanding debt borrowings.</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">As of December 31, 2021, if
interest rates increased/decreased by 1%, with all other variables having remained constant, and assuming the amount of bank borrowings
outstanding at the end of the year was outstanding for the entire year, profit attributable to equity owners of our Company would have
been RMB151,820 ($23,535) lower/higher, respectively, mainly as a result of higher/lower interest expenses incurred on the outstanding
debt borrowings.&#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; text-indent: 0.5in">As of December 31, 2020, if
interest rates increased/decreased by 1%, with all other variables having remained constant, and assuming the amount of bank borrowings
outstanding at the end of the year was outstanding for the entire year, profit attributable to equity owners of our Company would have
been RMB 1,095,297 ($158,599) lower/higher, respectively, mainly as a result of higher/lower interest expenses incurred on the outstanding
debt borrowings.&#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"></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 -->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><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Foreign Exchange Risk </i></b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our functional currency is
the RMB, and our financial statements are presented in U.S. dollars. China&#8217;s currency has gradually depreciated against most foreign
currencies over the last few years. The average exchange rate for US$ against Chinese RMB has changed from US$1.00 for RMB6.4508 in fiscal
2021 to US $1.00 for RMB6.7290 in fiscal 2022. The exchange rate was US$1.00 for RMB6.8972 as of December 31, 2022. The change in the
value of RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any
underlying change in our business or results of operation. If using the average exchange rate of fiscal 2021, our revenue, cost of revenue
and total expenses, including selling expenses, general administrative expenses, bad debt expense and research and development expenses,
for the year ended December 31, 2022 would decrease by approximately $280,000, $245,000 and $694,000, respectively.</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">Currently, our assets, liabilities,
revenues and costs are denominated in RMB and in U.S. dollars, our exposure to foreign exchange risk will primarily relate to those financial
assets denominated in U.S. dollars. Any significant revaluation of RMB against U.S. dollar may materially affect our earnings and financial
position, and the value of, and any dividends payable on, our Common Shares in U.S. dollars in the future. See &#8220;<i>Item 3. Key Information-
D. Risk Factors&#160;&#8212;&#160;Risks Related to Doing Business in China&#160;&#8212;&#160;Fluctuations in exchange rates could result
in foreign currency exchange losses to us and may reduce the value of, and amount in U.S. Dollars of dividends payable on, our shares
in foreign currency terms.&#8221;</i></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"><b><i>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; text-indent: 0.5in">As of December 31, 2022, we
had cash and cash equivalents of $0.1 million. Our cash and cash equivalents are invested primarily in savings and deposit accounts with
original maturities of three months or less. Savings and deposit accounts generate a small amount of interest income.&#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"><b><i>Inflation 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; text-indent: 0.5in">Inflationary factors such
as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that
inflation has had a material effect on our financial position or results of operations to date, a high rate of inflation in the future
may have an adverse effect on our ability to maintain current levels of gross profit and selling, general and administrative expenses
as a percentage of net sales if the selling prices of our products do not increase with these increased costs.</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"><b><i>Commodity 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; text-align: justify; margin: 0pt 0; text-indent: 0.5in">As a developer and manufacturer of construction
materials and equipment, our Company is exposed to the risk of an increase in the price of raw materials. We historically have been able
to pass on price increases to customers by virtue of pricing terms that vary with changes in raw material prices such as steel and cement,
but we have not entered into any contract to hedge any specific commodity risk. Moreover, our Company does not purchase or trade on commodity
instruments or positions; instead, it purchases commodities for use.</p><div>

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

</div><div><a id="a_016"></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; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A.&#160;Debt 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; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>B.&#160;Warrants and Rights</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; text-indent: 0.5in">Not applicable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>C.&#160;Other 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; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>D. American Depositary Shares</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; text-indent: 0.5in">Not applicable.</p><div>

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

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART II</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="a_018"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 13. Defaults, Dividends 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; text-indent: 0.5in">None.&#160;</p><div>

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

</div><div><a id="a_019"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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"><b>Material Modifications to the Rights of Security Holders</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; text-indent: 0.5in">See &#8220;<i>Item&#160;10.
Additional Information &#8211; B. Memorandum and Articles of Association</i>&#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; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Use of Proceeds</b>&#160;</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; text-indent: 0.5in">Not applicable.</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_020"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 15. Controls and Procedures </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%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">(a)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Disclosure Controls and Procedures.</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; text-indent: 0.5in">As of December 31, 2022 (the
&#8220;Evaluation Date&#8221;), the Company carried out an evaluation, under the supervision of and with the participation of management,
including the Company&#8217;s chief executive officer and chief financial officer, of the effectiveness of the design and operation of
the Company&#8217;s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on
the foregoing, the chief executive officer and chief financial officer concluded that as of the Evaluation Date the Company&#8217;s disclosure
controls and procedures were not effective due to the material weaknesses identified 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><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">(b)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Management&#8217;s Annual Report on Internal Control over Financial Reporting.</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; text-indent: 0.5in">Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is
a process designed under the supervision of our chief executive officer and chief financial officer to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purpose in
accordance with U.S. generally accepted accounting principles.</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">Management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2022. In making this assessment, management used the framework set
forth in the report Internal Control &#8211; Integrated framework issued&#160;in 2013 by the Committee of Sponsoring Organization of the
Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company&#8217;s internal control system, including
(1) the control environment, (2) risk assessment, (3) control activities, (4) information and communication and (5) monitoring.</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; text-indent: 0.5in">Based on that evaluation,
management concluded that these controls were ineffective at December 31, 2022 due to material weaknesses relating to (i) a lack
of full-time accounting and financial reporting personnel with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements;
and (ii) a lack of an effective review by management for the year ended accounting close and reporting.&#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; text-align: left"><b>Remediation Activities
and Plans</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; text-indent: 0.5in">The Company is in the process
of designing and implementing measures to improve our internal control over financial reporting to remediate the material weaknesses that
have we identified, including (i) hiring external financial consultants with experience in U.S. GAAP and SEC reporting obligations; (ii)
implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting
personnel; iii) implementing new policies and procedures to standardize relevant processes, and (iv) enhancing our internal recordkeeping.</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">Since initially identifying
the material weaknesses, we have improved our internal control environment in the following ways:</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%"><tr style="vertical-align: top">
<td style="width: 48px"></td><td style="width: 48px">(i)</td><td style="text-align: justify">Management engaged certain qualified consultants with relevant U.S. GAAP and SEC reporting experience
and qualification to strengthen the Company&#8217;s financial reporting and U.S. GAAP and SEC reporting training; and</td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: 20pt">&#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: 48px"></td><td style="width: 48px">(ii)</td><td style="text-align: justify">Management strengthened the application of critical accounting policies and implemented new critical accounting
policies to support the financial reporting and disclosure.</td></tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 48px"><span style="font-size: 10pt">(c)</span></td>
    <td><span style="font-size: 10pt">Attestation report of the registered public accounting firm.</span></td></tr>
  </table><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-indent: 0.5in">Not applicable.</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-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 126; 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; text-indent: 0.5in">&#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: 48px">&#160;</td>
    <td style="width: 48px"><span style="font-size: 10pt">(d)</span></td>
    <td><span style="font-size: 10pt">Changes in Internal Control over Financial Reporting.&#160;</span></td></tr>
  </table><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; text-indent: 0.5in">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&#160;materially affect, our internal control over financial reporting.</p><div>

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

</div><div><a id="a_021"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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_022"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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; text-indent: 0.5in">The Company&#8217;s Board
of Directors has determined that Ms. Lidong Liu qualifies as an &#8220;audit committee financial expert&#8221; in accordance with applicable
Nasdaq standards. The Company&#8217;s Board of Directors has also determined that Ms. Liu and the other members of the Audit Committee
are all &#8220;independent&#8221; in accordance with the applicable Nasdaq standards.</p><div>

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

</div><div><a id="a_023"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 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; text-indent: 0.5in">Our board of directors has
adopted a code of business conduct and ethics that applies to all of our directors, executive officers and employees. We have filed our
code of business conduct and ethics as an exhibit to our registration statement on Form F-1, declared effective on July 27, 2017 (File
No. 333-217355). The code is also available on our official website under the investor relations section at&#160;www.retoeco.com.</p><div>

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

</div><div><a id="a_024"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16C. Principal Accountant Fees </b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
the aggregate fees by categories specified below in connection with certain professional services rendered and billed by YCM CPA Inc.,
our independent registered public accounting firm, for the periods indicated.</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><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="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center"><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="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center"><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="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%"><span style="font-size: 10pt">Audit fees<sup>(1)</sup></span></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">190,000</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">190,000</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Audit-Related fees</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Tax fees</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt"><span style="font-size: 10pt">All other fees<sup>(2)</sup></span></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</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">$</td><td style="border-bottom: Black 4pt double; text-align: right">190,000</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">190,000</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; 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">(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 and review of the interim financial statements.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; 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">(2)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">All other fees include the aggregate fees billed in each of the fiscal years for products and services provided by our independent registered public accounting firm other than the services reported under audit fees, audit-related fees, and tax fees.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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">The policy of our audit committee
is to pre-approve all audit and non-audit services provided by YCM CPA Inc., 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; text-indent: 0.5in">&#160;</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="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; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_025"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16D. Exemptions form 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-indent: 0.5in">Not Applicable.</p><div>

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

</div><div><a id="a_026"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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-indent: 0.5in">None.</p><div>

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

</div><div><a id="a_027"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16F. Change in Registrant&#8217;s Certifying Accountant</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-indent: 0.5in"><b>(1) Previous Independent Registered Public Accounting
Firm</b></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; text-indent: 1in">(i) On March 15, 2021, the Company
dismissed its independent registered public accounting firm, Friedman LLP (&#8220;Friedman&#8221;).</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(ii) The report of Friedman
on the financial statements of the Company for the fiscal years ended December 31, 2019, and the related statements of operations and
comprehensive income (loss), changes in shareholders&#8217; equity (deficit), and cash flows for the fiscal years ended December 31, 2019
did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting
principles, except that the audit report on the financial statements of the Company for the year ended December 31, 2019 contained an
uncertainty about the Company&#8217;s ability to continue as a going concern.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(iii) The decision to change
the independent registered public accounting firm was recommended and approved by the Audit Committee of the Company.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(iv) During the fiscal years
ended December 31, 2019 and 2020 and the subsequent interim period from January 1, 2021 through March 15, 2021, the date of dismissal,
(a) there were no disagreements with Friedman on any matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Friedman, would have caused it to make reference
thereto in its reports on the financial statements for such years and (b) there were no &#8220;reportable events&#8221; as described in
Item 304(a)(1)(v) of Regulation S-K.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(v) On March 15, 2021, the Company
provided Friedman with a copy of the Current Report 6-K which was filed on March 15, 2020 and had requested that it furnished the Company
with a letter addressed to the U.S. Securities and Exchange Commission stating whether it agreed with the above statements. A copy of
such letter was filed as an Exhibit 16.1 to the Company&#8217;s Current Report on Form 6-K filed on March 15, 2021 and was incorporated
herein for reference in this 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-indent: 0.5in"><b>(2) New Independent Registered Public Accounting
Firm</b></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 15, 2021, the Audit
Committee approved the appointment of YCM CPA Inc. (&#8220;YCM&#8221;) as its new independent registered public accounting firm to undertake
the Company&#8217;s audit for the financial year ending December 31, 2020. YCM also conducted the audit for the financial year ending
December 31, 2021.</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">During the two fiscal years
ended December 31, 2020 and December 31, 2019 and the subsequent interim period from January 1, 2021 through March 15, 2021, prior to
the engagement of YCM, neither the Company, nor someone on its behalf, has consulted YCM regarding:</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: 1in">(i) either: the application
of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered
on the Company&#8217;s consolidated financial statements, and either a written report was provided to the Company or oral advice was provided
that the new independent registered public accounting firm concluded was an important factor considered by the Company in reaching a decision
as to the accounting, auditing or financial reporting issue; or</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 1in">(ii) any matter that was either
the subject of a disagreement as defined in paragraph 304(a)(1)(iv) of Regulation S-K or a reportable event as described in paragraph
304(a)(1)(v) of Regulation S-K.&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in"></p><div>

</div><!-- Field: Page; Sequence: 128; 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 -->122<!-- 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-indent: 1in">&#160;</p><div>

</div><div><a id="a_028"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16G. Corporate Governance</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; text-indent: 0.5in">Our Common Shares are listed
on the Nasdaq Capital Market. As such, we are subject to corporate governance requirements imposed by Nasdaq. Under Nasdaq rules, listed
non-US companies such as ourselves may, in general, follow their home country corporate governance practices in lieu of some of the Nasdaq
corporate governance requirements.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain corporate governance
practices in the BVI, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. The
following summarizes some significant ways in which our corporate governance practices differ from those followed by domestic companies
under the listing standards of the 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; text-indent: 0.5in">Pursuant to the home country
rule exemption set forth under Nasdaq Listing Rule 5615(a)(3)(A), which provides (with certain exceptions not relevant to the conclusions
expressed herein) that a foreign private issuer may follow its home country practice in lieu of the requirements of the Nasdaq Marketplace
Rule 5600 Series, we elected to be exempt from the requirements as follows:</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: 24px"><span style="font-size: 10pt">(a)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Nasdaq Marketplace Rule 5620 which provides that (with certain exceptions not relevant to the conclusions expressed herein) each company listing common stock or voting preferred stock, and their equivalents, shall hold an annual meeting of shareholders no later than one year after the end of the company&#8217;s fiscal year-end; and</span></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: 0.5in">&#160;</td>
    <td style="width: 24px"><span style="font-size: 10pt">(b)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Nasdaq Marketplace Rule 5635 which sets forth the circumstances under which shareholder approval is required prior to an issuance of securities in connection with: (i) the acquisition of the stock or assets of another company; (ii) equity-based compensation of officers, directors, employees or consultants; (iii) a change of control; and (iv) transactions other than public offerings.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: 20pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently intend to comply
with the Nasdaq corporate governance practices and do not rely on the home country rule exemption and except for the foregoing, there
is no significant difference between our corporate governance practices and what the Nasdaq requires of domestic U.S. companies.</p><div>

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

</div><div><a id="a_029"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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-indent: 0.5in">Not applicable.</p><div>

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

</div><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><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; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

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


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

</div><div><a id="a_031"></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; text-align: center">&#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 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-indent: 0.5in">We have elected to provide financial statements
pursuant to Item&#160;18.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#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 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; text-indent: 0.5in">The consolidated financial
statements of ReTo Eco-Solutions, Inc. are included at the end of this annual report, beginning with page F-1.</p><div>

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

</div><div><a id="a_034"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 19. Exhibits</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"></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 style="width: 1%">&#160;</td>
    <td style="width: 90%; text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390017008237/ff12017ex3i_retoeco.htm">Memorandum and Articles of Association (Incorporated herein by reference to Exhibit 3.1 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">2.1</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390017010565/ff12017a1ex4i_retoecosol.htm">Specimen Common Share Certificate (Incorporated herein by reference to Exhibit 4.1 to our Form F-1/A (File No. 333-219709) filed on November 13, 2017)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</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"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390020034273/f20f2020ex2-2_retoeco.htm">Description of Securities Registered under Section 12 of the Exchange Act. (Incorporated herein by reference to Exhibit 2.2 to our Form 20-F filed on October 30, 2020)&#160;</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390017008237/ff12017ex9i_retoeco.htm">Form of Shareholder&#8217;s Voting Proxy Agreement (Incorporated herein by reference to Exhibit 9.1 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <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/1687277/000121390022023161/f20f2021ex4-1_retoeco.htm">Joint Venture Agreement to Establish Xinyi REIT, dated November 17, 2014 by and between Xinyi Transport Investment Co., Ltd. and Beijing REIT Technology Development Co., Ltd.&#160;(Incorporated herein by reference to Exhibit 4.1 to our Form 20-F filed on May 2, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390017008237/ff12017ex2viii_retoeco.htm">Translation of Supplementary Agreement Establishing Xinyi REIT (Incorporated herein by reference to Exhibit 2.8 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)</a></span></td></tr>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</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/1687277/000121390017008237/ff12017ex2ix_retoeco.htm">REIT India Joint Venture Agreement (Incorporated herein by reference to Exhibit 2.9 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <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/1687277/000121390022023161/f20f2021ex4-4_retoeco.htm">Employment Agreement, dated December 31, 2021 by and among ReTo Eco-Solutions, Inc., Beijing REIT and Hengfang Li (Incorporated herein by reference to Exhibit 4.4 to our Form 20-F filed on May 2, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</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/1687277/000121390022023161/f20f2021ex4-5_retoeco.htm">Employment Agreement, dated December 31, 2021 by and among ReTo Eco-Solutions, Inc., Beijing REIT and Guangfeng Dai (Incorporated herein by reference to Exhibit 4.5 to our Form 20-F filed on May 2, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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    <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/1687277/000121390022023161/f20f2021ex4-6_retoeco.htm">Employment Agreement, dated December 31, 2021 by and among ReTo Eco-Solutions, Inc., Beijing REIT and Zhizhong Hu (Incorporated herein by reference to Exhibit 4.6 to our Form 20-F filed on May 2, 2022)</a></span></td></tr>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.7</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022023161/f20f2021ex4-7_retoeco.htm">Employment Agreement, dated December 31, 2021 by and among ReTo Eco-Solutions, Inc., Beijing REIT and Degang Hou (Incorporated herein by reference to Exhibit 4.7 to our Form 20-F filed on May 2, 2022)</a></span></td></tr>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022050054/ea164732ex10-1_retoeco.htm">Employment Agreement, dated August 15, 2022, by and between the Company and Yue Hu (Incorporated herein by reference to Exhibit 10.1 to our Form 6-K filed on August 22, 2022)</a></span></td></tr>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.9</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390021031261/ea142346ex10-1_reto.htm">Employment Agreement, dated June 3, 2021 by and between ReTo Eco-Solutions, Inc. and Lidong Liu (Incorporated herein by reference to Exhibit 10.1 to our Form 6-K filed on June 7, 2021)</a></span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 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 -->124<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></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 style="width: 1%">&#160;</td>
    <td style="width: 90%; text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390017008237/ff12017ex10xiii_retoeco.htm">Joint Patent Agreement with Luoyang Water-Conservancy Surveying &amp; Design Co., Ltd. (Incorporated herein by reference to Exhibit 10.13 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.11</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="https://www.sec.gov/Archives/edgar/data/1687277/000121390017010565/ff12017a1ex10-15_reto.htm">Translation of Indemnification Agreement for Housing Provident Fund (Incorporated herein by reference to Exhibit 10.15 to our Form F-1/A (File No. 333-219709) filed on October 16, 2017)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.14</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390023018546/ea174767ex4-1_retoeco.htm">2022 Share Incentive Plan (Incorporated herein by reference to Exhibit 4.1 to our registration statement on Form S-8 filed on March 8, 2023)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.15</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022012198/ea156783ex4-1_retoeco.htm">Convertible Promissory Note dated March 10, 2022 issued to Streeterville Capital, LLC (Incorporated herein by reference to Exhibit 4.1 to our Current Report 6-K, filed on March 14, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.16</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022012198/ea156783ex10-1_retoeco.htm">Securities Purchase Agreement dated March 10, 2022 by and between ReTo Eco-Solutions, Inc. and Streeterville Capital, LLC (Incorporated herein by reference to Exhibit 10.1 to our Current Report 6-K, filed on March 14, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.17</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022023161/f20f2021ex4-19_retoeco.htm">Amendment to Convertible Promissory Note dated March 28, 2022 issued to Streeterville Capital, LLC. (Incorporated herein by reference to Exhibit 4.19 to our Form 20-F filed on May 2, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.18</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022000491/ea153314ex10-1_retoeco.htm">Translation of Equity Transfer Agreement, dated December 27, 2021 by and among REIT Technology Development Co., Ltd., Xiaoping Li, Jing Peng, REIT Mingde, Hainan Yile IoT and Yangpu Fangyuyuan (Incorporated herein by reference to Exhibit 10.1 to our Form 6-K, filed on January 4, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022010759/ea156504ex99-2_retoeco.htm">Subscription Agreement dated February 17, 2022, by and between ReTo Eco-Solutions, Inc and Xiaoping Li (Incorporated by reference to Exhibit 99.2 to our Form SCHEDULE 13D, filed on March 4, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">4.20</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022030738/ea160856ex10-1_retoeco.htm">Securities Purchase Agreement, dated May 25, 2022, by and between ReTo Eco-Solutions, Inc. and Hainan Tashanshi Digital Information Co., Ltd (Incorporated by reference to Exhibit 10.1 to our Form 6-K, filed on June 1, 2022)</a></span></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022023161/f20f2021ex4-23_retoeco.htm">Translation of Lease Agreement, dated November 25, 2021, by and between REIT Technology Development Co., Ltd and Hainan Nuclear Power Co., Ltd (Incorporated herein by reference to Exhibit 4.23 to our Form 20-F filed on May 2, 2022)</a></span></td></tr>

<tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td style="font-size: 10pt">&#160;</td>
    <td style="font-size: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="f20f2022ex4-22_retoeco.htm">Translation of Lease Agreement, dated March 25, 2023, by and between Beijing REIT Technology Development Co., Ltd and Cheng Zhang</a>&#160;</span></td></tr>

<tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390022023161/f20f2021ex4-24_retoeco.htm">Settlement Agreement, dated April 8, 2022, by and among Beijing REIT Technology Development Co., Ltd., Xinyi Traffic Investment Co., Ltd. and REIT New Materials Xinyi Co., Ltd. (Incorporated herein by reference to Exhibit 4.24 to our Form 20-F filed on May 2, 2022)</a></span></td></tr>

<tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
<tr style="background-color: rgb(204,238,255)">
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  <tr style="background-color: White">
    <td style="vertical-align: top">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt"><a href="http://www.sec.gov/Archives/edgar/data/1687277/000121390017008237/ff12017ex99i_retoeco.htm">Code of Business Conduct and Ethics (Incorporated herein by reference to Exhibit 99.1 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)</a></span></td></tr>
  <tr style="background-color: White">
    <td style="vertical-align: top">&#160;</td>
    <td>&#160;</td>
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  <tr style="background-color: rgb(204,238,255)">
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  <tr style="background-color: White">
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  <tr style="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">&#160;</p><div>

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

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

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

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  <tr style="background-color: rgb(204,238,255)">
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    <td>&#160;</td>
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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">&#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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</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">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;<b>&#160;</b></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"><b>&#160;</b></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; text-align: center">&#160;</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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>&#160;</td>
    <td colspan="2"><span style="font-size: 10pt"><b>RETO ECO-SOLUTIONS, INC.</b>&#160;</span></td></tr>
  <tr style="vertical-align: bottom">
    <td style="width: 60%">&#160;</td>
    <td style="width: 4%">&#160;</td>
    <td style="width: 36%">&#160;</td></tr>
  <tr>
    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt">By:</span></td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"><span style="font-size: 10pt">/s/ Hengfang Li</span></td></tr>
  <tr>
    <td>&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt">Hengfang Li</span></td></tr>
  <tr>
    <td>&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom"><span style="font-size: 10pt">Chief Executive Officer</span></td></tr>
  <tr>
    <td>&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom">(Principal Executive Officer)</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">Date: May 1, 2023</p><div>

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


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->127<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES</b></p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top; width: 90%"><span style="font-size: 10pt"><a href="#f_006">Report of independent registered public accounting firm PCAOB ID&#160;6781</a></span></td>
    <td style="vertical-align: bottom; width: 10%; text-align: center"><span style="font-size: 10pt">F-2</span></td></tr>
  <tr style="background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_001"><span style="font-size: 10pt">Consolidated balance sheets as of December&#160;31, 2022 and 2021</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">F-4</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_002"><span style="font-size: 10pt">Consolidated statements of operations and comprehensive income (loss) for the years ended December&#160;31, 2022, 2021 and 2020</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">F-5</span></td></tr>
  <tr style="background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_003"><span style="font-size: 10pt">Consolidated statements of shareholders&#8217; equity for the years ended December&#160;31, 2022, 2021 and 2020</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">F-6</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_004"><span style="font-size: 10pt">Consolidated statements of cash flows for the years ended December&#160;31, 2022, 2021 and 2020</span></a></td>
    <td style="vertical-align: bottom; text-align: center"><span style="font-size: 10pt">F-7</span></td></tr>
  <tr style="background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; vertical-align: top"><a href="#f_005"><span style="font-size: 10pt">Notes to consolidated financial statements</span></a></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></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"><span style="background-color: white"><b>REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></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">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">ReTo Eco-solutions, Inc.</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="background-color: white"><b>Opinion
on the Financial</b></span><span style="font-family: Times New Roman, Times, Serif">&#160;</span> <span style="background-color: white"><b>Statements</b></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"><span style="background-color: white">We have
audited the accompanying consolidated balance sheets of </span>ReTo Eco-solutions, Inc. <span style="background-color: white">and subsidiaries
(collectively, the &#8220;Company&#8221;) as of December 31, 2022 and 2021, and the related consolidated statements of operations and
comprehensive income (loss), changes in stockholders&#8217; equity, and cash flows for the years ended December 31, 2022, 2021 and 2020,
and the related notes (collectively referred to as the &#8220;financial statements&#8221;). In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results
of its operations and its cash flows for the years ended December 31, 2022, 2021 and 2020, in conformity with accounting principles generally
accepted in the United States of America.</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; background-color: white"><b>Going Concern</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">The accompanying consolidated
financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated
financial statements, the Company records an accumulated deficit as of December 31, 2022, and the Company currently has net working capital
deficit, continued net losses and negative cash flows from operations. These conditions raise substantial doubt about the Company&#8217;s
ability to continue as a going concern. Management&#8217;s plans in regards to these matters are also described in Note 3. These consolidated
financial statements do not include any adjustments that might result from the outcome of these uncertainties.</p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white"><b>Basis
for Opinion</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">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&#160;and regulations of the Securities and Exchange Commission and the PCAOB.</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">We conducted
our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our 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.</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 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 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.</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: 135; Options: NewSection; Value: 2 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white"><b>Critical
Audit Matters</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">The critical
audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.</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"><i><span style="text-decoration:underline">Impairment
of goodwill - Mingde Reporting Unit &#8212; Refer to Notes 2, and 5 to the financial statements</span></i></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"><span style="background-color: white"><i>Critical
Audit Matter Description</i></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">Goodwill represents the excess of the cost of
an acquisition over the fair value of the identifiable assets acquired less liabilities assumed of an acquired business. The Group&#8217;s
goodwill at December 31, 2021 arose from its business acquisition of REIT Mingde and its subsidiaries. Goodwill acquired in a business
combination is not amortized, but instead tested for impairment at least annually, or more frequently if certain circumstances indicate
a possible impairment may exist. In accordance with ASC 350-20, Intangibles-Goodwill and Other, Goodwill, (&#8220;ASC 350-20&#8221;) the
Group has assigned and assessed goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level
below the operating segment. The Group has determined that it has one reporting unit, which is also its only reportable segment. For the
year ended December 31, 2022, due to the slow development of REIT Mingde and its subsidiaries, the Company performed the two-step test
for the REIT Mingde and its subsidiaries. In accordance with ASC 350-20, the Company recorded an impairment loss of $1,018,870 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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">We identified
goodwill impairment as a critical audit matter because the determination of the estimated future cash flows requires significant management
judgment, specifically forecasting future sales, gross profits and general expenses. Changes in these estimates could have a significant
impact on whether goodwill should be further evaluated for impairment and could have a significant impact on the measurement of the resulting
impairment charge. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures
to evaluate the reasonableness of the Company&#8217;s judgments used in these estimates.</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"><span style="background-color: white"><i>How the
Critical Audit Matter Was Addressed in the Audit</i></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"><span style="background-color: white">Our audit
procedures related to management&#8217;s judgments regarding the estimated future cash flows, specifically projection of future sales,
gross margin and general expense growth assumptions included the following, among others:</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; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(1)</td><td style="text-align: justify"><span style="background-color: white">We evaluated management&#8217;s
ability to accurately estimate future cash flows by comparing actual results to management&#8217;s historical forecasts and internal
communications regarding the Company&#8217;s business plan and strategy.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36pt; text-align: justify; text-indent: -18pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"></td><td style="width: 0.25in; text-align: left">(2)</td><td style="text-align: justify"><span style="background-color: white">We evaluated the reasonableness
of management&#8217;s estimated future cash flows by comparing the projections to historical operating results, performed independent
analysis, and exercised professional judgment during our evaluation process.</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"><span style="background-color: white">/s/ <ix:nonNumeric contextRef="c0" name="dei:AuditorName">YCM CPA, Inc</ix:nonNumeric>.</span></p><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="background-color: white">We have served as the Company&#8217;s
auditor since 2021. </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">PCAOB ID <ix:nonNumeric contextRef="c0" name="dei:AuditorFirmId">6781</ix:nonNumeric><br/>
<ix:nonNumeric contextRef="c0" name="dei:AuditorLocation">Irvine, California</ix:nonNumeric><br/>
May 01, 2023</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: center"><b>RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES</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>CONSOLIDATED BALANCE SHEETS</b></p><div>

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

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <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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  <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-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Receivable from disposition - current</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: -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></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">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Long-term investment in equity investee</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">Right-of-use assets</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Goodwill</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: -9pt; padding-left: 9pt">Total Assets</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: -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></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-decoration: underline; text-align: center; text-indent: -9pt; padding-left: 9pt">LIABILITIES AND 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: 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></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">Current Liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Short-term loans</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherShortTermBorrowings" scale="0" unitRef="usd">1,319,490</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Convertible debt</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConvertibleDebtCurrent" scale="0" unitRef="usd">3,922,686</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="text-align: left; text-indent: -9pt; padding-left: 9pt">Advances from customers</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CustomerAdvancesCurrent" scale="0" unitRef="usd">2,551,216</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Due to a minority shareholder</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="reto:DueToAMinorityShareholder" scale="0" unitRef="usd">725,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-3">-</div></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">Deferred grants - current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredRevenueCurrent" scale="0" unitRef="usd">18,563</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Accounts payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableCurrent" scale="0" unitRef="usd">2,624,701</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="text-align: left; text-indent: -9pt; padding-left: 9pt">Accounts payable - related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-4">-</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="c3" decimals="0" format="ixt:num-dot-decimal" name="reto:AccountPayableRelatedParty" scale="0" unitRef="usd">10,199</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Accrued and other liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableAndOtherAccruedLiabilitiesCurrent" scale="0" unitRef="usd">2,717,432</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="text-align: left; text-indent: -9pt; padding-left: 9pt">Loans from third parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedParty" scale="0" sign="-" unitRef="usd">1,106,233</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="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedParty" scale="0" sign="-" unitRef="usd">1,593,977</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Taxes payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TaxesPayableCurrent" scale="0" unitRef="usd">2,077,088</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="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TaxesPayableCurrent" scale="0" unitRef="usd">2,599,770</ix:nonFraction></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">Due to related parties</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-5">-</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="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrent" scale="0" unitRef="usd">472,439</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Operating lease liabilities, current</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityCurrent" scale="0" unitRef="usd">277,036</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="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityCurrent" scale="0" unitRef="usd">155,857</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Deferred tax liability</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="reto:DeferredTaxLiability" scale="0" unitRef="usd">325,593</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="reto:DeferredTaxLiability" scale="0" unitRef="usd">370,856</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Total Current Liabilities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LiabilitiesCurrent" scale="0" unitRef="usd">17,665,038</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <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></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Loans from third parties-noncurrent</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesNoncurrent" scale="0" unitRef="usd">1,160,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-6">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Operating lease liabilities - noncurrent</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityNoncurrent" scale="0" unitRef="usd">158,650</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityNoncurrent" scale="0" unitRef="usd">120,558</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Total Liabilities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Liabilities" scale="0" unitRef="usd">18,983,688</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Liabilities" scale="0" unitRef="usd">16,876,789</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: 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></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">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-7">&#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-8">&#160;</div></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></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">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: White">
    <td style="text-indent: -9pt; padding-left: 9pt">Common Share, $<ix:nonFraction contextRef="c2" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares"><ix:nonFraction contextRef="c3" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares">0.001</ix:nonFraction></ix:nonFraction> par value, <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares"><ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares">200,000,000</ix:nonFraction></ix:nonFraction> shares authorized, <ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares">43,398,885</ix:nonFraction></ix:nonFraction> shares and <ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares"><ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares">28,965,034</ix:nonFraction></ix:nonFraction> shares issued and outstanding as of December 31, 2022 and 2021, respectively</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockValue" scale="0" unitRef="usd">43,400</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="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockValue" scale="0" unitRef="usd">28,966</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Additional paid-in capital</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AdditionalPaidInCapital" scale="0" unitRef="usd">53,331,093</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="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AdditionalPaidInCapital" scale="0" unitRef="usd">46,776,170</ix:nonFraction></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">Statutory reserve</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="reto:StatutoryReserve" scale="0" unitRef="usd">1,066,554</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="c3" decimals="0" format="ixt:num-dot-decimal" name="reto:StatutoryReserve" scale="0" unitRef="usd">1,230,387</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Accumulated deficit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RetainedEarningsAccumulatedDeficit" scale="0" sign="-" unitRef="usd">47,813,206</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="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RetainedEarningsAccumulatedDeficit" scale="0" sign="-" unitRef="usd">33,347,984</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <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: 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.&#160;</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: 137; Value: 2 --><div>
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</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>RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES</b></p><div>

</div><div><a id="f_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS)</b></p><div>

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

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  <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-align: left">Impairment of long-lived assets</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="text-align: left; padding-bottom: 1.5pt">Research and development expenses</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: 1.5pt">Total Operating Expenses</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Loss from Operations</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingIncomeLoss" scale="0" sign="-" unitRef="usd">15,251,274</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Interest expense</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestExpense" scale="0" unitRef="usd">321,686</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Interest income</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:InterestIncome" scale="0" unitRef="usd">3,234</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="reto:InterestIncome" scale="0" sign="-" unitRef="usd">64</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Other income (expenses), net</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeDefinedBenefitPlansNetUnamortizedGainLossArisingDuringPeriodNetOfTax" scale="0" unitRef="usd">177,753</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeDefinedBenefitPlansNetUnamortizedGainLossArisingDuringPeriodNetOfTax" scale="0" unitRef="usd">480,054</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Loss from disposal of REIT Changjiang</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-12">-</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="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:LossFromDisposalOfREITChangjiang" scale="0" sign="-" unitRef="usd">6,293,149</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-13">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Gain from dissolution of subsidiaries</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:GainFromDissolutionOfSubsidiaries" scale="0" sign="-" unitRef="usd">508,345</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-14">-</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-15">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Gain from disposal of Gu&#8217;an REIT</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-16">-</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-17">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="reto:GainFromDisposalOfGuanREIT" scale="0" sign="-" unitRef="usd">2,231,270</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Share of losses in equity method investments</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:ShareOfLossesInEquityMethodInvestments" scale="0" unitRef="usd">46,209</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="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:ShareOfLossesInEquityMethodInvestments" scale="0" unitRef="usd">142,673</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-18">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Change in fair value convertible debt</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:ChangeInFairValueConvertibleDebt" scale="0" unitRef="usd">467,383</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="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:ChangeInFairValueConvertibleDebt" scale="0" unitRef="usd">1,908,830</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"><div style="-sec-ix-hidden: hidden-fact-19">-</div></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; text-align: left; padding-bottom: 1.5pt">Total Other Income (Expenses), net</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NonoperatingIncomeExpense" scale="0" sign="-" unitRef="usd">8,473,085</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Loss before provision for income taxes</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" scale="0" sign="-" unitRef="usd">15,397,220</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" scale="0" sign="-" unitRef="usd">20,474,074</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest" scale="0" sign="-" unitRef="usd">4,718,033</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Income taxes provision (benefit)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxExpenseBenefit" scale="0" sign="-" unitRef="usd">17,562</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Net loss from continuing operations</td><td style="font-weight: bold">&#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: 1.5pt">Net loss from discontinued operations, net of taxes</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Net Loss</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="0" sign="-" unitRef="usd">15,379,658</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="0" sign="-" unitRef="usd">22,073,933</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Less: net loss attributable to noncontrolling interest</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLossAttributableToRedeemableNoncontrollingInterest" scale="0" sign="-" unitRef="usd">750,603</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt">Net loss attributable to ReTo Eco-Solutions, Inc.</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:NetLossAttributableToReToEcoSolutionsInc" scale="0" unitRef="usd">21,104,826</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Comprehensive Loss:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left">Net Loss</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">$</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic" scale="0" sign="-" unitRef="usd">15,379,658</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Other 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: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Foreign currency translation adjustments</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:ForeignCurrencyTranslationAdjustments" scale="0" unitRef="usd">1,183,819</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="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:ForeignCurrencyTranslationAdjustments" scale="0" sign="-" unitRef="usd">493,769</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="reto:ForeignCurrencyTranslationAdjustments" scale="0" sign="-" unitRef="usd">1,923,316</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="font-weight: bold; text-align: left">Comprehensive Loss</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTax" scale="0" sign="-" unitRef="usd">16,563,477</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTax" scale="0" sign="-" unitRef="usd">21,580,164</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherComprehensiveIncomeLossNetOfTax" scale="0" sign="-" unitRef="usd">10,977,292</ix:nonFraction></td><td style="font-weight: bold; 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">Less: comprehensive loss attributable to noncontrolling interest</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTaxAttributableToNoncontrollingInterest" scale="0" sign="-" unitRef="usd">680,918</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="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTaxAttributableToNoncontrollingInterest" scale="0" sign="-" unitRef="usd">938,771</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTaxAttributableToNoncontrollingInterest" scale="0" sign="-" unitRef="usd">1,132,148</ix:nonFraction></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; text-align: left; padding-bottom: 4pt">Comprehensive loss attributable to ReTo Eco-Solutions, Inc.</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTax" scale="0" sign="-" unitRef="usd">15,882,559</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTax" scale="0" sign="-" unitRef="usd">20,641,393</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ComprehensiveIncomeNetOfTax" scale="0" sign="-" unitRef="usd">9,845,144</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">Net loss attributable to ReTo Eco-Solutions, Inc.</td><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">Continuing operations</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsAttributableToNoncontrollingEntity" scale="0" unitRef="usd">14,629,055</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="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsAttributableToNoncontrollingEntity" scale="0" unitRef="usd">19,508,436</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsAttributableToNoncontrollingEntity" scale="0" unitRef="usd">4,161,162</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Discontinued operations</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-21">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromDiscontinuedOperationsNetOfTaxAttributableToNoncontrollingInterest" scale="0" unitRef="usd">1,596,390</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromDiscontinuedOperationsNetOfTaxAttributableToNoncontrollingInterest" scale="0" unitRef="usd">7,612,601</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; padding-bottom: 4pt">Total</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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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; 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: 138; Value: 2 --><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>
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    </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"><b>RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES</b></p><div>

</div><div><a id="f_003"></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"><b>FOR THE YEARS ENDED DECEMBER 31, 2022, 2021
AND 2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 40pt">&#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-align: center">&#160;</td><td style="text-align: center">&#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: 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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    <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="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Net loss</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-98">-</div></td><td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-99">-</div></td><td style="font-weight: bold; text-align: left">&#160;</td>
    <td style="text-align: left">&#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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  <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="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><div style="-sec-ix-hidden: hidden-fact-121">-</div></td><td style="font-weight: bold; text-align: left">&#160;</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: 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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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 40pt">&#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; text-indent: 40pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 40pt"></p><div>

</div><!-- Field: Page; Sequence: 139; Value: 2 --><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-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS INC.</b></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"><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">&#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>&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left">CASH FLOWS FROM OPERATING ACTIVITIES</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <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-align: left; text-indent: -9pt; padding-left: 9pt">Adjustments to reconcile net loss to net cash provided by (used in) operating 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)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Deferred tax provision (benefit)</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="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DepreciationDepletionAndAmortization" scale="0" unitRef="usd">621,805</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="text-align: left; padding-left: 9pt">Change in fair value in convertible debt</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)">
    <td style="text-align: left; padding-left: 9pt">Impairment of long-lived assets</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Stock-based compensation</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Change in bad debt allowances</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Change in inventory reserve</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="text-align: left; padding-left: 9pt">(Gain) loss from disposal of subsidiary</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Gain from dissolution of a subsidiary</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: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Amortization of operating lease right-of-use assets</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>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Accounts receivable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsReceivable" scale="0" unitRef="usd">2,745,026</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-align: left; padding-left: 9pt">Accounts receivable - related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseInAccountsReceivableRelatedParty" scale="0" sign="-" unitRef="usd">2,824</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Advances to suppliers</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidSupplies" scale="0" sign="-" unitRef="usd">255,613</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="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidSupplies" scale="0" sign="-" unitRef="usd">905,758</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidSupplies" scale="0" sign="-" unitRef="usd">2,621,196</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Advances to suppliers - related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseInPrepaidSuppliesRelatedParties" scale="0" unitRef="usd">241,714</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 9pt">Inventories</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInInventories" scale="0" sign="-" unitRef="usd">108,188</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInInventories" scale="0" unitRef="usd">58,308</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Prepayments and other current assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" scale="0" unitRef="usd">134,711</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="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" scale="0" unitRef="usd">128,130</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" scale="0" unitRef="usd">742,853</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Changes in operating 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></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Advances from customers</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseInCustomerAdvance" scale="0" unitRef="usd">662,391</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="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseInCustomerAdvance" scale="0" sign="-" unitRef="usd">1,436,799</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseInCustomerAdvance" scale="0" unitRef="usd">423,517</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Advances from customers - related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueFromRelatedParties" scale="0" unitRef="usd">2,201</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInDueFromRelatedParties" scale="0" sign="-" unitRef="usd">2,056</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Deferred revenue</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseDeferredRevenue" scale="0" sign="-" unitRef="usd">254,828</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="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseDeferredRevenue" scale="0" sign="-" unitRef="usd">31,000</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseDeferredRevenue" scale="0" unitRef="usd">25,051</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Deferred grants</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:DeferredGrants" scale="0" unitRef="usd">19,024</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="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:DeferredGrants" scale="0" sign="-" unitRef="usd">230,197</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="reto:DeferredGrants" scale="0" unitRef="usd">463,360</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Accounts payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseInLongTermAccountsPayable" scale="0" unitRef="usd">680,770</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="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseInLongTermAccountsPayable" scale="0" unitRef="usd">1,163,509</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="reto:IncreaseDecreaseInLongTermAccountsPayable" scale="0" sign="-" unitRef="usd">477,341</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Accounts payable - related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayableRelatedParties" scale="0" sign="-" unitRef="usd">9,659</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="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayableRelatedParties" scale="0" sign="-" unitRef="usd">144,969</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayableRelatedParties" scale="0" sign="-" unitRef="usd">1,352,618</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Accrued and other liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherAccountsPayableAndAccruedLiabilities" scale="0" sign="-" unitRef="usd">240,979</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="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherAccountsPayableAndAccruedLiabilities" scale="0" unitRef="usd">997,686</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOtherAccountsPayableAndAccruedLiabilities" scale="0" unitRef="usd">1,088,452</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Taxes payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedTaxesPayable" scale="0" sign="-" unitRef="usd">641,431</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="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedTaxesPayable" scale="0" unitRef="usd">76,419</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedTaxesPayable" scale="0" unitRef="usd">698,905</ix:nonFraction></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">
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Proceeds from disposal of subsidiaries</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Addition 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="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquirePropertyPlantAndEquipment" scale="0" unitRef="usd">149,547</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-align: left; padding-left: 9pt">Addition of intangible assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireIntangibleAssets" scale="0" unitRef="usd">1,303,965</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Investment in equity method investment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-142">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="reto:PaymentsToAcquireEquityMethodInvestment" scale="0" unitRef="usd">2,649,840</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Prepayment on CIP</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:PrepaymentOnCIP" scale="0" unitRef="usd">2,552,958</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 9pt">Net cash from acquisition of REIT Mingde</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"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:DepositMadeForAcquisition" scale="0" sign="-" unitRef="usd">21,339</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-143">-</div></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; text-align: left; padding-left: 9pt">Net cash provided by&#160;investing activities from continuing operations</td><td style="font-weight: bold">&#160;</td>
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    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInInvestingActivitiesContinuingOperations" scale="0" unitRef="usd">100,158</ix:nonFraction></td><td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInInvestingActivitiesContinuingOperations" scale="0" unitRef="usd">1,129,136</ix:nonFraction></td><td style="font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 1.5pt; padding-left: 9pt">Net cash used in investing activities from discontinued operations</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="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashProvidedByUsedInInvestingActivitiesDiscontinuedOperations" scale="0" sign="-" unitRef="usd">1,843,757</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashProvidedByUsedInInvestingActivitiesDiscontinuedOperations" scale="0" sign="-" unitRef="usd">184,735</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-left: 9pt">Net cash provided by (used in) investing activities</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInInvestingActivities" scale="0" unitRef="usd">4,242,703</ix:nonFraction></td><td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInInvestingActivities" scale="0" sign="-" unitRef="usd">1,743,599</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <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">CASH FLOWS FROM FINANCING ACTIVITIES</td><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; padding-left: 9pt">Proceeds from short-term bank loans</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromOtherShortTermDebt" scale="0" unitRef="usd">668,700</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromOtherShortTermDebt" scale="0" unitRef="usd">11,012,040</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Repayment of short-term bank loans</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfShortTermDebt" scale="0" unitRef="usd">1,545,450</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="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfShortTermDebt" scale="0" unitRef="usd">5,774,926</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfShortTermDebt" scale="0" unitRef="usd">13,097,915</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Repayment of long-term bank loans</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfLongTermDebt" scale="0" unitRef="usd">1,394,854</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfLongTermDebt" scale="0" unitRef="usd">144,937</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-left: 9pt">Proceeds received from share issuance</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromStockPlans" scale="0" unitRef="usd">3,582,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <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">-</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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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 9pt">Repayment of related party loans</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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    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivitiesContinuingOperations" scale="0" sign="-" unitRef="usd">684,362</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#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: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Net cash provided by financing activities&#160;from discontinued operations</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashProvidedByUsedInFinancingActivitiesDiscontinuedOperations" scale="0" unitRef="usd">4,732,509</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashProvidedByUsedInFinancingActivitiesDiscontinuedOperations" scale="0" unitRef="usd">367,808</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-left: 9pt">Net cash provided by (used in) financing activities</td><td style="font-weight: bold">&#160;</td>
    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="0" unitRef="usd">4,755,815</ix:nonFraction></td><td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <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: -9pt; padding-left: 9pt">EFFECT OF EXCHANGE RATE CHANGES ON CASH </td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EffectOfExchangeRateOnCashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" sign="-" unitRef="usd">203,651</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalentsPeriodIncreaseDecreaseIncludingExchangeRateEffect" scale="0" sign="-" unitRef="usd">343,600</ix:nonFraction></td><td style="font-weight: bold; text-align: left">)</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <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: -9pt; padding-left: 9pt">CASH, BEGINNING OF YEAR</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c25" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" unitRef="usd">1,120,840</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c12" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" unitRef="usd">985,715</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt">CASH, END OF YEAR</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  <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">-</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="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Cash and cash equivalents, restricted cash of continued operation, at end of period</td><td style="font-weight: bold; padding-bottom: 4pt">&#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: 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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  <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-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Withdrawal of capital by original minority shareholder in Xinyi REIT</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-151">-</div></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Share to be issued for acquisition of REIT Mingde</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">-</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </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: 140; Value: 2 --><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="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"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></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>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 1 &#8211; ORGANIZATION AND DESCRIPTION OF BUSINESS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#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">ReTo Eco-Solutions, Inc. (&#8220;ReTo&#8221;)
is a business company established under the laws of the British Virgin Islands on August 7, 2015 as a holding company to develop business
opportunities in the People&#8217;s Republic of China (the &#8220;PRC&#8221; or &#8220;China&#8221;). ReTo and its subsidiaries are collectively
referred to as the Company. ReTo, through its subsidiaries, is engaged in (i) manufacture and distribution of eco-friendly construction
materials and equipment used for the production of these eco-friendly construction materials and related consultation and technological
services; (ii) consultation, design, project implementation and construction of urban ecological protection projects; (iii) roadside assistance
services; and (iv) software development services.</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">As of December 31, 2022, the accompanying consolidated
financial statements of the Company reflected the principal activities of the entities listed below. All inter-company balances and transactions
have been eliminated upon consolidation.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_4" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfSubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipDescriptionTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfSubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipDescriptionTextBlock"><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 style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">ReTo Eco-Solutions, Inc.</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Beijing REIT Ecological Engineering Technology Co., Ltd. (&#8220;Beijing REIT Ecological&#8221;)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Hainan REIT Construction Engineering Co., Ltd. (&#8220;REIT Construction&#8221;)**</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">REIT New Materials Xinyi Co., Ltd. (&#8220;Xinyi REIT&#8221;)</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c55" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Xinyi, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c55" continuedAt="reto_OwnershipPercentageDescription-c55_cont_1" name="reto:OwnershipPercentageDescription">70</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c55_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Nanjing Dingxuan Environmental Protection Technology Development Co., Ltd. (&#8220;Dingxuan&#8221;)**</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">REIT Q GREEN Machines Private Ltd (&#8220;REIT India&#8221;)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">REIT Ecological Technology Co., Ltd. (&#8220;REIT Ordos&#8221;)*</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Datong Ruisheng Environmental Engineering Co., Ltd. (&#8220;Datong Ruisheng&#8221;)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c59" continuedAt="reto_OwnershipPercentageDescription-c59_cont_1" name="reto:OwnershipPercentageDescription">100</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c59_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Guangling REIT Ecological Cultural Tourism Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c60" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Datong, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c60" continuedAt="reto_OwnershipPercentageDescription-c60_cont_1" name="reto:OwnershipPercentageDescription">100</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c60_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">REIT (Xiong&#8217;an, Hebei) Eco Technology Co., Ltd. (&#8220;REIT Xiong&#8217;an&#8221;)**</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c61" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Xiong&#8217;an, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="-sec-ix-hidden: hidden-fact-155">-</span></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">REIT Technology Development Co., Ltd (&#8220;REIT Technology&#8221;)</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c62" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Haikou, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c62" continuedAt="reto_OwnershipPercentageDescription-c62_cont_1" name="reto:OwnershipPercentageDescription">100</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c62_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Hainan REIT Mingde Investment Holding Co., Ltd (&#8220;REIT Mingde&#8221;)</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c63" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Haikou, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c63" continuedAt="reto_OwnershipPercentageDescription-c63_cont_1" name="reto:OwnershipPercentageDescription">100</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c63_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Yangpu Fangyuyuan United Logistics Co., Ltd. (&#8220;Fangyuyuan&#8221;)</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c64" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Haikou, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c64" continuedAt="reto_OwnershipPercentageDescription-c64_cont_1" name="reto:OwnershipPercentageDescription">90</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c64_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Hainan Kunneng Direct Supply Chain Management Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c65" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Haikou, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c65" continuedAt="reto_OwnershipPercentageDescription-c65_cont_1" name="reto:OwnershipPercentageDescription">51</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c65_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Hainan Yile IoT Technology Co., Ltd (&#8220;Hainan Yile IoT&#8221;)</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c66" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Haikou, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c66" continuedAt="reto_OwnershipPercentageDescription-c66_cont_1" name="reto:OwnershipPercentageDescription">61.6</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c66_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Hainan Yile IoV Technology Research Institute Co., Ltd, (&#8220;IoV Technology Research&#8221;)</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c67" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Haikou, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c67" continuedAt="reto_OwnershipPercentageDescription-c67_cont_1" name="reto:OwnershipPercentageDescription">90</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c67_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Ruishi Tongda Ecological Management Co., Ltd.**</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c68" id="ix_2_fact" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Gansu,China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c68" continuedAt="_OwnershipPercentageDescription-c68_cont_1" id="ix_3_fact" name="reto:OwnershipPercentageDescription">70</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="_OwnershipPercentageDescription-c68_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Honghe Ruitu Ecological Technology Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c69" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Yunnan,China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c69" continuedAt="reto_OwnershipPercentageDescription-c69_cont_1" name="reto:OwnershipPercentageDescription">100</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c69_cont_1">%</ix:continuation></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Hainan Coconut Network Freight Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: center"><ix:nonNumeric contextRef="c70" name="us-gaap:SubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipState">Haikou, China</ix:nonNumeric></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c70" continuedAt="reto_OwnershipPercentageDescription-c70_cont_1" name="reto:OwnershipPercentageDescription">100</ix:nonNumeric></td><td style="text-align: left"><ix:continuation id="reto_OwnershipPercentageDescription-c70_cont_1">%</ix:continuation></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_4"><ix:continuation id="_ScheduleOfSubsidiaryOfLimitedLiabilityCompanyOrLimitedPartnershipDescriptionTextBlock-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"> <td style="width: 24px; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td> <td style="text-align: justify; font-size: 10pt"><ix:footnote id="ix_0_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Previously known as &#8220;REIT Yangcheng&#8221;</span></ix:footnote></td></tr> <tr style="vertical-align: top"> <td style="font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">**</span></td> <td style="text-align: justify; font-size: 10pt"><ix:footnote id="ix_1_footnote" xml:lang="en-US"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dingxuan was dissolved on August 30, 2022; REIT Xiong&#8217;an was dissolved on September 9, 2022. REIT Construction was dissolved subsequently on February 9, 2023. Ruishi Tongda Ecological Management Co., Ltd. was dissolved on March 7, 2023.</span></ix:footnote></td></tr> </table></ix:continuation></ix:continuation><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: 141; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_1" escape="true" name="us-gaap:SignificantAccountingPoliciesTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b>&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#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="_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"><b>Use of Estimates</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_3" id="_SignificantAccountingPoliciesTextBlock-c0_cont_2"><ix:continuation continuedAt="_UseOfEstimates-c0_cont_2" id="_UseOfEstimates-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of financial statements in conformity
with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. These estimates are based on information as of the date of 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_4" id="_SignificantAccountingPoliciesTextBlock-c0_cont_3"><ix:continuation id="_UseOfEstimates-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Significant estimates required to be made by management
include, but are not limited to, the valuation of accounts receivable, inventories, advances to suppliers, useful lives of property, plant
and equipment, intangible assets, the recoverability of long-lived assets, provision necessary for contingent liabilities, revenue recognition
under the input method, and realization of deferred tax assets. Actual results could differ from those 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_5" id="_SignificantAccountingPoliciesTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" continuedAt="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Cash and Cash Equivalents</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_6" id="_SignificantAccountingPoliciesTextBlock-c0_cont_5"><ix:continuation id="_CashAndCashEquivalentsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cash and cash equivalents represent cash on hand
and cash deposited in major third-party payment processing platform such as Alipay. In addition, highly liquid investments which have
original maturities of three months or less when purchased are classified as cash equivalents. The Company maintains most of the bank
accounts in the PRC. On May 1, 2015, the PRC&#8217;s new Deposit Insurance Regulation came into effect, pursuant to which banking financial
institutions, such as commercial banks, established in the PRC are required to purchase deposit insurance for deposits in RMB and in foreign
currency placed with them. Such Deposit Insurance Regulation would not be effective in providing complete protection for the Company&#8217;s
accounts, as its aggregate deposits are much higher than the compensation limit, which is RMB<ix:nonFraction contextRef="c71" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InsuranceRecoveries" scale="0" unitRef="cny">500,000</ix:nonFraction> for one bank.</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_7" id="_SignificantAccountingPoliciesTextBlock-c0_cont_6"><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"><b>Accounts Receivable, net</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_8" id="_SignificantAccountingPoliciesTextBlock-c0_cont_7"><ix:continuation id="_ReceivablesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accounts receivable are recognized and carried
at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers with
good credit standing with a maximum of 180 days and determines the adequacy of reserves for doubtful accounts based on individual account
analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence
that the Company may not be able to collect amounts due. 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. Based on the assessment of customers&#8217; credit
and ongoing relationships, the Company&#8217;s payment terms typically range from 90 days to 1 year. The provision is recorded against
accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income.
Actual amounts received may differ from management&#8217;s estimate of credit worthiness and the economic environment. Delinquent account
balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection
is not probable. As affected by the ongoing COVID-19 pandemic, the Company&#8217;s accounts receivable collection was negatively affected.
Based on subsequent collection analysis, the Company accrued increased bad debt reserve for the outstanding accounts receivable as of
December 31, 2022. As a result, allowance for uncollectible balances amounted to $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="reto:AllowancesForDoubtfulAccountsReceivables" scale="0" unitRef="usd">1,771,761</ix:nonFraction> and&#160;$<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="reto:AllowancesForDoubtfulAccountsReceivables" scale="0" unitRef="usd">904,052</ix:nonFraction> 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>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_10" id="_SignificantAccountingPoliciesTextBlock-c0_cont_9"><ix:continuation continuedAt="_InventoryPolicyTextBlock-c0_cont_2" id="_InventoryPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Inventories are stated at the lower of cost or
net realizable value. Costs include the cost of raw materials, freight, direct labor and related production overhead. The cost of inventories
is calculated using the weighted average method. Any excess of the cost over the net realizable value of each item of inventories is recognized
as a provision for diminution in the value of inventories.</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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price in the normal course of business less any costs to complete and sell products.&#160;The Company evaluates inventories on a quarterly
basis for its net realizable value adjustments, and reduces the carrying value of those inventories that are obsolete or in excess of
the forecasted usage to their estimated net realizable value based on various factors including aging and future demand of each type of
inventories. The Company recorded an inventory reserve of $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryValuationReserves" scale="0" unitRef="usd">31,527</ix:nonFraction> and $<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryValuationReserves" scale="0" unitRef="usd">12,116</ix:nonFraction> from its continuing operations as of December 31, 2022 and
2021, respectively.&#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>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_13" id="_SignificantAccountingPoliciesTextBlock-c0_cont_12"><ix:continuation id="reto_AdvancesToSuppliersPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Advances to suppliers consist of balances paid
to suppliers for services and materials that have not been provided or received. Advances to suppliers for service and material are short-term
in nature. Advances to Suppliers 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. In addition, at each reporting date, the Company generally determines the adequacy of allowance
for doubtful accounts by evaluating all available information, and then records specific allowances for those advances based on the specific
facts and circumstances. Allowance for uncollectible balances from the continuing operations amounted to $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="reto:AllowancesForDoubtfulAccountsAdvancesToSuppliers" scale="0" unitRef="usd">449,517</ix:nonFraction> and $<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="reto:AllowancesForDoubtfulAccountsAdvancesToSuppliers" scale="0" unitRef="usd">965,843</ix:nonFraction> as of December
31, 2022 and 2021, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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

</div><!-- Field: Page; Sequence: 142; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</b></p><div>

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

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_14" id="_SignificantAccountingPoliciesTextBlock-c0_cont_13"><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"><b>Property, Plant and Equipment</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_15" id="_SignificantAccountingPoliciesTextBlock-c0_cont_14"><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. The
straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_16" id="_SignificantAccountingPoliciesTextBlock-c0_cont_15"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfPropertyAndEquipmentEstimatedUsefulLivesTableTextBlock"><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: bottom">
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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  <tr style="vertical-align: bottom">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_17" id="_SignificantAccountingPoliciesTextBlock-c0_cont_16"><ix:continuation id="_PropertyPlantAndEquipmentPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Expenditures for maintenance and repairs, which
do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments
which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired
or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other
comprehensive income in other income or expenses.&#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_18" id="_SignificantAccountingPoliciesTextBlock-c0_cont_17"><ix:nonNumeric contextRef="c0" continuedAt="_PlantConstructionUsingIntermediaryPolicy-c0_cont_1" escape="true" name="us-gaap:PlantConstructionUsingIntermediaryPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Construction-in-Progress (&#8220;CIP&#8221;)</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_19" id="_SignificantAccountingPoliciesTextBlock-c0_cont_18"><ix:continuation id="_PlantConstructionUsingIntermediaryPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Construction-in-progress represents property and
buildings under construction and consists of construction expenditures, equipment procurement, and other direct costs attributable to
the construction. Construction-in-progress is not depreciated. Upon completion and ready for intended use, construction-in-progress is
reclassified to the appropriate category within property, plant and equipment.</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_20" id="_SignificantAccountingPoliciesTextBlock-c0_cont_19"><ix:nonNumeric contextRef="c0" continuedAt="_IntangibleAssetsFiniteLivedPolicy-c0_cont_1" escape="true" name="us-gaap:IntangibleAssetsFiniteLivedPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Intangible Assets</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_21" id="_SignificantAccountingPoliciesTextBlock-c0_cont_20"><ix:continuation continuedAt="_IntangibleAssetsFiniteLivedPolicy-c0_cont_2" id="_IntangibleAssetsFiniteLivedPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Intangible assets consist primarily of land use
rights and software. Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company.
The government grants individuals and companies the right to use parcels of land for specified periods of time. These land use rights
are sometimes referred to informally as &#8220;ownership&#8221;. Land use rights are stated at cost less accumulated amortization. Intangible
assets are amortized using the straight-line method with the following estimated useful lives:</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_22" id="_SignificantAccountingPoliciesTextBlock-c0_cont_21"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfIntangibleAssetsAndGoodwillTableTextBlock"><ix:continuation id="_IntangibleAssetsFiniteLivedPolicy-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: bottom">
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    <td style="white-space: nowrap; width: 1%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; white-space: nowrap; width: 9%; text-align: center"><span style="font-size: 10pt"><b>Useful life</b></span></td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td><span style="font-size: 10pt">Land use rights</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom">
    <td><span style="font-size: 10pt">Software</span></td>
    <td>&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_23" id="_SignificantAccountingPoliciesTextBlock-c0_cont_22"><ix:nonNumeric contextRef="c0" continuedAt="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_1" escape="true" name="us-gaap:GoodwillAndIntangibleAssetsGoodwillPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Goodwill</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_24" id="_SignificantAccountingPoliciesTextBlock-c0_cont_23"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_2" id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill represents the excess of the cost of
an acquisition over the fair value of the identifiable assets acquired less liabilities assumed of an acquired business. The Group&#8217;s
goodwill at December 31, 2021 arose from its business acquisition of REIT Mingde and its subsidiaries. Goodwill acquired in a business
combination is not amortized, but instead tested for impairment at least annually, or more frequently if certain circumstances indicate
a possible impairment may exist.</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_25" id="_SignificantAccountingPoliciesTextBlock-c0_cont_24"><ix:continuation continuedAt="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_3" id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with ASC 350-20, Intangibles-Goodwill
and Other, Goodwill, (&#8220;ASC 350-20&#8221;) the Group has assigned and assessed goodwill for impairment at the reporting unit level.
A reporting unit is an operating segment or one level below the operating segment. The Group has determined that it has one reporting
unit, which is also its only reportable segment. The Group has the option to first assess qualitative factors to determine whether it
is necessary to perform the two-step test in accordance with ASC 350-20. If the Group believes, as a result of the qualitative assessment,
that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative
impairment test described below is required. Otherwise, no further testing is required. In the qualitative assessment, the Group considers
primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information
related to the operations. In performing the two-step quantitative impairment test, the first step compares the carrying amount of the
reporting unit to the fair value of the reporting unit based on either quoted market prices of the ordinary shares or estimated fair value
using a combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value
of the reporting unit, goodwill is not impaired, and the Group is not required to perform further testing. If the carrying value of the
reporting unit exceeds the fair value of the reporting unit, then the Group must perform the second step of the impairment test in order
to determine the implied fair value of the reporting unit&#8217;s goodwill. The fair value of the reporting unit is allocated to its assets
and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit
goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss.</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_26" id="_SignificantAccountingPoliciesTextBlock-c0_cont_25"><ix:continuation id="_GoodwillAndIntangibleAssetsGoodwillPolicy-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2022, due to the
slow development of REIT Mingde and its subsidiaries, the Group performed the two-step test for the reporting unit. In accordance with
ASC 350-20, the Group recorded an impairment loss of $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:ImpairmentLoss" scale="0" unitRef="usd">1,018,870</ix:nonFraction> (RMB <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:ImpairmentLoss" scale="0" unitRef="cny">6,856,458</ix:nonFraction>) for the year ended December 31, 2022.</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: 143; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES&#160;</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)</b></p><div>

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

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_27" id="_SignificantAccountingPoliciesTextBlock-c0_cont_26"><ix:nonNumeric contextRef="c0" continuedAt="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Impairment of Long-lived Assets</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_28" id="_SignificantAccountingPoliciesTextBlock-c0_cont_27"><ix:continuation id="_ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company reviews long-lived assets, including
definitive-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset&#8217;s
carrying value, then the asset is deemed to be impaired and written down to its fair value. Given the Company&#8217;s net loss position
in fiscal 2022, 2021 and 2020, the Company further assessed that the expected future cash flow generated from its machinery, equipment,
and other long-lived assets would not recover their carrying value and as a result, the Company recorded an impairment of approximately
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</div><div>

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</div><div>

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</div><div>

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exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting
in accordance with ASC 323,&#160;Investments-Equity Method and Joint Ventures (&#8220;ASC 323&#8221;). Under the equity method, the Company
initially records its investment at cost and the difference between the cost of the equity investee and the amount of the underlying equity
in the net assets of the equity investee is accounted for as if the investee were a consolidated subsidiary. The share of earnings or
losses of the investee are recognized in the consolidated statements of comprehensive loss. Equity method adjustments include the Company&#8217;s
proportionate share of investee income or loss, adjustments to recognize certain differences between the Company&#8217;s carrying value
and its equity in net assets of the investee at the date of investment, impairments, and other adjustments required by the equity method.
The Company assesses its equity investment for other-than-temporary impairment by considering factors as well as all relevant and available
information including, but not limited to, current economic and market conditions, the operating performance of the investees including
current earnings trends, the general market conditions in the investee&#8217;s industry or geographic area, factors related to the investee&#8217;s
ability to remain in business, such as the investee&#8217;s liquidity, debt ratios, and cash burn rate and other company-specific information.</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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determinable fair values are measured at cost minus impairment adjusted by observable price changes in orderly transactions for the identical
or a similar investment of the same issuer. These investments are measured at fair value on a nonrecurring basis when there are events
or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements
of comprehensive loss equal to the amount by which the carrying value exceeds the fair value of the investment. Prior to the adoption
of ASU 2016-01 on January&#160;1, 2019, these investments were accounted for using the cost method of accounting, measured at cost less
other-than-temporary impairment.</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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in Shexian Ruibo Environmental Science and Technology Co., Ltd. (Shexian Ruibo). On September 7, 2020, the Company acquired such equity
interest from an original shareholder of Shexian Ruibo and the original shareholder of Shexian Ruibo. Shexian Ruibo manufactures and sells
eco-friendly construction materials in the PRC. The Company accounted for the investments using equity method, because the Company has
significant influence but does not own a majority equity interest or otherwise control over the equity investee. Under 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. When the Company&#8217;s share of losses in the equity investee equals or exceeds its interest
in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or
guarantees on behalf of the equity investee. For the years ended December 31, 2022 and 2021, the investment loss from Shexian Ruibo was
$<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentRealizedGainLossOnDisposal" scale="0" unitRef="usd">46,209</ix:nonFraction> and $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentRealizedGainLossOnDisposal" scale="0" unitRef="usd">142,673</ix:nonFraction>, 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>

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in equity investees to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors
the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee;
other company specific information such as recent financing rounds; the geographic region, market and industry in which the equity investee
operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed
to be other-than-temporary, the carrying value of the equity investee is written down to fair value. As of December 31, 2022 and December
31, 2021, the Company did not recognize any impairment on its equity investment.&#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><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: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</b></p><div>

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

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_36" id="_SignificantAccountingPoliciesTextBlock-c0_cont_35"><ix:continuation id="_LesseeLeasesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company adopted ASU No. 2016-02&#8212;Leases
(Topic 842) on January 1, 2019 using the modified retrospective transition method permitted under ASU No. 2018-11. This transition approach
provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted.
In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among
other things, allowed us to carry forward the historical lease classification. The standard did not materially impact our consolidated
net earnings and cash flows.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_37" id="_SignificantAccountingPoliciesTextBlock-c0_cont_36"><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"><b>Fair Value of Financial Instruments</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_38" id="_SignificantAccountingPoliciesTextBlock-c0_cont_37"><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_39" id="_SignificantAccountingPoliciesTextBlock-c0_cont_38"><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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  <tr>
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  <tr>
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  <tr>
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  <tr>
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_40" id="_SignificantAccountingPoliciesTextBlock-c0_cont_39"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_4" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company considers the recorded value of its
financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, advance to suppliers, accounts
payable, accrued and other liabilities, advances from customers, deferred revenue, taxes payable and due to related parties to approximate
the fair value of the respective assets and liabilities at December31, 2022 and 2021, based upon the short-term nature of the assets and
liabilities.</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:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_5" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company believes that the carrying amount
of the short-term and long-term borrowings approximates fair value at December31, 2022 and 2021 based on the terms of the borrowings and
current market rates as the rates of the borrowings are reflective of the current market rates.</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_42" id="_SignificantAccountingPoliciesTextBlock-c0_cont_41"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_6" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company elected the fair value option to account
for its convertible loans. The Company engaged an independent valuation firm to perform the valuation. The fair value of the convertible
loans included in short term debts as of December 31, 2022 was $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShortTermLeaseCost" scale="0" unitRef="usd">3,922,686</ix:nonFraction> calculated using the binomial tree model. The convertible loans
are classified as level 3 instruments as the valuation was determined based on unobservable inputs which are supported by little or no
market activity and reflect the Company&#8217;s own assumptions in measuring fair value. Significant estimates used in developing the
fair value of the convertible loans include time to maturity, risk-free interest rate, straight debt discount rate, probability to convert
and expected timing of conversion. Refer to Note 13 for additional information.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_43" id="_SignificantAccountingPoliciesTextBlock-c0_cont_42"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_7" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As the inputs used in developing the fair value
for level 3 instruments are unobservable, and require significant management estimate, a change in these inputs could result in a significant
change in the fair value measurement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_44" id="_SignificantAccountingPoliciesTextBlock-c0_cont_43"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_8" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following is a reconciliation of the beginning
and ending balances for convertible loans measured at fair value on a recurring basis using significant unobservable inputs (Level 3)
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></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_45" id="_SignificantAccountingPoliciesTextBlock-c0_cont_44"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ConvertibleDebtTableTextBlock"><ix:continuation id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: justify">Opening balance</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="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FairValueMeasurementWithUnobservableInputsReconciliationsRecurringBasisLiabilityValue" scale="0" unitRef="usd">1,645,000</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">New convertible loans issued</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Accrued interest</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestPayableCurrent" scale="0" unitRef="usd">194,117</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">Loss on change in fair value of convertible loan</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrealizedGainLossOnDerivatives" scale="0" unitRef="usd">467,383</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify; padding-bottom: 1.5pt">Conversion of convertible loans</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><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>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</b></p><div>

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

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</div><div>

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Contracts with Customers (&#8220;ASC 606&#8221;) on January 1, 2018 using the modified retrospective approach. Under ASC 606, revenue
is recognized when control of promised goods or services is transferred to the Company&#8217;s customers in an amount of consideration
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</div><div>

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obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable
that a significant future reversal will&#160;not&#160;occur, (iv) allocate the transaction price to the respective performance obligations
in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_50" id="_SignificantAccountingPoliciesTextBlock-c0_cont_49"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_5" id="_RevenueRecognitionPolicyTextBlock-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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receive the equipment. The Company determines that such product warranty is not a separated performance obligation because the nature
of warranty is to provide assurance that a product will function as expected and in accordance with customer&#8217;s specification and
the Company has not sold the warranty separately. From its past experience, the Company has not experienced any material warranty costs
and, therefore, the Company does not believe an accrual for warranty cost is necessary for the years ended December 31, 2022, 2021 and
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_52" id="_SignificantAccountingPoliciesTextBlock-c0_cont_51"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_7" id="_RevenueRecognitionPolicyTextBlock-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_54" id="_SignificantAccountingPoliciesTextBlock-c0_cont_53"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_9" id="_RevenueRecognitionPolicyTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_55" id="_SignificantAccountingPoliciesTextBlock-c0_cont_54"><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 provides municipal construction services,
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the transfer of control occurs, based on a percentage-of-completion method using cost-to-cost input methods as a measure of progress.
When the percentage-of-completion method is used, the Company estimates the costs to complete individual contracts and records as revenue
that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated
costs (the cost-to-cost approach).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><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>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</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>Revenue Recognition (continued)</b></p><div>

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

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costs to complete each contract is a significant variable in the process of determining recognized revenue, requires judgment and can
change throughout the duration of a contract due to contract modifications and other factors impacting job completion. The costs of earned
revenue include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor,
supplies, tools and repairs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_57" id="_SignificantAccountingPoliciesTextBlock-c0_cont_56"><ix:continuation continuedAt="_RevenueRecognitionPolicyTextBlock-c0_cont_12" id="_RevenueRecognitionPolicyTextBlock-c0_cont_11"><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_58" id="_SignificantAccountingPoliciesTextBlock-c0_cont_57"><ix:continuation id="_RevenueRecognitionPolicyTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognizes revenue when technological
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</div><div>

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</div><div>

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pre-established credit requirements based upon an evaluation of customers&#8217; credit quality. Contact assets are recognized for in
related accounts receivable. Contract liabilities are recognized for contracts where payment has been received in advance of delivery.
The contract liability balance can vary significantly depending on the timing of when an order is placed and when shipment or delivery
occurs.</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_61" id="_SignificantAccountingPoliciesTextBlock-c0_cont_60"><ix:continuation id="_RevenueFromContractWithCustomerPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022 and 2021, other than accounts
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recorded on its consolidated balance sheet. Costs of fulfilling customers&#8217; purchase orders, such as shipping, handling and delivery,
which occur prior to the transfer of control, are recognized in selling, general and administrative expense when 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>

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</div><div>

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by products and services, as we believe it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are
affected by economic factors. The Company&#8217;s disaggregation of revenues for the years ended December 31, 2022, 2021 and 2020 is disclosed
in Note 21.</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_64" id="_SignificantAccountingPoliciesTextBlock-c0_cont_63"><ix:nonNumeric contextRef="c0" continuedAt="_ShippingAndHandlingCostPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:ShippingAndHandlingCostPolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Shipping and Handling</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>

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statements of income and comprehensive income. Shipping and handling costs associated with the Company&#8217;s continuing operations were
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</div><div>

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</div><div>

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from PRC government or related institutions. Cash subsidies which have no defined rules and regulations to govern the criteria necessary
for companies to enjoy the benefits are recognized as other income, net when received. Specific subsidies that local government has provided
for a specific purpose, such as research and development are recorded as other non-current liabilities when received and recognized as
other income or reduction of related expense when the specific performance is meet. As of December 31, 2020, the Company received related
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such grants as deferred grants on its consolidated balance sheet. As of December 31, 2022 and December 31, 2021, the remaining balance
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</div><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: 147; Value: 2 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</b></p><div>

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

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</div><div>

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whether an award should be classified and accounted for as a liability award or an equity award. All the Company&#8217;s share-based awards
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</div><div>

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uses the accelerated method for all awards granted with graded vesting. The Company accounts for forfeitures as they occur in accordance
with ASU No. 2016-09, Compensation &#8212; Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting. The
Company, with the assistance of an independent third-party valuation firm, determined the fair value of the stock options granted to employees.
The binomial option pricing model and Black-Scholes Model were applied in determining the estimated fair value of the options granted
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</div><div>

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</div><div>

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financial statement carrying amounts of existing assets and liabilities and their respective tax bases.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

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or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including
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</div><div>

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measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition
of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest
and penalties associated with tax positions, and related disclosures. The Company records a liability for uncertain tax positions when
it is probable that a loss has been incurred and the amount can be reasonably estimated.</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_75" id="_SignificantAccountingPoliciesTextBlock-c0_cont_74"><ix:continuation id="_IncomeTaxPolicyTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To the extent applicable, the Company records
interest and penalties as a general and administrative expense. The Company&#8217;s subsidiaries in China and Hong Kong are subject to
the income tax laws of the PRC and Hong Kong. No significant taxable income was generated outside the PRC for the years ended December
31, 2022, 2021 and 2020. As of December 31, 2022, the tax years ended December 31, 2018 through December 31, 2022 for the Company&#8217;s
PRC subsidiaries remain open for statutory examination by PRC tax authorities.</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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type of products sold. The VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing
or acquiring its finished products. The Company recorded a VAT payable net of payments in the accompanying consolidated financial statements.
All of the VAT returns of the Company have been and remain subject to examination by the tax authorities for five years from the date
of filing.</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_78" id="_SignificantAccountingPoliciesTextBlock-c0_cont_77"><ix:nonNumeric contextRef="c0" continuedAt="_EarningsPerSharePolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:EarningsPerSharePolicyTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Earnings (Loss) per Share</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_79" id="_SignificantAccountingPoliciesTextBlock-c0_cont_78"><ix:continuation id="_EarningsPerSharePolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company computes earnings (loss) per share
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complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average
common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of
potential common 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 common 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. For the years ended December 31, 2022, 2021 and 2020,
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</div><div>

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

</div><!-- Field: Page; Sequence: 148; Value: 2 --><div>
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    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</b></p><div>

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

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</div><div>

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currency. ReTo, REIT US and REIT Holdings use U.S. Dollars as their functional currency, while REIT India uses Indian rupee as the functional
currency. The Company&#8217;s financial statements are reported using U.S. Dollars. The results of operations and the consolidated statements
of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities
denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date.
The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution.
Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the consolidated
statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation
adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated
other comprehensive income (loss). Gains and losses from foreign currency transactions are included in the results of operations.</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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may fluctuate and is affected by, among other things, changes in the PRC&#8217;s political and economic conditions. Any significant revaluation
of RMB may materially affect the Company&#8217;s financial condition in terms of US$ reporting. The following table outlines the currency
exchange rates that were used in creating the consolidated financial statements in this report:</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_83" id="_SignificantAccountingPoliciesTextBlock-c0_cont_82"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDifferencesBetweenReportedAmountAndReportingCurrencyDenominatedAmountTableTextBlock"><ix:continuation id="_ForeignCurrencyTransactionsAndTranslationsPolicyTextBlock-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: bottom">
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December&#160;31,</b></p>
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    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December&#160;31,</b></p>
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  <tr>
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    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom; text-align: center">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: center">&#160;</td></tr>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: bottom">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_84" id="_SignificantAccountingPoliciesTextBlock-c0_cont_83"><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxUncertaintiesPolicy-c0_cont_1" escape="true" name="us-gaap:IncomeTaxUncertaintiesPolicy"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risks and Uncertainties</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_85" id="_SignificantAccountingPoliciesTextBlock-c0_cont_84"><ix:continuation continuedAt="_IncomeTaxUncertaintiesPolicy-c0_cont_2" id="_IncomeTaxUncertaintiesPolicy-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">The main
operation of the Company is located in the PRC. Accordingly, the Company&#8217;s business, financial condition, and results of operations
may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company&#8217;s
results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not
experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization
and structure disclosed in Note 1, this may not be indicative of future results.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_86" id="_SignificantAccountingPoliciesTextBlock-c0_cont_85"><ix:continuation continuedAt="_IncomeTaxUncertaintiesPolicy-c0_cont_3" id="_IncomeTaxUncertaintiesPolicy-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">The coronavirus
disease 2019 (&#8220;COVID-19&#8221;) pandemic has, and continues to have, a severe and negative impact on the PRC and the global economy.
The Company&#8217;s business has been negatively impacted by the COVID-19 pandemic.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_87" id="_SignificantAccountingPoliciesTextBlock-c0_cont_86"><ix:continuation id="_IncomeTaxUncertaintiesPolicy-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From late January 2020 through March 2020, the Company had to temporarily
suspend the manufacturing activities due to government restrictions. During the temporary business closure period, employees had very
limited access to its manufacturing facilities and the shipping companies were not available and as a result, the Company experienced
difficulty delivering the products to customers on a timely basis. In addition, due to the COVID-19 outbreak, some of the Company&#8217;s
customers or suppliers experienced financial distress, delayed or defaulted on their payments, reduced the scale of their business, or
suffered disruptions in their business due to the outbreak. Any increased difficulty in collecting accounts receivable, delayed raw materials
supply, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could
negatively impact its results of operations. The Company&#8217;s production and sales activities from its continuing operations returned
to normal after the spread of COVID-19 had been substantially controlled in China in late 2020. However, since 2021, there has been a
resurgence of COVID-19 cases caused by new variants such as Delta and Omicron in multiple cities in China, as well as across the world.
Restrictions have been re-imposed in certain cities to combat such outbreaks and emerging variants of the virus. The COVID-19 pandemic
has had a significant impact on the construction sector, which is sensitive to economic cycles. The nature of the impacts and extent of
the ramifications are in large part dependent upon the location of the underlying projects. Direct impacts have ranged from a slowdown
of available materials and labor through to suspensions and, in some instances, deferral and suspension of entire projects. COVID-19 had
a significant impact on the Company&#8217;s financial results for the years ended December 31, 2022 and 2021. On December&#160;7, 2022,
China announced 10 new rules&#160;that constitute a relaxation of almost all of its stringent COVID-19 pandemic control measures. Shortly
after their announcement, additional mobility restrictions issued by local governments were also scrapped. While such measures effectively
reopened business within China, COVID-19&#8217;s continued existence may have significant and still not well-understood impacts on our
industry. 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.</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: center"></p><div>

</div><!-- Field: Page; Sequence: 149; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></p></div><div>
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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"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</b></p><div>

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

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_88" id="_SignificantAccountingPoliciesTextBlock-c0_cont_87"><ix:nonNumeric contextRef="c0" continuedAt="_PriorPeriodReclassificationAdjustmentDescription-c0_cont_1" escape="true" name="us-gaap:PriorPeriodReclassificationAdjustmentDescription"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Reclassifications</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>

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of a business, certain prior-year amounts have been reclassified for consistency with the current-year presentation. These reclassifications
had no effect on the reported results of operations. The assets and liabilities related to the discontinued operations are classified
as assets/liabilities held for sale as of December 31, 2022 and 2021, while results of operations related to the discontinued operations,
including comparatives, were reported as losses from discontinued operations. Certain prior-year balance sheet accounts have been reclassified
to conform to the current-year presentation.<b>&#160;</b></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_90" id="_SignificantAccountingPoliciesTextBlock-c0_cont_89"><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: 0pt 0"><b>Concentrations and Credit Risk&#160;</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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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 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 affect the remittance.</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_92" id="_SignificantAccountingPoliciesTextBlock-c0_cont_91"><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">As of December 31, 2022 and 2021, $<ix:nonFraction contextRef="c76" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashEquivalentsAtCarryingValue" scale="0" unitRef="usd">97,554</ix:nonFraction> and
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_94" id="_SignificantAccountingPoliciesTextBlock-c0_cont_93"><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">As of December 31,&#160;2022, three customers
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</div><div>

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</div><div>

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accounts payable balance.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 2 &#8211; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</b></p><div>

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

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_97" id="_SignificantAccountingPoliciesTextBlock-c0_cont_96"><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"><b>Recent Accounting Pronouncements</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_98" id="_SignificantAccountingPoliciesTextBlock-c0_cont_97"><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
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</div><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_99" id="_SignificantAccountingPoliciesTextBlock-c0_cont_98"><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 Financial Accounting Standards
Board (the &#8220;FASB&#8221;) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) (&#8220;ASU 2016-13&#8221;), which
requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience,
current conditions, and reasonable and supportable forecasts. This ASU replaces the existing incurred loss model and is applicable to
the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by Accounting Standards
Update 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Accounting Standards Update 2019-04 Codification
Improvements to Topic 326, Financial Instruments &#8212; Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,
and Accounting Standards Update 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance
and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2018. As an emerging growth company, the Company adopted this guidance effective January 1, 2023. The adoption did
not have significant impact on the Company&#8217;s 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_100" id="_SignificantAccountingPoliciesTextBlock-c0_cont_99"><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"><span style="background-color: white">In January
2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic
323), and Derivatives and Hedging (Topic 815) (&#8220;ASU 2020-01&#8221;), which is intended to clarify the interaction of the accounting
for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting
for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for the Company beginning
January 1, 2021. The adoption did not impact the Company&#8217;s financial position.&#160;</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_101" id="_SignificantAccountingPoliciesTextBlock-c0_cont_100"><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"><span style="background-color: white">In August
2020, the FASB issued ASU 2020-06, &#8220;Debt &#8212; Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
&#8212; Contracts in Entity&#8217;s Own Equity (Subtopic 815-40)&#8221;. This ASU reduces the number of accounting models for convertible
debt instruments and convertible preferred stock. As well as amend the guidance for the derivatives scope exception for contracts in an
entity&#8217;s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related
EPS guidance. This standard became effective for the Company on January 1, 2022.&#160;The ASU did not have a significant impact on the
Company&#8217;s consolidated financial statements.</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><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_102" id="_SignificantAccountingPoliciesTextBlock-c0_cont_101"><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 October 2021, the FASB issued ASU No. 2021-08,
&#8220;&#8216;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_103" id="_SignificantAccountingPoliciesTextBlock-c0_cont_102"><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 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. <span style="font-family: Times New Roman, Times, Serif">The adoption
of this guidance did not have a material impact on the Company&#8217;s consolidated financial statements.</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><ix:continuation id="_SignificantAccountingPoliciesTextBlock-c0_cont_103"><ix:continuation id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except for the above-mentioned pronouncements,
there are no recently issued accounting standards that will have a material impact on the audited consolidated financial position, statements
of operations, and cash flows of the Company.</p></ix:continuation></ix:continuation><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><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></p></div><div>
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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"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="reto_GoingConcernTextBlock-c0_cont_1" escape="true" name="reto:GoingConcernTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 3 &#8211; GOING CONCERN </b></p><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="reto_GoingConcernTextBlock-c0_cont_2" id="reto_GoingConcernTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As reflected in the Company&#8217;s consolidated financial statements
for the year ended December 31, 2022, the Company&#8217;s revenue increased by approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RevenuesNetOfInterestExpense" scale="6" unitRef="usd">2.9</ix:nonFraction> million, or <ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:RevenueRemainingPerformanceObligationPercentage" scale="-2" unitRef="pure">80</ix:nonFraction>%, from approximately
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continued operation increased by approximately $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PresentValueOfFutureInsuranceProfitsGross" scale="6" unitRef="usd">0.4</ix:nonFraction> million, or <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="reto:GrossProfitFromContinuedOperationPercentage" scale="-2" unitRef="pure">109</ix:nonFraction>%, from approximately $<ix:nonFraction contextRef="c3" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PresentValueOfFutureInsuranceProfitsGross" scale="6" unitRef="usd">0.4</ix:nonFraction> million in the year ended December 31, 2021
to approximately $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DeferredPolicyAcquisitionCostAmortizationExpenseEffectOfAdjustmentsToEstimatedGrossProfitOrEstimatedGrossMargin" scale="6" unitRef="usd">0.8</ix:nonFraction> million for the year ended December 31, 2022, and its gross margin for the year ended December 31, 2022 increased
to <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:OtherThanTemporaryImpairmentLossesInvestmentsHeldtomaturitySecuritiesPortionRecognizedInEarningsNetQualitativeDisclosuresPercentageOfNonperformingAssets" scale="-2" unitRef="pure">13</ix:nonFraction>% from <ix:nonFraction contextRef="c4" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:OtherThanTemporaryImpairmentLossesInvestmentsHeldtomaturitySecuritiesPortionRecognizedInEarningsNetQualitativeDisclosuresPercentageOfNonperformingAssets" scale="-2" unitRef="pure">11</ix:nonFraction>% for the last year. For the years ended December 31, 2022 and 2021, the Company incurred significant impairment losses
on bad debt expenses on uncollectible accounts receivable and advance payments due to changes in market conditions of its customers and
suppliers. As a result, for the years ended December 31, 2022 and 2021, the Company reported a net loss of approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="reto:NetLoss" scale="6" unitRef="usd">15.4</ix:nonFraction> million
and $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="reto:NetLoss" scale="6" unitRef="usd">22.1</ix:nonFraction> million, respectively. As of December 31, 2022, the Company had a working capital deficit of approximately $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="reto:WorkingCapitalDeficit" scale="6" unitRef="usd">10.1</ix:nonFraction> million.&#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="reto_GoingConcernTextBlock-c0_cont_3" id="reto_GoingConcernTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, the Company had large bank borrowings
as of December 31, 2022 and some of the bank loans will mature and need to be repaid within the next 12 months. If the Company cannot
renew existing loans or borrow additional loans from banks, the Company&#8217;s working capital may be further negatively impacted.</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="reto_GoingConcernTextBlock-c0_cont_4" id="reto_GoingConcernTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, the Company had cash
of approximately $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:InvestmentsAndCash" scale="6" unitRef="usd">0.1</ix:nonFraction> million. In addition, the Company had outstanding accounts receivable of approximately $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="reto:AccountsReceivableOutstanding" scale="6" unitRef="usd">2.2</ix:nonFraction> million (including accounts
receivable from third-party customers of $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="reto:AccountsReceivableFromThirdParties" scale="6" unitRef="usd">2.1</ix:nonFraction> million and accounts receivable from related party customers of approximately $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="reto:AccountsReceivableFromRelatedParty" scale="6" unitRef="usd">0.1</ix:nonFraction> million),
of which approximately $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="reto:AccountsReceivableCollectedBack" scale="6" unitRef="usd">0.3</ix:nonFraction> million, or <ix:nonFraction contextRef="c103" decimals="3" format="ixt:num-dot-decimal" name="reto:PercentageOfAccountsReceivableCollectedBack" scale="-2" unitRef="pure">7.7</ix:nonFraction>%, had been subsequently collected between January and April 2022, and became available for
use as working capital. As of December 31, 2022, the Company had outstanding bank loans of approximately $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="reto:BankLoansOutstanding" scale="6" unitRef="usd">1.3</ix:nonFraction> million from a PRC bank.</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="reto_GoingConcernTextBlock-c0_cont_5" id="reto_GoingConcernTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management expects that it would be able to renew
all of its existing bank loans upon their maturity based on past experience and the Company&#8217;s good credit history. Currently, the
Company is working to improve its liquidity and capital source mainly through cash flow from its operations, renewal of bank borrowings,
and borrowing from related parties. In order to fully implement its business plan and sustain continued growth, the Company may also seek
equity financing from outside investors. At the present time, however, the Company does not have commitments of funds from any potential
investors. No assurance can be given that additional financing, if required, would be available on favorable terms or at all.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="reto_GoingConcernTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Based on above reasons, there is a substantial
doubt about the Company&#8217;s ability to continue as a going concern for the next 12 months from the issuance of the consolidated financial
statements.</p></ix:continuation><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 4 &#8211; DISCONTINUED OPERATION</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_2" id="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">The Company&#8217;s
subsidiary Gu&#8217;an REIT was primarily engaged in manufacturing and distribution of machinery and equipment used for environmental-friendly
construction materials production. On January 2, 2020,&#160;Beijing REIT signed a share transfer agreement with a third party - Hebei
Huishitong Techonology Inc. (&#8220;Huishitong&#8221;) to sell <ix:nonFraction contextRef="c104" decimals="2" format="ixt:num-dot-decimal" name="reto:EquityPercentageOfOwnership" scale="-2" unitRef="pure">100</ix:nonFraction>% ownership interest in Gu&#8217;an REIT to Huishitong for a cash consideration
of RMB<ix:nonFraction contextRef="c105" decimals="-5" format="ixt:num-dot-decimal" name="reto:CashConsideration" scale="6" unitRef="cny">39.9</ix:nonFraction> million (approximately $<ix:nonFraction contextRef="c105" decimals="-5" format="ixt:num-dot-decimal" name="reto:CashConsideration" scale="6" unitRef="usd">5.7</ix:nonFraction> million). As of December 31, 2019, the Company received RMB<ix:nonFraction contextRef="c106" decimals="-5" format="ixt:num-dot-decimal" name="reto:AcquisitionDepositReceivedAmount" scale="6" unitRef="cny">9.7</ix:nonFraction> million (approximately $<ix:nonFraction contextRef="c106" decimals="-5" format="ixt:num-dot-decimal" name="reto:AcquisitionDepositReceivedAmount" scale="6" unitRef="usd">1.5</ix:nonFraction> million)
from Huishitong as an acquisition deposit. In 2020, the Company received an additional RMB<ix:nonFraction contextRef="c107" decimals="-5" format="ixt:num-dot-decimal" name="reto:AcquisitionDepositAdditinalAmountReceived" scale="6" unitRef="cny">26.6</ix:nonFraction> million (approximately $<ix:nonFraction contextRef="c107" decimals="-5" format="ixt:num-dot-decimal" name="reto:AcquisitionDepositAdditinalAmountReceived" scale="6" unitRef="usd">4.1</ix:nonFraction> million). In
2021, the Company received the remaining RMB<ix:nonFraction contextRef="c108" decimals="-5" format="ixt:num-dot-decimal" name="reto:RemainingAmountReceived" scale="6" unitRef="cny">3.6</ix:nonFraction> million (approximately $<ix:nonFraction contextRef="c108" decimals="-5" format="ixt:num-dot-decimal" name="reto:RemainingAmountReceived" scale="6" unitRef="usd">0.6</ix:nonFraction> million). The Company recorded a gain from the disposition
of $<ix:nonFraction contextRef="c109" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxReconciliationDispositionOfAssets" scale="0" unitRef="usd">2,231,270</ix:nonFraction> for the year ended December 31, 2020.</span></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="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_3" id="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s subsidiary, REIT Changjiang
was primarily engaged in solid waste processing business. On November 12, 2021, the Company signed a share transfer agreement with Zhixin
Group (Hong Kong) Co., Ltd. and Xiamen Zhixin Building Materials Co., Ltd. (collectively, &#8220;Zhixin&#8221;) to sell <ix:nonFraction contextRef="c110" decimals="2" format="ixt:num-dot-decimal" name="reto:PercentageOfOwnershipInterest" scale="-2" unitRef="pure">100</ix:nonFraction>% ownership
interest in REIT Changjiang to Zhixin for a cash consideration of RMB<ix:nonFraction contextRef="c110" decimals="-5" format="ixt:num-dot-decimal" name="reto:CashConsideration" scale="6" unitRef="cny">60.0</ix:nonFraction> million (approximately $<ix:nonFraction contextRef="c110" decimals="-5" format="ixt:num-dot-decimal" name="reto:CashConsideration" scale="6" unitRef="usd">9.4</ix:nonFraction> million). As of December 31, 2021,
the Company received RMB<ix:nonFraction contextRef="c4" decimals="-6" format="ixt:num-dot-decimal" name="reto:CashReceived" scale="6" unitRef="cny">15</ix:nonFraction> million (approximately $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="reto:CashReceived" scale="6" unitRef="usd">2.1</ix:nonFraction> million) from Zhixin. The Company recorded a loss from the disposition of $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:LossOfDisposition" scale="0" unitRef="usd">6,335,508</ix:nonFraction>
for the year ended December 31, 2021. During the year ended December 31, 2022, the Company further received RMB<ix:nonFraction contextRef="c111" decimals="-5" format="ixt:num-dot-decimal" name="reto:CashReceived" scale="6" unitRef="cny">38.5</ix:nonFraction> million (approximately
$<ix:nonFraction contextRef="c111" decimals="-5" format="ixt:num-dot-decimal" name="reto:CashReceived" scale="6" unitRef="usd">5.7</ix:nonFraction> million) from Zhixin. The remaining balance amounted to $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:RemainingBalanceAmount" scale="0" unitRef="usd">1,067,945</ix:nonFraction>. Allowance for uncollectible balances from the operations amounted
to $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:AllowanceForUncollectibleBalance" scale="0" unitRef="usd">1,067,945</ix:nonFraction> as of December 31, 2022, respectively.</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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shift that has a major effect on the Company&#8217;s operations and financial results, which trigger discontinued operations accounting
in accordance with ASC 205-20-45. The results of operations related to the discontinued operations for the years ended December 31, 2021
and 2020 were reported as loss from discontinued operations.</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="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_5" id="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The results of discontinued operations of REIT
Changjiang for years ended December 31, 2022, 2021 and 2020 are as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDisposalGroupsIncludingDiscontinuedOperationsIncomeStatementBalanceSheetAndAdditionalDisclosuresTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; 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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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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

</div><!-- Field: Page; Sequence: 153; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></p></div><div>
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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"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

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</div><div>

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believes the acquisition will expand the Company&#8217;s technology application in the transportation market. The operating results of
REIT Mingde and its subsidiaries, which have been included in the Company&#8217;s consolidated financial statements since December 31,
2021, was insignificant. In lieu of cash consideration of RMB <ix:nonFraction contextRef="c120" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionConsiderationTransferredOtherAssets" scale="6" unitRef="cny">10</ix:nonFraction> million, the Company issued an aggregate of <ix:nonFraction contextRef="c121" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ExcessStockSharesIssued" scale="0" unitRef="shares">2,580,000</ix:nonFraction> common shares to
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</div><div>

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are not material. The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed for the acquired
entities at the acquisition date, which represents the net purchase price allocation at the date of the acquisition based on a valuation
performed by an independent valuation firm engaged by 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="_AssetAcquisitionTextBlock-c0_cont_4" id="_AssetAcquisitionTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfRecognizedIdentifiedAssetsAcquiredAndLiabilitiesAssumedTableTextBlock"><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">
    <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: 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>&#160;</td><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)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Non-controlling interest</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:BusinessCombinationAcquisitionOfLessThan100PercentNoncontrollingInterestFairValue" scale="0" unitRef="usd">784,184</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">Total consideration</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; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation id="_AssetAcquisitionTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill is mainly attributable to the excess
of the consideration paid over the fair value of the net assets acquired that cannot be recognized separately as identifiable assets,
and comprise (a) the assembled work force and (b) the expected but unidentifiable business growth as a result of the synergy resulting
from the acquisition. None of the goodwill is expected to be deductible for income tax purposes. For the year ended December 31, 2022,
the Company fully impaired the goodwill related to the acquisition of REIT Mingde and its subsidiaries.</p></ix:continuation><div>

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

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

</div><!-- Field: Page; Sequence: 154; Value: 2 --><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 -->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: 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"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:LoansNotesTradeAndOtherReceivablesDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 6 &#8211; ACCOUNTS RECEIVABLE, NET</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_2" id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounts receivable consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_3" id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfAccountsNotesLoansAndFinancingReceivableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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    <td style="white-space: nowrap">&#160;</td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Total accounts receivable from third-party customers, net</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Add: accounts receivable, net, related parties</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="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsReceivableRelatedParties" scale="0" unitRef="usd">93,589</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">Accounts receivable, net</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_4" id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Due to a change in market conditions as affected by the COVID-19 outbreak
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</div><div>

</div><ix:continuation continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_5" id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Allowance for doubtful accounts movement is as
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</div><div>

</div><ix:continuation continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_6" id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfCreditLossesForFinancingReceivablesCurrentTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; 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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</div><div>

</div><ix:continuation continuedAt="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_7" id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Below is the aging schedule of accounts receivable
as of December 31, 2022 and 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 id="_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock-c0_cont_7"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:AccountsReceivableNoncurrentPastDueTableTextBlock"><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; text-align: justify">&#160;</td><td style="white-space: nowrap; 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: 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)">
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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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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c129" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsReceivableNet" scale="0" unitRef="usd">86,712</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="c130" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsReceivableNet" scale="0" unitRef="usd">107,317</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; 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="c2" decimals="0" format="ixt:num-dot-decimal" name="reto:BadDebtReserve" scale="0" sign="-" unitRef="usd">1,771,761</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:nonNumeric></ix:continuation><div>

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

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

</div><!-- Field: Page; Sequence: 155; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></p></div><div>
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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"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="reto_AdvancesToSuppliersNetTextBlock-c0_cont_1" escape="true" name="reto:AdvancesToSuppliersNetTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 7 &#8211; ADVANCES TO SUPPLIERS, NET</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="reto_AdvancesToSuppliersNetTextBlock-c0_cont_2" id="reto_AdvancesToSuppliersNetTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Advances to suppliers include prepayments for
raw materials used for production of construction materials for the Company&#8217;s construction projects, which consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="reto_AdvancesToSuppliersNetTextBlock-c0_cont_3" id="reto_AdvancesToSuppliersNetTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfAdvancesToSuppliersTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Land reclamation prepayments</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: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="reto_AdvancesToSuppliersNetTextBlock-c0_cont_4" id="reto_AdvancesToSuppliersNetTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our suppliers generally require refundable prepayments
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production and takes up to 6 to 12 months for the suppliers to deliver the construction materials.</ix:nonNumeric> The prepayment is necessary to secure
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</div><div>

</div><ix:continuation continuedAt="reto_AdvancesToSuppliersNetTextBlock-c0_cont_5" id="reto_AdvancesToSuppliersNetTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The changes of allowance for doubtful accounts for the years ended
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</div><div>

</div><ix:continuation id="reto_AdvancesToSuppliersNetTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfChangesOfAllowanceForDoubtfulAccountsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: 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="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="reto:NotesReceivablesGross" scale="0" unitRef="usd">449,517</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></ix:nonNumeric></ix:continuation><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_InventoryDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:InventoryDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 8 &#8211; INVENTORIES, NET</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_InventoryDisclosureTextBlock-c0_cont_2" id="_InventoryDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Inventories, net, consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_InventoryDisclosureTextBlock-c0_cont_3" id="_InventoryDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfInventoryCurrentTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: 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="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryFinishedGoods" scale="0" unitRef="usd">221,180</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryFinishedGoods" scale="0" unitRef="usd">340,798</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Subtotal</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Less: Inventory allowance</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryAdjustments" scale="0" unitRef="usd">31,527</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="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InventoryAdjustments" scale="0" unitRef="usd">12,116</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">Inventories, 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; text-align: justify; text-indent: 0.5in">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_InventoryDisclosureTextBlock-c0_cont_4" id="_InventoryDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Inventories include raw material and finished
goods. Finished goods include direct material costs, direct labor costs and manufacturing overhead. &#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_InventoryDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December31, 2022, 2021 and
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_OtherCurrentAssetsTextBlock-c0_cont_1" escape="true" name="us-gaap:OtherCurrentAssetsTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 9 &#8211; PREPAYMENTS AND OTHER CURRENT ASSETS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_OtherCurrentAssetsTextBlock-c0_cont_2" id="_OtherCurrentAssetsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&#8217;s prepaid expenses and other current assets are as
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</div><div>

</div><ix:continuation continuedAt="_OtherCurrentAssetsTextBlock-c0_cont_3" id="_OtherCurrentAssetsTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="_DeferredCostsCapitalizedPrepaidAndOtherAssetsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:DeferredCostsCapitalizedPrepaidAndOtherAssetsDisclosureTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation id="_OtherCurrentAssetsTextBlock-c0_cont_3"><ix:continuation id="_DeferredCostsCapitalizedPrepaidAndOtherAssetsDisclosureTextBlock-c0_cont_1"><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">(1)</span></td> <td style="text-align: justify"><ix:footnote id="ix_2_footnote" xml:lang="en-US"><span style="font-size: 10pt">Other receivables mainly consisted of advances to employees for business development purposes and prepaid employee insurance and welfare benefit which will be subsequently deducted from the employee&#8217;s payroll.</span></ix:footnote></td></tr> </table></ix:continuation></ix:continuation><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><!-- Field: Page; Sequence: 156; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></p></div><div>
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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"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:OperatingLeasesOfLessorDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 10 &#8211; LEASE </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_2" id="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has several operating leases for manufacturing
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</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_3" id="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s operating leases primarily
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</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_4" id="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:OperatingLeaseLeaseIncomeTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td style="white-space: nowrap; text-align: center">&#160;</td><td style="white-space: nowrap; 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)">
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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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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_5" id="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The weighted average remaining lease terms and
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</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_6" id="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_5"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfWeightedAverageNumberOfSharesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>Remaining lease term and discount rate:</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)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_7" id="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following is a schedule of maturities of lease liabilities as of
December 31, 2022:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_OperatingLeasesOfLessorDisclosureTextBlock-c0_cont_7"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:LesseeOperatingLeaseLiabilityMaturityTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">2024</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Total lease payments</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="padding-bottom: 4pt">Present value of lease liabilities</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiability" scale="0" unitRef="usd">435,686</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#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: 157; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></p></div><div>
    </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"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 11 &#8211; PROPERTY, PLANT AND EQUIPMENT, NET</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property, plant and equipment, net consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_3" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:PropertyPlantAndEquipmentTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <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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  <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-align: left">Office and electronic equipment</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c139" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PropertyPlantAndEquipmentGross" scale="0" unitRef="usd">159,069</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Leasehold improvement</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-169">-</div></td><td style="padding-bottom: 1.5pt; 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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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_4" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Given the Company&#8217;s net loss position, the
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machinery. As a result, the Company recorded an impairment of approximately $<span style="-sec-ix-hidden: hidden-fact-171">nil</span>, $<ix:nonFraction contextRef="c4" decimals="-5" format="ixt:num-dot-decimal" name="reto:RecordedAnImpairment" scale="6" unitRef="usd">4.3</ix:nonFraction> million and $<ix:nonFraction contextRef="c5" decimals="-5" format="ixt:num-dot-decimal" name="reto:RecordedAnImpairment" scale="6" unitRef="usd">2.3</ix:nonFraction> million on its fixed assets for
the year ended December 31, 2022, 2021 and 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="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_5" id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2021, the Company&#8217;s properties
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</div><div>

</div><ix:continuation id="_PropertyPlantAndEquipmentDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depreciation expense was $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Depreciation" scale="0" unitRef="usd">414,841</ix:nonFraction>, $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Depreciation" scale="0" unitRef="usd">835,054</ix:nonFraction> and
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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

</div><!-- Field: Page; Sequence: 158; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:IntangibleAssetsDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 12 &#8211; INTANGIBLE ASSETS, NET</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#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">Intangible assets, net consisted of the following:&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#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%">
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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"><ix:nonFraction contextRef="c145" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FiniteLivedIntangibleAssetsGross" scale="0" unitRef="usd">1,299,612</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="c146" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FiniteLivedIntangibleAssetsGross" scale="0" unitRef="usd">29,472</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; 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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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IntangibleAssetsDisclosureTextBlock-c0_cont_4" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022 and 2021, land use rights
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</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">Amortization expense was $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AmortizationOfIntangibleAssets" scale="0" unitRef="usd">206,964</ix:nonFraction>, $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AmortizationOfIntangibleAssets" scale="0" unitRef="usd">34,671</ix:nonFraction> and
$<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AmortizationOfIntangibleAssets" scale="0" unitRef="usd">29,695</ix:nonFraction> for the years ended December 31, 2022, 2021 and 2020, respectively.</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="_IntangibleAssetsDisclosureTextBlock-c0_cont_6" id="_IntangibleAssetsDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Estimated future amortization expense is as follows:&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#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%">
  <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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  <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-align: justify">2026</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="text-align: left; padding-bottom: 1.5pt">2028 and Thereafter</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="padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table></ix:nonNumeric></ix:continuation><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_DebtDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:DebtDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 13&#8211;CONVERTIBLE LOANS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_2" id="_DebtDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>March Debenture</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="_DebtDisclosureTextBlock-c0_cont_3" id="_DebtDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 1, 2021, the Company entered into a securities
purchase agreement with an accredited investor (the &#8220;Debenture Holder&#8221;) for the issuance of a Convertible Debenture (the &#8220;March
Debenture&#8221;) in the aggregate principal amount of up to $<ix:nonFraction contextRef="c151" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd">2,300,000</ix:nonFraction> with a maturity date of twelve months after the issuance thereof,
provided that in case of an event of default, the March Debenture may become at the Debenture Holder&#8217;s election immediately due
and payable. In addition, the Company paid to an affiliate of the March Debenture Holder a fee equal to <ix:nonFraction contextRef="c151" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateStatedPercentage" scale="-2" unitRef="pure">3.5</ix:nonFraction>% of the amount of the Debenture
and a one-time due diligence and structuring fee of $<ix:nonFraction contextRef="c151" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFeeAmount" scale="0" unitRef="usd">10,000</ix:nonFraction> at the closing.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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

</div><!-- Field: Page; Sequence: 159; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></p></div><div>
    </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"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 13&#8211;CONVERTIBLE LOANS (continued)</b></p><div>

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

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_4" id="_DebtDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Debenture Holder may convert the March Debenture
in its sole discretion to Company&#8217;s common shares at any time at the lower of $<ix:nonFraction contextRef="c152" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares">2.50</ix:nonFraction> or <ix:nonFraction contextRef="c152" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtWeightedAverageInterestRate" scale="-2" unitRef="pure">95</ix:nonFraction>% of the average of the two lowest daily
VWAPs during the ten consecutive trading days immediately preceding the conversion date, provided that the conversion price may not be
less than $<ix:nonFraction contextRef="c152" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleConversionPrice1" scale="0" unitRef="usdPershares">0.50</ix:nonFraction> (the &#8220;March Debenture Floor Price&#8221;). The Debenture Holder may not convert any portion of a Debenture if such
conversion would result in the Debenture Holder beneficially owning more than <ix:nonFraction contextRef="c153" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateDuringPeriod" scale="-2" unitRef="pure">4.99</ix:nonFraction>% of Company&#8217;s then issued and common shares,
provided that such limitation may be waived by the Debenture Holder with a 65 days&#8217; notice. Any time after the issuance of the March
Debenture that the daily VWAP is less than the March Debenture Floor Price for a period of 10 consecutive trading days (each such occurrence,
a &#8220;March Debenture Triggering Event&#8221;) and only for so long as such conditions exist after a March Debenture Triggering Event,
the Company shall make monthly payments beginning on the 30<sup>th</sup>&#160;day after the date of the March Debenture Triggering Event.
Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the March Debenture
Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of <ix:nonFraction contextRef="c153" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentRedemptionPricePercentageOfPrincipalAmountRedeemed" scale="-2" unitRef="pure">20</ix:nonFraction>% of such principal amount
and (iii) accrued and unpaid interest hereunder as of each payment date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_5" id="_DebtDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has elected to recognize the March
Debenture at fair value and therefore there was no further evaluation of embedded features for bifurcation. The March Debenture was fully
converted into <ix:nonFraction contextRef="c154" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares">2,369,501</ix:nonFraction> common shares of the Company for the year ended December 31, 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="_DebtDisclosureTextBlock-c0_cont_6" id="_DebtDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>July Debenture</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="_DebtDisclosureTextBlock-c0_cont_7" id="_DebtDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 6, 2021, the Company entered into another
securities purchase with the Debenture Holder for the issuance of a Convertible Debenture (the &#8220;July Debenture&#8221;) in the aggregate
principal amount of up to $<ix:nonFraction contextRef="c155" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd">2,500,000</ix:nonFraction> with a maturity date of twelve months after the issuance thereof, provided that in case of an event
of default, the July Debenture may become at the Debenture Holder&#8217;s election immediately due and payable. In addition, the Company
paid to an affiliate of the Debenture Holder a fee equal to <ix:nonFraction contextRef="c155" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateStatedPercentage" scale="-2" unitRef="pure">3.5</ix:nonFraction>% of the amount of the July Debenture and a one-time due diligence and
structuring fee of $<ix:nonFraction contextRef="c155" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFeeAmount" scale="0" unitRef="usd">5,000</ix:nonFraction> at the closing.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DebtDisclosureTextBlock-c0_cont_8" id="_DebtDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Debenture Holder may convert the July Debenture
in its sole discretion to Company&#8217;s common shares at any time at the lower of $<ix:nonFraction contextRef="c156" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares">1.50</ix:nonFraction> or <ix:nonFraction contextRef="c156" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtWeightedAverageInterestRate" scale="-2" unitRef="pure">95</ix:nonFraction>% of the average of the two lowest daily
VWAPs during the ten consecutive trading days immediately preceding the conversion date, provided that the conversion price may not be
less than $<ix:nonFraction contextRef="c156" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleConversionPrice1" scale="0" unitRef="usdPershares">0.50</ix:nonFraction> (the &#8220;July Debenture Floor Price&#8221;). The Debenture Holder may not convert any portion of the July Debenture
if such conversion would result in the Debenture Holder beneficially owning more than <ix:nonFraction contextRef="c157" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentInterestRateDuringPeriod" scale="-2" unitRef="pure">4.99</ix:nonFraction>% of Company&#8217;s then issued and common
shares, provided that such limitation may be waived by the Debenture Holder with a 65 days&#8217; notice. Any time after the issuance
of the July Debenture that the daily VWAP is less than the July Debenture Floor Price for a period of 10 consecutive trading days (each
such occurrence, a &#8220;July Debenture Triggering Event&#8221;) and only for so long as such conditions exist after a July Debenture
Triggering Event, the Company shall make monthly payments beginning on the 30th day after the date of the July Debenture Triggering Event.
Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the July Debenture
Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of <ix:nonFraction contextRef="c157" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentRedemptionPricePercentageOfPrincipalAmountRedeemed" scale="-2" unitRef="pure">20</ix:nonFraction>% of such principal amount
and (iii) accrued and unpaid interest hereunder as of each payment 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="_DebtDisclosureTextBlock-c0_cont_9" id="_DebtDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The principal balance of $<ix:nonFraction contextRef="c158" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd">1,130,000</ix:nonFraction> of the July
Debenture was converted into <ix:nonFraction contextRef="c159" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares">1,385,533</ix:nonFraction> common shares of the Company for the year ended December 31, 2021. The remaining balance of $<ix:nonFraction contextRef="c156" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd">1,370,000</ix:nonFraction>
of the July Debenture was converted into <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares">1,068,078</ix:nonFraction> common shares of the Company during the year ended December 31, 2022.&#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="_DebtDisclosureTextBlock-c0_cont_10" id="_DebtDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>2022 March Debenture</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="_DebtDisclosureTextBlock-c0_cont_11" id="_DebtDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 10, 2022, the Company entered into a
securities purchase agreement with an accredited investor for the issuance of a Convertible Promissory Note (the &#8220;Note&#8221;) in
the aggregate principal amount of $<ix:nonFraction contextRef="c160" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd">3,105,000</ix:nonFraction> with a maturity date of twelve months after the payment of the purchase price for the Note,
which will be converted into Company&#8217;s common shares. The Note carries an original issue discount of $<ix:nonFraction contextRef="c161" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredFinanceCostsNet" scale="0" unitRef="usd">90,000</ix:nonFraction>. In addition, the Company
paid $<ix:nonFraction contextRef="c162" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LegalFees" scale="0" unitRef="usd">15,000</ix:nonFraction> to the investor to cover legal fees, accounting fees, due diligence etc. On October 13, 2022 the Company entered into a standstill
agreement with the investor. Pursuant to the standstill agreement, the investor will not seek to convert any portion of the Note for a
period beginning as of the date of the agreement and ending on December 10, 2022 (the &#8220;Standstill Period&#8221;). Balance of the
Note shall be increased by $<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:OtherExpenses" scale="0" unitRef="usd">310,500.00</ix:nonFraction> (the &#8220;Standstill Fee&#8221;) as of the date of the agreement. The fair value of the Note
was $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedAtFairValue" scale="0" unitRef="usd">3,922,686</ix:nonFraction> 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="_DebtDisclosureTextBlock-c0_cont_12" id="_DebtDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The principal balance of $<ix:nonFraction contextRef="c163" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd">100,000</ix:nonFraction> of the 2022
March Debenture was converted into <ix:nonFraction contextRef="c164" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares">290,773</ix:nonFraction> common shares of the Company on December 20, 2022. Subsequently to December 31, 2022, an aggregated
principal balance of $<ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd">350,000</ix:nonFraction> of the March Debenture was converted into <ix:nonFraction contextRef="c153" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares">1,388,804</ix:nonFraction> common shares of the Company and the Company renewed
the 2022 March Debenture with the investors in 2023.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation id="_DebtDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022 and 2021,
due to change in fair value of convertible debentures, the Company recorded an unrealized loss of $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:unrealizedLossExpense" scale="0" unitRef="usd">467,383</ix:nonFraction> and $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="reto:unrealizedLossExpense" scale="0" unitRef="usd">1,908,830</ix:nonFraction> in other expense,
respectively. Interest expense recognized for these convertible debentures for the years ended December 31, 2022 and 2021 were $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseDebt" scale="0" unitRef="usd">194,117</ix:nonFraction>
and $<ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseDebt" scale="0" unitRef="usd">132,516</ix:nonFraction>, respectively.</p></ix:continuation><div>

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

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

</div><!-- Field: Page; Sequence: 160; Value: 2 --><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 -->27<!-- 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"></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>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_ShortTermDebtTextBlock-c0_cont_1" escape="true" name="us-gaap:ShortTermDebtTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 14&#8211;SHORT-TERM LOANS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_2" id="_ShortTermDebtTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Short-term loans consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_3" id="_ShortTermDebtTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfShortTermDebtTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfShortTermDebtTextBlock"><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; text-align: justify">&#160;</td><td style="white-space: nowrap; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; white-space: nowrap; font-weight: bold; text-align: center">December&#160;31,<br/>
 2022</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="border-bottom: Black 1.5pt solid; white-space: nowrap; font-weight: bold; text-align: center">December&#160;31,<br/>
 2021</td><td style="white-space: nowrap; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: justify">Hunyuan Rural Credit Cooperative Association (1)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c175" decimals="0" format="ixt:num-dot-decimal" id="ix_8_fact" name="reto:ShortTermLoanBorrowing" scale="0" unitRef="usd">725,000</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c176" decimals="0" format="ixt:num-dot-decimal" id="ix_9_fact" name="reto:ShortTermLoanBorrowing" scale="0" unitRef="usd">784,500</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify">Bank of Jiangsu (2)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c177" decimals="0" format="ixt:num-dot-decimal" id="ix_10_fact" name="reto:ShortTermLoanBorrowing" scale="0" unitRef="usd">362,500</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c178" decimals="0" format="ixt:num-dot-decimal" id="ix_11_fact" name="reto:ShortTermLoanBorrowing" scale="0" unitRef="usd">784,500</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_ShortTermDebtTextBlock-c0_cont_4" id="_ShortTermDebtTextBlock-c0_cont_3"><ix:continuation id="_ScheduleOfShortTermDebtTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 31px; text-align: justify"><span style="font-size: 10pt">(1)</span></td> <td style="text-align: justify"><ix:footnote id="ix_3_footnote" xml:lang="en-US"><span style="font-size: 10pt">On December 6, 2021, Datong Ruisheng entered into a bank loan agreement with Hunyuan Rural Credit Cooperative Association to borrow approximately $<ix:nonFraction contextRef="c165" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="usd">0.8</ix:nonFraction> million (RMB<ix:nonFraction contextRef="c165" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:ShortTermBorrowings" scale="6" unitRef="cny">5</ix:nonFraction> million) as working capital loan for a term of one year. 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</div><div>

</div><ix:continuation id="_ShortTermDebtTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022, 2021 and
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_LongTermDebtTextBlock-c0_cont_1" escape="true" name="us-gaap:LongTermDebtTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 15&#8211;LONG TERM LOAN</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_2" id="_LongTermDebtTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfDebtInstrumentsTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfDebtInstrumentsTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December&#160;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="padding-bottom: 1.5pt">&#160;</td><td style="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>2021</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Long-term loans</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left; padding-bottom: 1.5pt">Jiangsu Yuantong Municipal Projects Construction Co., Ltd. (1)</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="width: 1%; border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" id="ix_14_fact" name="us-gaap:DebtInstrumentCarryingAmount" scale="0" unitRef="usd">1,160,000</ix:nonFraction></td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="width: 1%; border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-172">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-</div></td><td style="width: 1%; 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">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LongTermDebtNoncurrent" scale="0" unitRef="usd">1,160,000</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-173">-</div></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_LongTermDebtTextBlock-c0_cont_3" id="_LongTermDebtTextBlock-c0_cont_2"><ix:continuation id="_ScheduleOfDebtInstrumentsTextBlock-c0_cont_1"><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">(1)</span></td> <td style="text-align: justify"><span style="font-size: 10pt"><ix:footnote id="ix_6_footnote" xml:lang="en-US">In October 11 2022 REIT Construction entered into a third-party loan agreement with Jiangsu Yuantong Municipal Projects Construction Co., Ltd to borrow approximately $<ix:nonFraction contextRef="c181" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" scale="6" unitRef="usd">1.1</ix:nonFraction> million (RMB <ix:nonFraction contextRef="c181" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" scale="6" unitRef="cny">8</ix:nonFraction> million) as working capital loan for two years. <ix:nonNumeric contextRef="c182" name="us-gaap:LongTermDebtDescription">The loan was from October 11, 2022 to October 10, 2024 and interest-free.</ix:nonNumeric></ix:footnote> </span></td></tr> </table><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 id="_LongTermDebtTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022, 2021 and
2020 interest on the Company&#8217;s long-term loans amounted to $<span style="-sec-ix-hidden: hidden-fact-174">nil</span>, $<span style="-sec-ix-hidden: hidden-fact-175">nil</span> and $ $<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseLongTermDebt" scale="0" unitRef="usd">90,074</ix:nonFraction>, respectively.</p></ix:continuation><div>

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

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

</div><!-- Field: Page; Sequence: 161; Value: 2 --><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 -->28<!-- 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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="reto_LoansFromThirdPartiesTextBlock-c0_cont_1" escape="true" name="reto:LoansFromThirdPartiesTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 16&#8211;LOANS FROM THIRD PARTIES</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="reto_LoansFromThirdPartiesTextBlock-c0_cont_2" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfLoansFromThirdPartiestableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#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)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><div style="-sec-ix-hidden: hidden-fact-176">-</div></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">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c185" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyNoncurrent" scale="0" unitRef="usd">145,000</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="c205" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyNoncurrent" scale="0" unitRef="usd">219,660</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Zhang Miao</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c206" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyNoncurrent" scale="0" unitRef="usd">145,000</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="c207" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyNoncurrent" scale="0" unitRef="usd">156,900</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="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-177">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c210" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyNoncurrent" scale="0" unitRef="usd">66,399</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Chai Guirong</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c192" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyNoncurrent" scale="0" unitRef="usd">145,000</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">
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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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</div><div>

</div><ix:continuation continuedAt="reto_LoansFromThirdPartiesTextBlock-c0_cont_3" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 9, 2021, Beijing REIT obtained a working
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interest-free. the loan was fully repaid 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="reto_LoansFromThirdPartiesTextBlock-c0_cont_4" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 29, 2021, Beijing REIT obtained a working
capital loan of $<ix:nonFraction contextRef="c184" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyCurrent" scale="0" unitRef="usd">219,660</ix:nonFraction> from Changshu Tongjiang Engineering Co., Ltd. The loan is from July 29, 2021 to July 28, 2022 and interest-free.
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</div><div>

</div><ix:continuation continuedAt="reto_LoansFromThirdPartiesTextBlock-c0_cont_5" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 8, 2021, Beijing REIT obtained a working
capital loan of $<ix:nonFraction contextRef="c186" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyCurrent" scale="0" unitRef="usd">156,900</ix:nonFraction> from Zhang Miao. The loan is from February 8, 2021 to February 7, 2022 and interest-free. After partial repayment,
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from Zhang Miao for working capital. The loan is due on demanded and interest free.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p></ix:continuation><div>

</div><div>

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

</div><ix:continuation continuedAt="reto_LoansFromThirdPartiesTextBlock-c0_cont_6" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 1, 2021, Hainan Yile IoT obtained a
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The loan was fully repaid 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="reto_LoansFromThirdPartiesTextBlock-c0_cont_7" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 21, 2021, Hainan Yile IoT obtained
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</div><div>

</div><ix:continuation continuedAt="reto_LoansFromThirdPartiesTextBlock-c0_cont_8" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 2, 2021, Hainan Yile IoT obtained a
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the loan balance was $<ix:nonFraction contextRef="c192" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CompensatingBalanceAmount" scale="0" unitRef="usd">145,000</ix:nonFraction> 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="reto_LoansFromThirdPartiesTextBlock-c0_cont_9" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 4, 2021, Yile Vehicles obtained a working
capital loan of $<ix:nonFraction contextRef="c193" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyCurrent" scale="0" unitRef="usd">52,718</ix:nonFraction> from Hainan Boxinda Science Technology Partnership. The loan is from July 4, 2021 to July 3, 2023 and interest-free.
The loan balance was $<ix:nonFraction contextRef="c194" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyCurrent" scale="0" unitRef="usd">48,720</ix:nonFraction> as of December 31, 2022. On January 30, 2022, Yile International obtained a working capital loan of $<ix:nonFraction contextRef="c195" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyCurrent" scale="0" unitRef="usd">101,500</ix:nonFraction>
from Hainan Boxinda Science Technology Partnership. The loan is from January 30, 2022 to January 29, 2023 and interest-free. On February
17, 2022, REIT Technology obtained a working capital loan of $<ix:nonFraction contextRef="c196" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyCurrent" scale="0" unitRef="usd">62,350</ix:nonFraction> from Hainan Boxinda Science Technology Partnership. The loan is from
February17, 2022 to February16, 2023 and interest-free.</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="reto_LoansFromThirdPartiesTextBlock-c0_cont_10" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 29, 2022, Beijing REIT obtained three
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December 31, 2022.The loan was repaid $ <ix:nonFraction contextRef="c199" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LoansPayable" scale="0" unitRef="usd">174,000</ix:nonFraction> in March, 2023.</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="reto_LoansFromThirdPartiesTextBlock-c0_cont_11" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 9, 2022, Beijing REIT obtained a working
capital loan of $<ix:nonFraction contextRef="c200" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionDueFromToRelatedPartyCurrent" scale="0" unitRef="usd">10,500</ix:nonFraction> from Beijing Dingji Rubik&#8217;s Cube. The loan was due on demand and interest-free.</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="reto_LoansFromThirdPartiesTextBlock-c0_cont_12" id="reto_LoansFromThirdPartiesTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 18, 2022, Beijing REIT obtained a
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</div><div>

</div><ix:continuation id="reto_LoansFromThirdPartiesTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 19, 2022, Beijing REIT obtained a
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repayment, the loan balance was $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfNotesPayable" scale="0" unitRef="usd">68,150</ix:nonFraction> as of December 31, 2022.</p></ix:continuation><div>

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:IncomeTaxDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 17&#8211;TAXES</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_2" id="_IncomeTaxDisclosureTextBlock-c0_cont_1"><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"><b>(a)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Corporate income taxes</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_3" id="_IncomeTaxDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is subject to income taxes on an entity
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_4" id="_IncomeTaxDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ReTo was incorporated in the British Virgin Islands
and is exempt from paying income tax. REIT Holdings is registered in Hong Kong as a holding 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="_IncomeTaxDisclosureTextBlock-c0_cont_5" id="_IncomeTaxDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s operating subsidiaries were
all incorporated in the PRC and are subject to PRC income tax, which is computed according to the relevant laws and regulations in the
PRC. Under the Enterprise Income Tax Law of PRC, the corporate income tax rate applicable to all companies, including both domestic and
foreign-invested companies, is <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationAtFederalStatutoryIncomeTaxRate" scale="-2" unitRef="pure">25</ix:nonFraction>%. However, Beijing REIT, Hainan Yile IoT and IoV Technology Research were recognized as a High-New Technology
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_6" id="_IncomeTaxDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table reconciles income tax expense
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_7" id="_IncomeTaxDisclosureTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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    <td colspan="10" style="border-bottom: Black 1.5pt solid; white-space: nowrap; font-weight: bold; text-align: center">For the Years Ended December 31,</td><td style="white-space: nowrap; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <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>
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    <td style="width: 64%; text-align: left">Income tax benefit computed based on PRC statutory income tax rate</td><td style="width: 1%">&#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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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_8" id="_IncomeTaxDisclosureTextBlock-c0_cont_7"><ix:continuation id="_ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr> <td style="vertical-align: top"><span style="font-size: 10pt">(1)</span></td> <td style="text-align: justify"><ix:footnote id="ix_7_footnote" xml:lang="en-US"><span style="font-size: 10pt">Represents the tax losses incurred from operations outside of China.</span></ix:footnote></td></tr> <tr> <td style="vertical-align: top">&#160;</td> <td style="text-align: justify">&#160;</td></tr> <tr> <td style="vertical-align: top; width: 24px"><span style="font-size: 10pt">(2)</span></td> <td style="text-align: justify"><ix:footnote id="ix_8_footnote" xml:lang="en-US"><span style="font-size: 10pt">According to PRC tax regulations, <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationDeductions" scale="-2" unitRef="pure">200</ix:nonFraction>% of current year R&amp;D expense approved by the local tax authority may be deducted from tax income.</span></ix:footnote></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-size: 10pt">(3)</span></td> <td style="text-align: justify"><ix:footnote id="ix_9_footnote" xml:lang="en-US"><span style="font-size: 10pt">Represents expenses incurred by the Company that were not deductible for PRC income tax.</span></ix:footnote></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_9" id="_IncomeTaxDisclosureTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The breakdown of the Company&#8217;s income (loss) before income tax
provision is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_10" id="_IncomeTaxDisclosureTextBlock-c0_cont_9"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfIncomeBeforeIncomeTaxDomesticAndForeignTableTextBlock"><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; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="10" style="border-bottom: Black 1.5pt solid; white-space: nowrap; font-weight: bold; text-align: center">For the Years Ended December 31,</td><td style="white-space: nowrap; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <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>
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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">$</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesDomestic" scale="0" unitRef="usd">9,398,680</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Loss before income tax expense from outside of China</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesForeign" scale="0" unitRef="usd">5,998,540</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt">Total loss before income tax provision</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="reto:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterests" scale="0" unitRef="usd">15,397,220</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c5" decimals="0" format="ixt:num-dot-decimal" name="reto:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterests" scale="0" unitRef="usd">4,718,032</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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

</div><!-- Field: Page; Sequence: 163; Value: 2 --><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 -->30<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </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"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 17&#8211;TAXES (continued)</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%">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-size: 10pt"><b>(a)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Corporate income taxes (continued)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_11" id="_IncomeTaxDisclosureTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Loss before income tax expense from outside of
China represents the losses incurred in ReTo, REIT Holdings, REIT India and REIT US, which are mainly holding companies incorporated outside
of China.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_12" id="_IncomeTaxDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The income tax provision (benefit) for the years ended December 31,
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_13" id="_IncomeTaxDisclosureTextBlock-c0_cont_12"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%">Current</td><td style="width: 1%">&#160;</td>
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</div><div>

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amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. Due to continuous
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_15" id="_IncomeTaxDisclosureTextBlock-c0_cont_14"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfDeferredTaxAssetsAndLiabilitiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_16" id="_IncomeTaxDisclosureTextBlock-c0_cont_15"><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="_IncomeTaxDisclosureTextBlock-c0_cont_17" id="_IncomeTaxDisclosureTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is subject to VAT for selling products
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</div><div>

</div><ix:continuation continuedAt="_IncomeTaxDisclosureTextBlock-c0_cont_18" id="_IncomeTaxDisclosureTextBlock-c0_cont_17"><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="_IncomeTaxDisclosureTextBlock-c0_cont_20" id="_IncomeTaxDisclosureTextBlock-c0_cont_19"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfIncomeTaxesPayableTableTextBlock"><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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</div><div>

</div><ix:continuation id="_IncomeTaxDisclosureTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022 and 2021, the Company
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in China. For the years ended December 31, 2022 and 2021, the Company has not received any penalty and interest charge notice from local
tax authorities. Due to uncertainties associated with the status of examinations, including the protocols of finalizing audits by the
relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these unpaid tax balances.
The final outcome of this tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or
expiration of the statute of limitations. The Company believes it is likely that the Company can reach an agreement with the local tax
authority to fully settle its tax payables in a short term but cannot guarantee such settlement will ultimately occur.</p></ix:continuation><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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

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</div><div>

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</div><div>

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legal actions arising in the ordinary course of business. The majority of these claims and proceedings are related to, or arise from,
lease disputes, commercial disputes, worker compensation complaints, default on guaranteeing third-party lease obligations, and default
on loans. The Company first determines whether a loss from a claim is probable, and if it is reasonable to estimate the potential loss,
the loss will be accrued. The Company discloses a range of possible losses, if a loss from a claim is probable but the amount of loss
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</div><div>

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</div><div>

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</div><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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    <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-189">-</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-190">-</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; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-192">-</div></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-193">-</div></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:RelatedPartyTransactionsDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 19&#8211;RELATED PARTY TRANSACTIONS</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company records transactions with various
related parties. These related party balances as of December 31, 2022 and 2021 and transactions for the years ended December 31, 2022,
2021 and 2020 are identified as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_2"><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"><b>(1)</b></span></td>
    <td><span style="font-size: 10pt"><b>Related parties with transactions and related party relationships </b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfRelatedPartiesWithTransactionsAndRelatedPartyRelationshipsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; width: 50%"><span style="font-size: 10pt"><b>Name of Related Party</b></span></td>
    <td style="width: 1%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 49%; text-align: center"><span style="font-size: 10pt"><b>Relationship to the Company</b></span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Mr. Hengfang Li</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><ix:nonNumeric contextRef="c227" name="reto:NameOfRelatedParty"><span style="font-size: 10pt">Chief Executive Officer and Chairman of the Board of Directors</span></ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Q Green Techcon Private Limited</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><ix:nonNumeric contextRef="c228" name="reto:NameOfRelatedParty"><span style="font-size: 10pt">Owned by the minority shareholder of REIT India</span></ix:nonNumeric></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Shexian Ruibo</span></td>
    <td style="vertical-align: bottom">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Zhongrong Honghe Eco Construction Materials Co., Ltd</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><ix:nonNumeric contextRef="c230" name="reto:NameOfRelatedParty"><span style="font-size: 10pt">An entity controlled by Ms. Hong Ma</span></ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Hunyuan Baiyang Food Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><ix:nonNumeric contextRef="c231" name="reto:NameOfRelatedParty"><span style="font-size: 10pt">An entity controlled by Mr. Hengfang Li</span></ix:nonNumeric></td></tr>
  <tr style="background-color: White">
    <td style="vertical-align: bottom; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Bei Qi Yin Jian Yi Le (Haikou) Smart Move Science Technology Co., Ltd.</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: top; text-align: justify"><ix:nonNumeric contextRef="c232" name="reto:NameOfRelatedParty"><span style="font-size: 10pt">Hainan Yile IoT owns 45% ownership interest in this company</span></ix:nonNumeric></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Zhongtou REIT Information Service (Beijing) Co., Ltd</span></td>
    <td style="vertical-align: bottom">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><ix:nonNumeric contextRef="c233" name="reto:NameOfRelatedParty"><span style="font-size: 10pt">An entity controlled by Mr. Xinyang Li and Ms. Xinran Li, children of Mr. Hengfang Li</span></ix:nonNumeric></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 9pt; text-indent: -9pt"><span style="font-size: 10pt">Handan Ruisheng Construction Material Technology Co., Ltd.</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><ix:nonNumeric contextRef="c234" name="reto:NameOfRelatedParty"><span style="font-size: 10pt">An entity controlled by Shexian Ruibo</span></ix:nonNumeric></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_4"><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"><b>(2)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Due to related parties</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_6" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2022 and 2021, the balance of due to related parties
was as follows:&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_7" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ScheduleOfRelatedPartyTransactionsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left; padding-bottom: 4pt">Mr. Hengfang Li</td><td style="width: 1%; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; width: 1%; text-align: left">$</td><td style="border-bottom: Black 4pt double; width: 9%; text-align: right"><ix:nonFraction contextRef="c235" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="0" unitRef="usd">208,225</ix:nonFraction></td><td style="width: 1%; padding-bottom: 4pt; text-align: left">&#160;</td><td style="width: 1%; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; width: 1%; text-align: left">$</td><td style="border-bottom: Black 4pt double; width: 9%; text-align: right"><ix:nonFraction contextRef="c236" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DueToRelatedPartiesCurrentAndNoncurrent" scale="0" unitRef="usd">472,439</ix:nonFraction></td><td style="width: 1%; padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_8" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Hengfang Li is the Chief Executive Officer
and major shareholder of the Company. Mr. Li periodically provides working capital loans to support the Company&#8217;s operations when
needed. Such advances were non-interest bearing and due on demand.</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="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_9" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_8"><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"><b>(3)</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>Accounts receivable from related parties</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_10" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounts receivable from related parties consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_11" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_10"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfTheBalancesResultingFromNormalCourseOfBusinessWithRelatedParties"><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: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; width: 76%; text-align: left">Q Green Techcon Private Limited</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-align: left">Hunyuan Baiyang Food Co., Ltd.</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c231" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsReceivableRelatedParties" scale="0" unitRef="usd">37,048</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">Bei Qi Yin Jian Yi Le (Haikou) Smart Move Science Technology Co., Ltd.</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="c232" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsReceivableRelatedParties" scale="0" unitRef="usd">46,688</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c239" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsReceivableRelatedParties" scale="0" unitRef="usd">50,520</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_12" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company fully collected the accounts receivable as of December
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</div><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"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 19&#8211;RELATED PARTY TRANSACTIONS (continued)</b></p><div>

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

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_13" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_12"><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"><b>(4)</b></span></td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_14" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Advance to suppliers, related party, consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_15" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_14"><ix:nonNumeric contextRef="c0" continuedAt="reto_ScheduleOfAdvanceToSupplierRelatedPartyTableTextBlock-c0_cont_1" escape="true" name="reto:ScheduleOfAdvanceToSupplierRelatedPartyTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <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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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_16" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_15"><ix:continuation id="reto_ScheduleOfAdvanceToSupplierRelatedPartyTableTextBlock-c0_cont_1"><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"><ix:footnote id="ix_10_footnote" xml:lang="en-US"><span style="font-size: 10pt">The balance represents the Company&#8217;s purchase advances for eco-friendly materials and equipment supplied by Shexian Ruibo.</span></ix:footnote></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_17" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_18" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounts payables to related parties consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_19" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_18"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfAccountsPayablesToRelatedPartiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_20" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_19"><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"><b>(6)</b></span></td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_21" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Sales to related parties consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_22" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_21"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfSalesToRelatedPartiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; 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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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_23" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cost of revenue associated with the sales to these
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</div><div>

</div><ix:continuation continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_24" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_23"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 24px"><span style="font-size: 10pt"><b>(7)</b></span></td>
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  </table><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="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_25" id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Purchases from related parties consisted of the
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</div><div>

</div><ix:continuation id="_RelatedPartyTransactionsDisclosureTextBlock-c0_cont_25"><ix:nonNumeric contextRef="c0" escape="true" name="reto:ScheduleOfPurchasesFromRelatedPartiesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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

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</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>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:StockholdersEquityNoteDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 20</b>&#8211;<b>SHAREHOLDERS&#8217; EQUITY </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#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"><b>Statutory reserve</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#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">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;). <ix:nonNumeric contextRef="c0" name="reto:DescriptionOfAppropriationsToStatutorySurplusReserve">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&#8217;s registered capital.</ix:nonNumeric> Appropriations to the discretionary surplus reserve are made at the discretion
of the Board of Directors. The restricted amounts as determined pursuant to PRC statutory laws totaled $<ix:nonFraction contextRef="c252" decimals="0" format="ixt:num-dot-decimal" name="reto:RestrictedAmount" scale="0" unitRef="usd">1,066,554</ix:nonFraction> and $<ix:nonFraction contextRef="c253" decimals="0" format="ixt:num-dot-decimal" name="reto:RestrictedAmount" scale="0" unitRef="usd">1,230,387</ix:nonFraction> as of
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</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"><b>Shares issuances</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_5" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is a company limited by shares established
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</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">On September 5, 2019, the Company entered into
a consulting service agreement with FirstTrust Group, Inc. (&#8220;FirstTrust&#8221;), pursuant to which FirstTrust would assist the Company
with strategic initiatives over the service period from August 16, 2019 to August 15, 2020. The Company issued <ix:nonFraction contextRef="c254" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonUnitIssued" scale="0" unitRef="shares">400,000</ix:nonFraction> common shares valued
at $<ix:nonFraction contextRef="c255" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueNewIssues" scale="0" unitRef="usd">448,000</ix:nonFraction> based on the fair market price of the Company&#8217;s common shares, at $<ix:nonFraction contextRef="c254" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares">1.12</ix:nonFraction> per share on September 5, 2019. The stock-based
compensation is amortized over the service period. The Company recognized stock-based compensation expenses of $<span style="-sec-ix-hidden: hidden-fact-202">nil</span>, $<span style="-sec-ix-hidden: hidden-fact-203">nil</span> and $<ix:nonFraction contextRef="c258" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeBenefitsAndShareBasedCompensation" scale="0" unitRef="usd">280,000</ix:nonFraction>
for the years ended December 31, 2022, 2021 and 2020, respectively.</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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_7" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Company&#8217;s 2018 Share Incentive
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to its directors and executives in exchange for their services for the period from January 1, 2020 to December 31, 2021. For the years
ended December 31, 2022, 2021 and 2020, the Company recognized stock-based compensation expenses of $<span style="-sec-ix-hidden: hidden-fact-204">nil</span>, $<ix:nonFraction contextRef="c262" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeBenefitsAndShareBasedCompensation" scale="0" unitRef="usd">325,375</ix:nonFraction> and $<ix:nonFraction contextRef="c263" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeBenefitsAndShareBasedCompensation" scale="0" unitRef="usd">325,375</ix:nonFraction>, respectively.</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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period from January 1, 2020 to December 31, 2021. For the years ended December 31, 2022, 2021 and 2020, the Company recognized stock-based
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</div><div>

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the Company with strategic initiatives over the service period between January 23, 2021 to January 24, 2024. For the first-year service,
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per share on April 9, 2021. Stock-based compensation is amortized over the service period. For the years ended December 31, 2022 and 2021,
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</div><div>

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</div><div>

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</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>grant date<br/>
</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>value</b></p></td><td style="white-space: nowrap; padding-bottom: 1.5pt">&#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: White">
    <td style="text-align: justify; padding-bottom: 4pt">Nonvested as of December 31, 2021</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-201">-</div></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

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

</div><!-- Field: Page; Sequence: 167; Value: 2 --><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">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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


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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 20&#8211;SHAREHOLDERS&#8217; EQUITY
(continued)</b></p><div>

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

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_12" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 11, 2021, the Company issued <ix:nonFraction contextRef="c274" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonUnitIssued" scale="0" unitRef="shares">75,000</ix:nonFraction> common
Shares to Yorkville Advisors Global LP for services rendered in connection with Company&#8217;s corporate strategy on the Nasdaq Stock
Market. For the year ended December 31, 2021, the Company recognized stock-based compensation expenses of $<ix:nonFraction contextRef="c275" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeBenefitsAndShareBasedCompensation" scale="0" unitRef="usd">84,637</ix:nonFraction>.</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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_13" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">On December
27, 2021, the Company entered into an acquisition agreement to acquire&#160;<ix:nonFraction contextRef="c118" decimals="2" format="ixt:num-dot-decimal" name="reto:EquityPercentageOfOwnership" scale="-2" unitRef="pure">100</ix:nonFraction>% equity interest in REIT Mingde and its subsidiaries from
two unrelated parties for a consideration of $<ix:nonFraction contextRef="c276" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionConsiderationTransferred" scale="0" unitRef="usd">1,569,000</ix:nonFraction>&#160;(or RMB&#160;<ix:nonFraction contextRef="c276" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionConsiderationTransferred" scale="6" unitRef="cny">10</ix:nonFraction>&#160;million). REIT Mingde, through its subsidiaries, is
primarily engaged in providing roadside assistance services and software development services. The acquisition was completed on December
28, 2021 (the &#8220;acquisition date&#8221;). The Company believes the acquisition will expand the Company&#8217;s technology application
in the transportation market. In lieu of cash consideration of RMB&#160;<ix:nonFraction contextRef="c277" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionConsiderationTransferred" scale="6" unitRef="usd">10</ix:nonFraction>&#160;million, the Company issued an aggregate of&#160;<ix:nonFraction contextRef="c121" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonUnitIssued" scale="0" unitRef="shares">2,580,000</ix:nonFraction>&#160;common
shares to the sellers, based on a price of $<ix:nonFraction contextRef="c278" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares">0.61</ix:nonFraction>&#160;per share and the exchange rate of USD to RMB of&#160;<ix:nonFraction contextRef="c278" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="cnyPershares">6.39</ix:nonFraction>&#160;on February 22,
2022.</span></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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_14" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">On April
22, 2022, the Company&#8217;s board of directors approved the issuance of an aggregate of&#160;<ix:nonFraction contextRef="c279" decimals="0" format="ixt:num-dot-decimal" name="reto:AggregateCommonShares" scale="0" unitRef="shares">1,025,000</ix:nonFraction>&#160;common shares to its employees
for their services under the 2018 Share Incentive Plan; and also approved the issuance of an aggregate of&#160;<ix:nonFraction contextRef="c280" decimals="0" format="ixt:num-dot-decimal" name="reto:AggregateCommonShares" scale="0" unitRef="shares">3,000,000</ix:nonFraction>&#160;common shares
to its employees, officers and directors for their services under the 2021 Share Incentive Plan, both of which were registered under the
registration statement on Form S-8 which was filed with the SEC on April 26, 2022. The Company issued an aggregate of&#160;<ix:nonFraction contextRef="c281" decimals="0" format="ixt:num-dot-decimal" name="reto:AggregateCommonShares" scale="0" unitRef="shares">4,025,000</ix:nonFraction>&#160;shares
between May 9, 2022 and June 4, 2022 and&#160;recognized share-based compensation expenses of $<ix:nonFraction contextRef="c282" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeBenefitsAndShareBasedCompensation" scale="0" unitRef="usd">3,296,475</ix:nonFraction>&#160;related to the issuance.</span></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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_15" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">On May 25,
2022,&#160;the Company&#160;issued&#160;<ix:nonFraction contextRef="c283" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonUnitIssued" scale="0" unitRef="shares">5,970,000</ix:nonFraction>&#160;Common Shares to Hainan Tashanshi Digital Information Co. Ltd. at $<ix:nonFraction contextRef="c283" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharePrice" scale="0" unitRef="usdPershares">0.60</ix:nonFraction>&#160;per
share for aggregate gross proceeds of $<ix:nonFraction contextRef="c284" decimals="0" format="ixt:num-dot-decimal" name="reto:AggregateGrossProceeds" scale="0" unitRef="usd">3,582,000</ix:nonFraction>.</span></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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_16" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 8, 2023, the Company&#8217;s board of
directors approved the issuance of an aggregate of <ix:nonFraction contextRef="c285" decimals="0" format="ixt:num-dot-decimal" name="reto:AggregateCommonShares" scale="0" unitRef="shares">5,000,000</ix:nonFraction> Common Shares to its employees, officers and directors for their services
<span style="background-color: white">under the 2022 Share Incentive Plan</span>.</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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_17" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 27, 2023, the Company entered into
a consulting service agreement with Express Transportation Ltd. (&#8220;ETL&#8221;). Pursuant to the agreement, ETL has agreed to provide
feasibility, analysis and risk management services on investment project in mainland China in exchange for <ix:nonFraction contextRef="c286" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonUnitIssued" scale="0" unitRef="shares">2,000,000</ix:nonFraction> Common Shares, which
were issued on March 8, 2023.</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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_18" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 27, 2023, the Company entered into
a consulting service agreement with Maxleed Investment Holding Ltd. (&#8220;MIHL&#8221;). Pursuant to the agreement, MIHL has agreed to
provide strategy, due diligence, business expansion and optimization services in exchange for <ix:nonFraction contextRef="c287" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonUnitIssued" scale="0" unitRef="shares">2,000,000</ix:nonFraction> Common Shares, which were issued
on March 8, 2023.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_19" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><span style="text-decoration:underline">Conversion of convertible debentures</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_20" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2022, the Company
issued an aggregate of <ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="reto:AggregateCommonShares" scale="0" unitRef="shares">1,358,851</ix:nonFraction> common shares for conversion of convertible debentures based on the conversion price ranging from $<ix:nonFraction contextRef="c288" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:CommonStockConvertibleConversionPriceDecrease" scale="0" unitRef="usdPershares">0.24</ix:nonFraction>-$<ix:nonFraction contextRef="c289" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:CommonStockConvertibleConversionPriceIncrease" scale="0" unitRef="usdPershares">0.34</ix:nonFraction>.
(see Note 13).</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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_21" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">For the
year ended December 31, 2021, the Company issued an aggregate of&#160;<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="reto:AggregateCommonShares" scale="0" unitRef="shares">3,755,034</ix:nonFraction>&#160;common shares for conversion of convertible debentures
based on the conversion price ranging from $<ix:nonFraction contextRef="c290" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:CommonStockConvertibleConversionPriceDecrease" scale="0" unitRef="usdPershares">0.97</ix:nonFraction>-$<ix:nonFraction contextRef="c291" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:CommonStockConvertibleConversionPriceIncrease" scale="0" unitRef="usdPershares">1.11</ix:nonFraction>. (see Note 13).</span></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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_22" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white"><b><span style="text-decoration:underline">Purchase
of non-controlling interest in Xinyi REIT</span></b></span></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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_23" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">On
April 8, 2022, the Company signed an agreement with the minority shareholder of Xinyi REIT. Pursuant to the agreement, the Company agreed
to purchase the minority shareholder&#8217;s&#160;<ix:nonFraction contextRef="c292" decimals="2" format="ixt:num-dot-decimal" name="reto:EquityPercentageOfOwnership" scale="-2" unitRef="pure">30</ix:nonFraction>% equity interest in Xinyi REIT for an aggregated consideration of RMB<ix:nonFraction contextRef="c293" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionConsiderationTransferred" scale="6" unitRef="cny">18</ix:nonFraction>&#160;million
which is payable in four installments of RMB&#160;<ix:nonFraction contextRef="c294" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionConsiderationTransferred" scale="6" unitRef="cny">4</ix:nonFraction>&#160;million, RMB&#160;<ix:nonFraction contextRef="c295" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionConsiderationTransferred" scale="6" unitRef="cny">4</ix:nonFraction>&#160;million, RMB&#160;<ix:nonFraction contextRef="c296" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionConsiderationTransferred" scale="6" unitRef="cny">5</ix:nonFraction>&#160;million, and RMB&#160;<ix:nonFraction contextRef="c297" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:AssetAcquisitionConsiderationTransferred" scale="6" unitRef="cny">5</ix:nonFraction>&#160;million
by the end of April 2022, June 2022, September 2022, and December 2022, respectively. The Company has paid RMB&#160;<ix:nonFraction contextRef="c0" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForFees" scale="6" unitRef="cny">13</ix:nonFraction>&#160;million (approximately
$<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForFees" scale="6" unitRef="usd">1.9</ix:nonFraction>&#160;million) as of December 31, 2022. As of December 31, 2022, the balance amounted to RMB&#160;<ix:nonFraction contextRef="c2" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedBalancePrincipalAmount" scale="6" unitRef="cny">5</ix:nonFraction>&#160;million (approximately $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedBalancePrincipalAmount" scale="6" unitRef="usd">0.7</ix:nonFraction>&#160;million).
The Company further paid RMB&#160;<ix:nonFraction contextRef="c2" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:NotesAndLoansPayable" scale="6" unitRef="cny">3</ix:nonFraction>&#160;million (approximately $<ix:nonFraction contextRef="c2" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:NotesAndLoansPayable" scale="6" unitRef="usd">0.4</ix:nonFraction>&#160;million) in 2023. </span>However, as of the date herein, the
remaining balance of RMB <ix:nonFraction contextRef="c2" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:Cash" scale="6" unitRef="cny">2</ix:nonFraction> million (<span style="background-color: white">approximately $<ix:nonFraction contextRef="c298" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Cash" scale="0" unitRef="usd">0</ix:nonFraction>.3million</span>) is due by Beijing REIT.&#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="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_24" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white"><b><span style="text-decoration:underline">Non-controlling
shareholder contribution</span></b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="background-color: white">On April
6, 2022, Hainan Shi Yuan Tong Da Ye Feng Private Equity Partnership (Limited Partnership) signed an investment agreement with&#160;REIT
Mingde to invest RMB&#160;<ix:nonFraction contextRef="c299" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedAtCost" scale="6" unitRef="cny">5</ix:nonFraction>&#160;million (approximately $<ix:nonFraction contextRef="c299" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedAtCost" scale="6" unitRef="usd">0.8</ix:nonFraction>&#160;million) into REIT Mingde &#8217;s subsidiary Fangyuyuan in exchange
for&#160;<ix:nonFraction contextRef="c300" decimals="2" format="ixt:num-dot-decimal" name="reto:EquityPercentageOfOwnership" scale="-2" unitRef="pure">10</ix:nonFraction>% equity interest.</span></p></ix:continuation><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: center"></p><div>

</div><!-- Field: Page; Sequence: 168; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; 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"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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

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

</div><ix:nonNumeric contextRef="c0" continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:SegmentReportingDisclosureTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 21&#8211;SEGMENT REPORTING</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_2" id="_SegmentReportingDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ASC 280, &#8220;Segment Reporting&#8221;, establishes
standards for reporting information about operating segments on a basis consistent with the Company&#8217;s internal organizational structure
as well as information about geographical areas, business segments and major customers in financial statements for details on the Company&#8217;s
business segments. The Company uses the &#8220;management approach&#8221; in determining reportable operating segments. The management
approach considers the internal organization and reporting used by the Company&#8217;s chief operating decision maker for making operating
decisions and assessing performance as the source for determining the Company&#8217;s reportable segments. Management, including the chief
operating decision maker, reviews operation results by the revenue of different products or services. Based on management&#8217;s assessment,
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material, municipal construction projects, and technology consulting and other services.</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="_SegmentReportingDisclosureTextBlock-c0_cont_3" id="_SegmentReportingDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Construction material segment manufactures and
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construction material. Construction service segment generates revenue from contracting municipal construction projects. Technological
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</div><div>

</div><ix:continuation continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_4" id="_SegmentReportingDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table presents summary information
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</div><div>

</div><ix:continuation continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_5" id="_SegmentReportingDisclosureTextBlock-c0_cont_4"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfSegmentReportingInformationBySegmentTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfSegmentReportingInformationBySegmentTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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<br/>
and <br/>
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sales</b></span></td><td style="white-space: nowrap; text-align: center; padding-bottom: 1.5pt">&#160;</td><td style="white-space: nowrap; text-align: center; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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materials<br/>
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consulting<br/>
 and other <br/>
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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: 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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</div><div>

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

</div><!-- Field: Page; Sequence: 169; Value: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES</b></p><div>

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


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

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 21&#8211;SEGMENT REPORTING (continued)</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_SegmentReportingDisclosureTextBlock-c0_cont_6" id="_SegmentReportingDisclosureTextBlock-c0_cont_5"><ix:continuation continuedAt="_ScheduleOfSegmentReportingInformationBySegmentTextBlock-c0_cont_2" id="_ScheduleOfSegmentReportingInformationBySegmentTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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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>

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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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  </table></ix:continuation></ix:continuation><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"></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_SubsequentEventsTextBlock-c0_cont_1" escape="true" name="us-gaap:SubsequentEventsTextBlock"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 22&#8211;SUBSEQUENT EVENTS </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c0_cont_2" id="_SubsequentEventsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 13, 2023, REIT New Materials Xinyi Co.,
Ltd. and Weiying Zhou were named as defendants in a lawsuit. The complaint demanded for a repayment of a loan of RMB<ix:nonFraction contextRef="c325" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="0" unitRef="cny">550,000</ix:nonFraction> and the related
interest calculated based on the PRC&#8217;s one year borrowing benchmark rate. The Company filed a response to dispute the allegations
and intended to defend itself vigorously in this matter.</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="_SubsequentEventsTextBlock-c0_cont_3" id="_SubsequentEventsTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 23, 2023, REIT New Materials Xinyi Co.,
Ltd. was named as defendants in a lawsuit. The complaint demanded for a repayment of a loan of RMB<ix:nonFraction contextRef="c326" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfConstructionLoansPayable" scale="0" unitRef="cny">25,607</ix:nonFraction>. On April 11, 2023, REIT New
Materials Xinyi Co., Ltd. was named as defendants in a lawsuit. The complaint demanded for payment of transportation fee of RMB<ix:nonFraction contextRef="c327" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ResultsOfOperationsTransportationCosts" scale="0" unitRef="cny">700,000</ix:nonFraction>.
The Company disputed the allegations and intends to defend itself vigorously in these matters.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_SubsequentEventsTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, the Company is regularly subject
to claims and litigation. The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant
uncertainties, and could be material to our operating results and cash flows for a particular period. The Company evaluates, on a regular
basis, developments in its legal proceedings and other contingencies that could affect the amount of liability, including amounts in excess
of any previous accruals and reasonably possible losses disclosed, and make adjustments and changes to the accruals and disclosures as
appropriate. For the matters the Company discloses that does not include an estimate of the amount of loss or range of losses, such an
estimate is not possible or is immaterial, and the Company may be unable to estimate the possible loss or range of losses that could potentially
result from the application of non-monetary remedies. Until the final resolution of such matters, if any of the Company&#8217;s estimates
and assumptions change or prove to have been incorrect, the Company may experience losses in excess of the amounts recorded, which could
have a material effect on the Company&#8217;s business, consolidated financial position, results of operations, or cash flows.</p></ix:continuation><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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

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

</div><div style="display: none"><ix:header>
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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
☐
TRANSITIONAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
TRANSITIONAL
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
001-38307
RETO ECO-SOLUTIONS, INC.
(Exact Name of registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
British Virgin Islands
(Jurisdiction of incorporation or organization)
c/o Beijing REIT Technology Development Co.,
Ltd
.
X-702, Tower A, 60 Anli Road
,
Chaoyang District
Beijing
,
People's Republic of
China
100101
(Address of principal executive offices)
Hengfang Li
c/o Beijing REIT Technology Development Co.,
Ltd
.
X-702, Tower A, 60 Anli Road
,
Chaoyang District
Beijing
,
People's Republic of
China
100101
(+86)
10-64827328
Email: ir@retoeco.com
(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
Common shares, $0.001 par value per share
RETO
The
Nasdaq
Stock Market LLC
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: as
of December 31, 2022,
43,398,885
common shares were issued and outstanding.
Indicate by check mark if
the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
☐
No
☒
If this report is an annual
or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934. Yes
☐
No
☒
Note - Checking the
box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Yes
☒
No
☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See 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.
☐
†The term "new
or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
Indicate by check mark whether
the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
☐
Yes
☒
No
Indicate by check mark which
basis of accounting the registrant has used to prepare the financial statements included in this filing:
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). ☐
U.S. GAAP
☒
International Financial Reporting Standards as issued
Other
☐
By the International Accounting Standards Board
☐
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
☒
(APPLICABLE ONLY TO ISSUERS
INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether
the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐
Yes
☐
No
Table of Contents
CERTAIN TERMS AND CONVENTIONS
ii
FORWARD LOOKING STATEMENTS
iv
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
48
Item 4A.
Unresolved Staff Comments
73
Item 5.
Operating and Financial Review and Prospects
73
Item 6.
Directors, Senior Management and Employees
89
Item 7.
Major Shareholders and Related Party Transactions
101
Item 8.
Financial Information
103
Item 9.
The Offer and Listing
105
Item 10.
Additional Information
105
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
118
Item 12.
Description of Securities Other Than Equity Securities
119
PART II
120
Item 13.
Defaults, Dividends Arrearages and Delinquencies
120
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
120
Item 15.
Controls and Procedures
120
Item 16.
[Reserved]
121
Item 16A.
Audit Committee Financial Expert
121
Item 16B.
Code of Ethics
121
Item 16C.
Principal Accountant Fees and Services
121
Item 16D.
Exemptions form the Listing Standards for Audit Committees
122
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
122
Item 16F.
Change in Registrant's Certifying Accountant
122
Item 16G.
Corporate Governance
123
Item 16H.
Mine Safety Disclosure
123
Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
123
PART III
124
Item 17.
Financial Statements
124
Item 18.
Financial Statements
124
Item 19.
Exhibits
124
i
CERTAIN TERMS AND CONVENTIONS
Except where the context otherwise requires and
for purposes of this annual report on Form 20-F only:
●
"Act" refers to The BVI Business Companies Act, 2004 (as amended);
●
"Beijing REIT" refers to Beijing REIT Technology Development Co., Ltd., a PRC limited liability company;
●
"Beijing REIT Ecological" refers to Beijing REIT Ecological Engineering Technology Co., Ltd., a PRC limited liability company;
●
"BVI" refers to the British Virgin Islands;
●
"China" or the "PRC" refers to the People's Republic of China and the term "Chinese" has a correlative meaning for the purpose of this annual report;
●
"Common Shares" refers to common shares of par value $0.001 per share issued in ReTo;
●
"CSRC" refers to the China Securities Regulatory Commission;
●
"Exchange Act" refers to the Securities Exchange Act of 1934, as amended;
●
"FINRA" refers to the Financial Industry Regulatory Authority, Inc.;
●
"Hainan Coconut" refers to Hainan Coconut Network Freight Co., Ltd., a limited liability company incorporated in mainland China and subsidiary of Yangpu Fangyuyuan;
●
"Hainan Kunneng" refers to Hainan Kunneng Direct Supply Chain Management Co., Ltd., a limited liability company incorporated in mainland China and subsidiary of Yangpu Fangyuyuan;
●
"Hainan Yile IoT" refers to Hainan Yile IoT Technology Co., Ltd, a PRC limited liability company and subsidiary of REIT Mingde;
●
"Hong Kong" refers to the Hong Kong Special Administrative Region of the PRC;
●
"IoV Technology Research" refers to Hainan Yile IoV Technology Research Institute Co., Ltd., a limited liability company incorporated in mainland China and subsidiary of Hainan Yile IoT;
●
"JOBS Act" refers to the Jumpstart Our Business Startups Act, enacted in April 2012;
●
"M&A" refers to the amended and restated memorandum and articles of association of ReTo, currently in effect and as amended from time to time;
●
"Macau" refers to the Macao Special Administrative Region of the PRC;
●
"mainland China" refers to the People's Republic of China, excluding, for the purpose of this annual report, Taiwan, Hong Kong and Macau;
●
"MOFCOM" refers to China's Ministry of Commerce;
●
"PCAOB" refers to the Public Company Accounting Oversight Board of the United States;
●
"PRC subsidiaries" refers to the Company's subsidiaries that were incorporated in mainland China;
●
"REIT Changjiang" refers to REIT MingSheng Environment Protection Construction Materials (Changjiang) Co., Ltd., a PRC limited liability company, which was disposed in December 2021;
●
"REIT Construction" refers to Hainan REIT Construction Engineering Co., Ltd., a PRC limited liability company, which was dissolved on February 9, 2023;
●
"REIT Holdings" refers to REIT Holdings (China) Limited, a Hong Kong limited company and a wholly owned subsidiary of ReTo;
●
"REIT Mingde" refers to Hainan REIT Mingde Investment Holding Co., Ltd., a PRC limited liability company and a wholly owned subsidiary of REIT Technology Development Co., Ltd.;
ii
●
"REIT Ordos" Refers to REIT Ecological Technology Co., Ltd., a limited liability company incorporated in mainland China and a wholly owned subsidiary of REIT Holdings;
●
"REIT Technology" refers to REIT Technology Development Co., Ltd., a PRC limited liability company and subsidiary of REIT Holdings;
●
"Renminbi" or "RMB" refers to the legal currency of the People's Republic of China;
●
"ReTo" refers to ReTo Eco-Solutions, Inc., a BVI business company (registered in the BVI with company number 1885527);
●
"SAFE" refers to China's State Administration of Foreign Exchange;
●
"SEC" refers to the U.S. Securities and Exchange Commission;
●
"Securities Act" refers to the Securities Act of 1933, as amended;
●
"Xinyi REIT" refers to REIT New Materials Xinyi Co., Ltd, a joint venture established by Beijing REIT;
●
"Yangpu Fangyuyuan" refers to Yangpu Fangyuyuan United Logistics Co., Ltd., a limited liability company incorporated in mainland China and a subsidiary of REIT Mingde;
●
"U.S. dollars", "US$" and "$" refer to the legal currency of the United States; and
●
"We", "us", "our", or the "Company" refers to ReTo Eco-Solutions, Inc. and its subsidiaries, unless the context requires otherwise.
For the sake of clarity, this
annual report follows the English naming convention of first name followed by last name, regardless of whether an individual's name
is Chinese or English. For example, the name of our chief executive officer will be presented as "Hengfang Li", even though,
in Chinese, his name would be presented as "Li Hengfang".
Our reporting and functional
currency is the Renminbi. Solely for the convenience of the reader, this annual report contains translations of some RMB amounts into
U.S. dollars, at specified rates. Except as otherwise stated in this annual report, all translations from RMB to U.S. dollars are made
at RMB6.8972 to US$1.00, the rate published by the Federal Reserve Board on December 31, 2022. No representation is made that the RMB
amounts referred to in this annual report could have been or could be converted into U.S. dollars at such rate.
Our fiscal year end is December
31. References to a particular "fiscal year" are to our fiscal year ended December 31 of that calendar year.
We own or have rights to trademarks
or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In
addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products.
This annual report may also contain trademarks, service marks and trade names of other companies, which are the property of their respective
owners. Our use or display of third parties' trademarks, service marks, trade names or products in this annual report is not intended
to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, some of the copyrights,
trade names and trademarks referred to in this annual report or the documents incorporated by reference herein are listed without their
©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade
names and trademarks. All other trademarks are the property of their respective owners.
iii
FORWARD-LOOKING STATEMENTS
This annual report contains
forward-looking statements. All statements contained in this annual report other than statements of historical fact, including statements
regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations,
are forward-looking statements. The words "believe," "may," "will," "estimate," "continue,"
"anticipate," "intend," "expect," and similar expressions are intended to identify forward-looking
statements. We have based these forward-looking statements largely on our current expectations and projections about future events and
trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business
operations and objectives, and financial needs. These forward-looking statements include statements relating to:
●
the potential impact on our business of the economic, political and social conditions of the PRC;
●
any changes in the laws of the PRC or local province that may affect our operations;
●
the impact of COVID-19 on our operations;
●
our ability to operate as a going concern;
●
the liquidity of our securities;
●
inflation and fluctuations in foreign currency exchange rates;
●
the ability to realize benefits of the acquisition of REIT Mingde and integrate and expand its businesses into our existing business and grow and manage growth profitably;
●
the ability to navigate geographic market risks of our eco-friendly constructions materials;
●
the ability to maintain a reserve for warranty or defective products and installation claims;
●
our on-going ability to obtain all mandatory and voluntary government and other industry certifications, approvals, and/or licenses to conduct our business;
●
our ability to maintain effective supply chain of raw materials and our products;
●
slowdown or contraction in industries in China in which we operate;
●
our ability to maintain or increase our market share in the competitive markets in which we do business;
●
our ability to diversify our product and service offerings and capture new market opportunities;
●
our estimates of expenses, capital requirements and needs for additional financing and our ability to fund our current and future operations;
●
the costs we may incur in the future from complying with current and future laws and regulations and the impact of any changes in the regulations on our operations; and
●
the loss of key members of our senior management.
These forward-looking statements
are subject to a number of risks, uncertainties and assumptions, including those described in the "Risk Factors," "Operating
and Financial Review and Prospects," and elsewhere in this annual report. Moreover, we operate in a very competitive and rapidly
changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess
the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions,
the future events and trends discussed in this annual report may not occur and actual results could differ materially and adversely from
those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking
statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved
or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance, or achievements. We are under no duty to update any of these forward-looking statements after
the date of this annual report or to conform these statements to actual results or revised expectations.
iv
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
Holding Company Structure
ReTo Eco-Solutions, Inc. ("ReTo",
collectively with its consolidated subsidiaries, the "Company," "we," "us", "our" or similar
terminology) is a holding company and a business company incorporated in the British Virgin Islands ("BVI") with no material
operations of its own. We conduct substantially all of our operations through our subsidiaries established in mainland China. Our equity
structure is a direct holding structure, that is, ReTo, the BVI entity listed in the U.S., controls Beijing REIT and other PRC operating
entities through REIT Holdings. See "
Item 4. Information on the Company - A. History and development of the company"
For
more details.
We face various risks and
uncertainties relating to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex
and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly
regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept
foreign investments, or list and conduct offerings on a United States or other foreign exchange. These risks could result in a material
adverse change in our operations and the value of our Common Shares, significantly limit or completely hinder our ability to continue
to offer securities to investors, or cause the value of such securities to significantly decline. For a detailed description of risks
relating to doing business in China, see "
Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business
in China."
The PRC government's
significant discretion and authority in regulating our operations and its oversight and control over offerings conducted overseas by,
and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer
securities to investors. Implementation of industry-wide regulations in this nature may cause the value of our securities to significantly
decline or become worthless. For more details, see
"Item 3. Key Information—D. Risk Factors—Risks Relating to Doing
Business in China— The PRC government's significant oversight and discretion over the conduct of our business and may intervene
or influence our operations at any time which could result in a material adverse change in our operation and/or the value of our Common
Shares.
"
Risks and uncertainties arising
from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations
in China, could result in a material adverse change in our operations and cause our Common Shares to decrease in value or become worthless.
For more details, see "
Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China— There
are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations. The rules and regulations in China
can change quickly with little advance notice and uncertainties in the interpretation and enforcement of PRC laws, rules and regulations
could limit the legal protections available to you and us.
"
1
Cash and Other Assets Transfers between the Holding Company and
Its Subsidiaries
Upon the closing of ReTo's
initial public offering ("IPO") in November 2017, ReTo received net proceeds of approximately $14.3 million. In March 2021,
ReTo issued a convertible debenture to an institutional investor in the principal amount of $2,300,000 and received net proceeds of $1,476,915.
In July 2021, ReTo issued a convertible debenture to an institutional investor in the principal amount of $2,500,000 and received net
proceeds of $2,189,256. In March 2022, ReTo issued the Note (as defined below) in the principal amount of $3,415,500 and received net
proceeds of $3,000,000. On May 25, 2022, ReTo issued 5,970,000 Common Shares to Hainan Tashanshi Digital Information Co. Ltd. ("Hainan
Tashanshi") at $0.60 per share for aggregate gross proceeds of $3,582,000 (the "Private Placement"), RMB19.6 million
(approximately $2.9 million) of which was transferred to Beijing REIT as a shareholder loan and approximately RMB4.4 million (approximately
$0.6 million) of which was transferred to Beijing REIT Ecological as a shareholder loan. As of the date of this annual report, with respect
to the net proceeds from the IPO, the convertible debentures, the Note and the Private Placement, ReTo had transferred an aggregate of
approximately $21.4 million to Beijing REIT through REIT Holdings via shareholder loans and capital contribution and approximately $0.6
million to Beijing REIT Ecological via shareholder loans.
Other than the IPO, the convertible
debentures, the Note and the Private Placement, ReTo has not raised funds from investors as of the date of this annual report, nor has
it transferred any other funds to its subsidiaries. To date, there have not been any dividends or other distributions from our PRC subsidiaries
to REIT Holdings and ReTo, both of which are located outside of mainland China. ReTo, as a BVI holding company, may rely on dividends
and other distributions on equity paid by its PRC subsidiaries for its cash and financing requirements, including the funds necessary
to pay dividends and other cash distributions to its shareholders, subject to ReTo's M&A and the Act or to service any expenses
and other obligations it may incur.
Within our direct holding
structure, the cross-border transfer of funds from ReTo to its PRC subsidiaries is permitted under laws and regulations of the PRC currently
in effect. Specifically, ReTo is permitted to provide funding to its PRC subsidiaries in the form of shareholder loans or capital contributions,
subject to satisfaction of applicable government registration, approval and filing requirements in China. There are no quantity limits
on ReTo's ability to make capital contributions to its PRC subsidiaries under the PRC law and regulations. However, the PRC subsidiaries
may only procure shareholder loans from REIT Holding in an amount equal to the difference between their respective registered capital
and total investment amount as recorded in the Chinese Foreign Investment Comprehensive Management Information System or 2.5 times of
its net assets, at the discretion of such PRC subsidiary.
For additional information,
see "
Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China — PRC regulation on loans
to, and direct investment in, PRC entities by offshore holding companies and governmental control in currency conversion may delay or
prevent us from using the proceeds of our offerings to make loans to or make additional capital contributions to our PRC subsidiaries,
which could materially and adversely affect our liquidity and our ability to fund and expand our business."
2
Subject to the passive foreign
investment company rules, the requirements of ReTo's M&A and the Act, the gross amount of any distribution that we make to investors
with respect to our securities (including any amounts withheld to reflect PRC withholding taxes) will be taxable as a dividend, to the
extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Any
proposed dividend would be subject to ReTo's M&A and the Act; specifically, ReTo may only pay a dividend if ReTo's directors
are satisfied, on reasonable grounds, that, immediately after the dividend is paid, the value of its assets will exceed its liabilities
and it will be able to pay its debts as they fall due.
The PRC Enterprise Income
Tax Law (the "EIT Law") and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to
dividends payable by PRC companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central
government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the
tax agreement between mainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment
of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant
tax authorities determine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the
relevant tax authorities may adjust the favorable withholding tax in the future. Accordingly, there is no assurance that the reduced 5%
withholding rate will apply to dividends received by our Hong Kong subsidiary from our PRC subsidiaries. This withholding tax will reduce
the amount of dividends we may receive from our PRC subsidiaries.
We maintain bank accounts
in China, including cash in Renminbi in the amount of RMB672,792 and cash in USD in the amount of US$97,554 as of December 31, 2022. Funds
are transferred between ReTo and its subsidiaries for their daily operation purposes. The transfer of funds between our PRC subsidiaries
are subject to the Provisions of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of
Private Lending Cases (2020 Second Revision, the "Provisions on Private Lending Cases"), which was implemented on January
1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on
Private Lending Cases set forth that private lending contracts will be upheld as invalid under the circumstance that (i) the lender swindles
loans from financial institutions for relending; (ii) the lender relends the funds obtained by means of a loan from another profit-making
legal person, raising funds from its employees, illegally taking deposits from the public; (iii) the lender who has not obtained the lending
qualification according to the law lends money to any unspecified object of the society for the purpose of making profits; (iv) the lender
lends funds to a borrower when the lender knows or should have known that the borrower intended to use the borrowed funds for illegal
or criminal purposes; (v) the lending is in violation of public orders or good morals; or (vi) the lending is in violation of mandatory
provisions of laws or administrative regulations. We have relied on the opinion of our PRC counsel, Yuan Tai Law Offices, that the Provisions
on Private Lending Cases does not prohibit using cash generated from one subsidiary to fund another subsidiary's operations. We
have not been notified of any other restriction which could limit our PRC subsidiaries' ability to transfer cash between subsidiaries.
As of the date of this annual report, we have not adopted any cash management policies that dictate how funds are transferred between
our holding company and our subsidiaries.
There is no assurance that
the PRC government will not intervene or impose restrictions on the ability of us or our subsidiaries to transfer cash. Most of our cash
is in Renminbi, and the PRC government could prevent the cash maintained in our bank accounts in mainland China from leaving mainland
China, could restrict deployment of the cash into the business of our subsidiaries and restrict the ability to pay dividends. For details
regarding the restrictions on our ability to transfer cash between us, and our subsidiaries, see "
Item 3. Key Information—D.
Risk Factors—Risks Related to Doing Business in China — The PRC government could prevent the cash maintained in our bank accounts
in mainland China from leaving mainland China, restrict deployment of the cash into the business of its subsidiaries and restrict the
ability to pay dividends to U.S. investors, which could materially adversely affect our operations.
" We currently do not have
cash management policies that dictate how funds are transferred between our BVI holding company and our subsidiaries.
Restrictions on Our Ability to Transfer Cash
Out of China and to U.S. Investors
Our PRC subsidiaries'
ability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay
dividends to their respective shareholders only out of their accumulated profits, if any, as determined in accordance with PRC accounting
standards and regulations. In addition, under PRC law, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax
profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. These
reserves are not distributable as cash dividends. If any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments
governing such debt may restrict its ability to pay dividends to ReTo.
3
To address persistent capital
outflows and the RMB's depreciation against the U.S. dollar in the fourth quarter of 2016, the People's Bank of China and
the State Administration of Foreign Exchange, or SAFE, implemented a series of capital control measures in the subsequent months, including
stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder
loan repayments. The PRC government may continue to strengthen its capital controls and our PRC subsidiaries' dividends and other
distributions may be subject to tightened scrutiny in the future. The PRC government also imposes controls on the conversion of RMB into
foreign currencies and the remittance of currencies out of mainland China. Therefore, we may experience difficulties in completing the
administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any.
Effect of The Holding Foreign Companies Accountable
Act
The Holding Foreign Companies
Accountable Act (the "HFCAA"), which was signed into law on December 18, 2020, requires a foreign company to submit that it
is not owned or manipulated by a foreign government or disclose the ownership of governmental entities and certain additional information,
if the PCAOB is unable to inspect completely a foreign auditor that signs the company's financial statements. If the PCAOB is unable
to inspect the Company's auditors for three consecutive years, the Company's securities will be prohibited from trading on
a national exchange. The Accelerating Holding Foreign Companies Accountable Act, which was enacted on December 29, 2022, has decreased
the number of non-inspection years from three years to two, thus reducing the time period before our Common Shares may be prohibited from
trading or delisted.
On December 16, 2021, the
PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms
headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB
included in the report of its determination a list of the accounting firms that are headquartered in mainland China or Hong Kong. This
list did not include YCM CPA Inc., our current auditor. Our auditor, as an auditor of companies that are traded publicly in the United
States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections
to assess its compliance with the applicable professional standards. On August 26, 2022, the PCAOB signed a Statement of Protocol with
the CSRC and MOF, 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 without any limitations on scope. However, uncertainties exist with respect to the implementation
of this framework and there is no assurance that the PCAOB will be able to execute, in a timely manner, its future inspections and investigations
in a manner that satisfies the Statement of Protocol. On December 15, 2022, the PCAOB 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.
These developments could add
uncertainties to the trading of our securities, including the possibility that the SEC may prohibit trading in our securities if the PCAOB
cannot fully inspect or investigate our auditor and we fail to appoint a new auditor that is accessible to the PCAOB and that Nasdaq can
delist our Common Shares.
If it is later determined
that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection.
Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken
in China that prevents the PCAOB from regularly evaluating our auditors' audits and their quality control procedures, could result
in a lack of assurance that our financial statements and disclosures are adequate and accurate, then such lack of inspection could cause
our securities to be delisted from the stock exchange.
On December 2, 2021, the SEC
adopted final amendments to its rules implementing the HFCAA. Such final rules establish procedures that the SEC will follow in (i) determining
whether a registrant is a "Commission-Identified Issuer" (a registrant identified by the SEC as having filed an annual report
with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable
to inspect or investigate completely because of a position taken by an authority in that jurisdiction) and (ii) prohibiting the trading
of an issuer that is a Commission-Identified Issuer for three consecutive years under the HFCAA. The SEC began identifying Commission-Identified
Issuers for the fiscal years beginning after December 18, 2020. A Commission-Identified Issuer is required to comply with the submission
and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified
Issuer based on its annual report for the fiscal year ended, for example, September 30, 2021, the registrant will be required to comply
with the submission or disclosure requirements in its annual report filing covering the fiscal year ended September 30, 2022.
4
For details on the effects
of HFCAA on us, see "
Item 3. Key Information—D. Risk Factors — Risks Related to Doing Business in China — Our
Common Shares may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect our auditors. The
delisting of our Common Shares, or the threat of their being delisted, may materially and adversely affect the value of your investment.
Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections. Furthermore,
on December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was enacted, which amends the HFCAA and requires 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.
"
Regulatory Permissions and Developments
We have been advised by our
PRC Counsel, Yuan Tai Law Offices, that pursuant to the relevant laws and regulations in China, none of our PRC subsidiaries'
currently engaged business is stipulated on the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2021
Version) (the "2021 Negative List") promulgated by the Ministry of Commerce (the "MOFCOM") and the National Development
and Reform Commission of the People's Republic of China ("NDRC") which entered into force on January 1, 2022. Therefore,
our PRC subsidiaries are able to conduct their business without being subject to restrictions imposed by the foreign investment laws and
regulations of the PRC. Certain of the business scope of our PRC subsidiaries are listed on the 2021 Negative List, such as value-added
telecommunication business, which the ratio of investment by foreign investors in a foreign-invested telecommunication enterprise that
engages in the operation of a value-added telecommunication business (except e-commerce, domestic multi-party communication, storage and
forwarding class and call center) shall not exceed 50%. Based on the confirmation of the PRC subsidiaries, these subsidiaries have not
been actually engaged in such business activities.
Certain of the business stated
on the business license of our PRC subsidiaries are subject to additional licenses and permits, such as value-added telecommunication
certification and construction enterprise qualifications. Based on the confirmation of the PRC subsidiaries, these subsidiaries have not
been actually engaged in business activities those require special licenses or permits and they will only carry out business activities
after obtaining corresponding licenses or permits. Currently, none of our PRC subsidiaries is required to obtain additional licenses or
permits beyond a regular business license for their operations currently being conducted. Each of our PRC subsidiaries is required to
obtain a regular business license from the local branch of the State Administration for Market Regulation ("SAMR"). Each of
our PRC subsidiaries has obtained a valid business license for its respective business scope, and no application for any such license
has been denied.
As of the date of this annual
report, ReTo and its PRC subsidiaries are not subject to permission requirements from the CSRC, the Cyberspace Administration of China
(the "CAC") or any other entity that is required to approve of its PRC subsidiaries' operations. Recently, the PRC government
initiated a series of regulatory actions and made a number of public statements on the regulation of business operations in China with
little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based
companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly
enforcement.
Among other things, the Regulations
on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the "M&A Rules") and Anti-Monopoly Law of the
People's Republic of China promulgated by the Standing Committee of the National People's Congress (the "SCNPC")
which became effective in 2008 and amended and put into effect as from August 1, 2022 (the "Anti-Monopoly Law"), established
additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and
complex. Such regulation requires, among other things, that the MOFCOM be notified in advance of any change-of-control transaction in
which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain
thresholds under the Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators, issued by
the State Council in 2008 and amended on September 19, 2018, are triggered. Moreover, the Anti-Monopoly Law requires that transactions
which involve the national security, the examination on the national security shall also be conducted according to the relevant provisions
of the State Council. In addition, the PRC Measures for the Security Review of Foreign Investment which became effective in January 2021
require acquisitions by foreign investors of PRC companies engaged in military-related or certain other industries that are crucial to
national security be subject to security review before consummation of any such acquisition.
5
On July 6, 2021, the relevant
PRC governmental authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas
listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems
to deal with the risks and incidents faced by China-based overseas-listed companies. As these opinions are recently issued, official guidance
and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. Given
the current PRC regulatory environment, it is uncertain when and whether ReTo, REIT Holdings or any of our PRC subsidiaries will be required
to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether
it will be denied or rescinded. See "
Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in
China—The approval and/or other requirements of the CSRC or other PRC governmental authorities may be required in connection with
an offering under PRC rules, regulations or policies, and, if required, we cannot predict whether or how soon we will be able to obtain
such approval." As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding
offshore offering from the CSRC or any other PRC governmental authorities.
On July 10, 2021, the CAC
published the Measures for Cybersecurity Review (Revised Draft for Comments), or the Measures, for public comments, which propose to authorize
the relevant government authorities to conduct cybersecurity review on a range of activities that affect or may affect national security,
including listings in foreign countries by companies that possess the personal data of more than one million users. On December 28, 2021,
the Measures for Cybersecurity Review (2021 Version) was promulgated and became effective on February 15, 2022, which iterates that any
"online platform operators" controlling personal information of more than one million users which seeks to list in a foreign
stock exchange should also be subject to cybersecurity review. The Measures for Cybersecurity Review (2021 Version), further elaborates
the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk
of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the
country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information
being affected, controlled, or maliciously used by foreign governments after listing abroad. We have relied on the opinion of our PRC
counsel, Yuan Tai Law Offices, that as a result of: (i) we do not hold personal information on more than one million users in our business
operations; and (ii) data processed in our business does not have a bearing on national security and thus may not be classified as core
or important data by the authorities, we are not required to apply for a cybersecurity review under the Measures for Cybersecurity Review
(2021 Version).
As advised by our PRC legal
counsel, Yuan Tai Law Offices, the PRC governmental authorities may have wide discretion in the interpretation and enforcement of these
laws, including the interpretation of the scope of "critical information infrastructure operators". In anticipation of the
strengthened implementation of cybersecurity laws and regulations and the continued expansion of our business, we may face challenges
in addressing its requirements and make necessary changes to our internal policies and practices in data processing. As of the date of
this annual report, we have not been involved in any investigations on cybersecurity review made by the CAC on such basis, and we have
not received any inquiry, notice, warning, or sanctions in such respect.
On August 20, 2021, the SCNPC
promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights
and privacy protection and took effect on November 1, 2021. Personal information refers to information related to identified or identifiable
natural persons which is recorded by electronic or other means and excluding anonymized information. The Personal Information Protection
Law provides that a personal information processor could process personal information only under prescribed circumstances such as with
the consent of the individual concerned and where it is necessary for the conclusion or performance of a contract to which such individual
is a party to the contract. If a personal information processor shall provide personal information to overseas parties, various conditions
shall be met, which includes security evaluation by the national network department and personal information protection certification
by professional institutions. The Personal Information Protection Law raises the protection requirements for processing personal information,
and many specific requirements of the Personal Information Protection Law remain to be clarified by the CAC, other regulatory authorities,
and courts in practice. We may be required to make further adjustments to our business practices to comply with the personal information
protection laws and regulations.
6
None of our PRC subsidiaries
currently operates in an industry that prohibits or limits foreign investment. As a result, as advised by our PRC counsel, Yuan Tai Law
Offices, other than those requisite for a domestic company in mainland China to engage in the businesses similar to those of our PRC subsidiaries,
none of our PRC subsidiaries is required to obtain any permission from Chinese authorities, including the CSRC, the CAC, or any other
governmental agency that is required to approve its current operations. However, if our PRC subsidiaries do not receive or maintain the
approvals, or we inadvertently conclude that such approvals are not required, or applicable laws, regulations, or interpretations change
such that our PRC subsidiaries are required to obtain approval in the future, we may be subject to investigations by competent regulators,
fines or penalties, ordered to suspend our PRC subsidiaries' relevant operations and rectify any non-compliance, prohibited from
engaging in relevant business or conducting any offering, and these risks could result in a material adverse change in our PRC subsidiaries'
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. As of the date of this annual report, we and our PRC subsidiaries have
received from PRC authorities all requisite licenses, permissions, or approvals needed to engage in the businesses currently conducted
in China, and no permission or approval has been denied.
CSRC released the Tentative
Measures for Administration of the Overseas Issuance and Listing of Securities by Domestic Enterprises (the "Tentative Measures")
on February 17, 2023, which became effective on March 31, 2023. The Tentative Measures lay out the filing regulation arrangement for both
direct and indirect overseas listing by PRC domestic companies, and clarify the determination criteria for indirect overseas listing in
overseas markets. Any future securities offerings and listings outside of mainland China by our Company, including but not limited to,
follow-on offerings, secondary listings and going private transactions, will be subject to the filing requirements with the CSRC under
the Tentative Measures, and we cannot assure you that we will be able to comply with such filing requirements in a timely manner, or at
all.  As of the date of this annual report, we have not received any formal inquiry, notice, warning, sanction, or objection from
the CSRC or any other PRC governmental authorities with respect to our listing on Nasdaq. As the Tentative Measures were newly published
and there is uncertainty with respect to the filing requirements and their implementation, if we are required to submit to the CSRC and
complete the filing procedure, we cannot be sure that we will be able to complete such filings in a timely manner, or at all. Any failure
or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability
to offer or continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our
reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of
our securities to significantly decline or be worthless.
Except as disclosed above,
in connection with our issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the
date of this annual report, we and our PRC subsidiaries, (i) are not required to obtain permissions from the PRC authorities, including
the CSRC or the CAC, and (ii) have not received or were denied such permissions by any PRC authority. We are subject to the risks of uncertainty
of any future actions of the PRC government in this regard including the risk that we inadvertently conclude that the permission or approvals
discussed here are not required, that applicable laws, regulations or interpretations change such that we and our PRC subsidiaries are
required to obtain approvals in the future.
A.
[Reserved]
B.
Capitalization and indebtedness.
Not applicable.
7
C.
Reasons for the offer and use of proceeds.
Not applicable.
D.
Risk factors.
Summary of Risk Factors
Below please find a summary
of the principal risks we face, organized under relevant headings.
Risks Related to Doing Business in China
We face risks and uncertainties
related to doing business in China in general, including, but not limited to, the following:
●
Changes in China's economic, political or social conditions or government policies or in relations between China and the United States;
●
●
The impact on our operations and value of our
    Common Shares by PRC government's significant oversight, control, intervention and/or influence over our business operation;
The complex and evolving laws and regulations
    regarding privacy and data protection, including China's new Data Security Law, Cybersecurity Review Measures, Personal Information
    Protection Law, that our business is subject to;
●
Uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations;
●
The risks of delisting or the threat of being delisted under the HFCAA
if the PCAOB is unable to inspect our auditor;
●
The approval of the CSRC, CAC or other Chinese regulatory agencies
which may be required in connection with our offshore offerings under Chinese law and, if required, our inability to obtain such approval
or complete such filing;
●
The potential treatment as a resident enterprise for PRC tax purposes
under the EIT Law and the risk of being subject to PRC income tax on our global income;
●
Foreign exchange controls in China, which could
    limit our use of funds that would be raised in future offerings, which could have a material adverse effect on our business;
●
The complex procedures under the PRC laws and regulation in connection with certain acquisitions of China-based companies by foreign investors;
●
PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion, which may restrict or prevent ReTo from making additional capital contributions or loans to its PRC subsidiaries;
●
Any limitation on the ability of our PRC subsidiaries to make payments to us;
●
Fluctuations in exchange rates;
●
The adverse impact on our business by the war in Ukraine;
●
The potential supply chain disruptions; and
●
Any severe or prolonged downturn in the global or Chinese economy.
8
Risks Related to Our Business and Industry
We are subject to risks and
uncertainties related to our business and industry, including, but not limited to, the following:
●
The potential slowdown of the industries in which our customers operate;
●
Any decline in the availability or increase in the cost of raw materials;
●
Any disruption in the supply chain of raw materials and our products;
●
Wage increases in China;
●
Our reliance on a limited number of vendors and the potential loss of any significant vendor;
●
Certain risks in collecting our accounts receivable;
●
Failure to protect our intellectual property rights;
●
The substantial doubt about our ability to continue as a going concern in the report of our independent registered public accounting firm on our financial statements for the years ended December 31, 2022, 2021 and 2020;
●
Failure to maintain a reserve for warranty or defective products and installation claims;
●
Product defects and unanticipated use or inadequate disclosure with respect to our products;
●
Inability to deliver our backlog on time;
●
Various hazards that may cause personal injury or property damage and increase our operating costs, which may exceed the coverage of our insurance;
●
Any material costs and losses as a result of claims our products do not meet regulatory requirements or contractual specifications;
●
Substantial liabilities to comply with environmental laws and regulations;
●
Inability to implement and maintain effective internal control over financial reporting;
●
The integration of newly acquired businesses;
●
Our continued investing in technology, resources, and new business capabilities;
●
Any failure to offer high quality services and support;
●
The competitiveness of the software and information technology service market in which we participate;
●
Reliance of Hainan Yile IoT on a limited number of customers;
●
Security incidents and attacks on our products or solutions;
●
Limited business insurance coverage;
●
The benefits we have received from certain government subsidies and incentives;
●
Changes in practices of insurance companies in the markets;
●
Defects or errors in our products or solutions;
●
Our reliance on the stable performance of servers, and any disruption to our servers due to internal and external factors; and
●
Our use of open source or third-party software.
9
Risks Related to Our Common Shares
We face risks and uncertainties
related to our Common Shares, including, but not limited to, the following:
●
The volatility of trading prices of our Common Shares;
●
Any negative reports by securities or industry analysts publish about our business;
●
Failure to meet the continued listing requirements of Nasdaq; and
●
Substantial future sales or perceived sales of our Common Shares in the public market.
Risks Related to Doing Business in China
Changes in the political and economic policies
of the PRC government or in relations between China and the United States may materially and adversely affect our business, financial
condition and results of operations and may result in our inability to sustain our growth and expansion strategies.
Substantially all of our operations
are conducted in mainland China and substantially all of our revenues is sourced from mainland China. Accordingly, our financial condition
and results of operations are affected to a significant extent by economic, political and legal developments in the PRC or changes in
government relations between China and the United States or other governments. There is significant uncertainty about the future relationship
between the United States and China with respect to trade policies, treaties, government regulations and tariffs.
The PRC economy differs from
the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth
rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures emphasizing the utilization
of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition,
the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government
also exercises significant control over China's economic growth by allocating resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular
industries or companies.
While the PRC economy has
experienced significant growth in the past four decades, growth has been uneven, both geographically and among various sectors of the
economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some
of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our financial condition and results
of operation could be materially and adversely affected by government control over capital investments or changes in tax regulations that
are applicable to us. In addition, the PRC government has implemented in the past certain measures, including interest rate increases,
to control the pace of economic growth. These measures may cause decreased economic activity.
In July 2021, the Chinese
government provided new guidance on China-based companies raising capital outside of China. In light of such developments, the SEC has
imposed enhanced disclosure requirements on China-based companies seeking to register securities with the SEC. As substantially all of
our operations are based in China, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising
or other activities by China based companies could adversely affect our business and results of operations. If the business environment
in China deteriorates from the perspective of domestic or international investment, or if relations between China and the United States
or other governments deteriorate, our operations in China as well as the market price of our Common Shares may be adversely affected.
10
Our business is subject to complex and evolving
laws and regulations regarding privacy and data protection. Compliance with China's new Data Security Law, Cybersecurity Review
Measures, Personal Information Protection Law, as well as additional laws, regulations and guidelines that the Chinese government promulgates
in the future may entail significant expenses and could materially affect our business.
Regulatory authorities in
China have implemented and are considering further legislative and regulatory proposals concerning data protection. China's new
Data Security Law went into effect on September 1, 2021. The Data Security Law provides that the data processing activities must be conducted
based on "data classification and hierarchical protection system" for the purpose of data protection and prohibits entities
in China from transferring data stored in China to foreign law enforcement agencies or judicial authorities without prior approval by
the Chinese government. The Data Security Law sets forth the legal liabilities of entities and individuals found to be in violation of
their data protection obligations, including rectification order, warning, fines of up to RMB5 million, suspension of relevant business,
and revocation of business permits or licenses.
In
addition, the PRC Cybersecurity Law provides that personal information and important data collected and generated by operators of critical
information infrastructure in the course of their operations in the PRC should be stored in the PRC, and the law imposes heightened regulation
and additional security obligations on operators of critical information infrastructure. According to the Cybersecurity Review Measures
promulgated by the CAC and certain other PRC regulatory authorities in April 2020, which became effective in June 2020, operators of critical
information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national
security. Any failure or delay in the completion of the cybersecurity review procedures may prevent the critical information infrastructure
operator from using or providing certain network products and services, and may result in fines of up to ten times the purchase price
of such network products and services. The PRC government recently launched cybersecurity reviews against a number of mobile apps operated
by several U.S.-listed Chinese companies and prohibiting these apps from registering new users during the review periods. We do not believe
that we constitute a critical information infrastructure operator under the Cybersecurity Review Measures.
On July 10, 2021, the CAC
issued the Cybersecurity Review Measures (revised draft for public comments), which proposed to authorize the relevant government authorities
to conduct cybersecurity review on a range of activities that affect or may affect national security. The PRC National Security Law covers
various types of national security, including technology security and information security. The Cybersecurity Review Measures (2021 Version)
took effect on February 15, 2022. The Cybersecurity Review Measures (2021 Version) expand the cybersecurity review to data processing
operators in possession of personal information of over 1 million users if the operators intend to list their securities in a foreign
country. Under the Cybersecurity Review Measures (2021 Version), the scope of entities required to undergo cybersecurity review to assess
national security risks that arise from data processing activities would be expanded to include all critical information infrastructure
operators who purchase network products and services and all data processors carrying out data processing activities that affect or may
affect national security. In addition, such reviews would focus on the potential risk of core data, important data, or a large amount
of personal information being stolen, leaked, destroyed, illegally used or exported out of China, or critical information infrastructure
being affected, controlled or maliciously used by foreign governments after such a listing. An operator that violates these measures shall
be dealt with in accordance with the provisions of the PRC Cybersecurity Law and the PRC Data Security Law.
According to the Cybersecurity
Review Measures (2021 Version), cybersecurity review will be required when (i) operators of critical information infrastructure purchasing
network products and services or online platform operators carry out data processing activities which do or may affect national security;
and (ii) any online platform operator controlling personal information of more than one million users which seeks to list in a foreign
stock exchange. The factors to be considered when assessing the national security risks of the relevant activities, including, among others,
(i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used
or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal
information being affected, controlled, or maliciously used by foreign governments after listing abroad. The CAC has said that under the
new rules companies holding data of more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other
nations because of the risk that such data and personal information could be "affected, controlled, and maliciously exploited by
foreign governments." The cybersecurity review will also look into the potential national security risks from overseas initial public
offerings. As advised our PRC legal counsel , because (i) none of our PRC subsidiaries collecting personal information or processing data
in actual operation, and (ii) none of our PRC subsidiaries is an "online platform operator holding more than one million users'
personal information", we believe the cybersecurity review requirement is not applicable us. However, there remains uncertainty
as to the interpretation and implementation of the revised Cybersecurity Review Measures and we cannot assure you that the CAC will reach
the same conclusion as our PRC counsel. As advised by our PRC legal counsel, the PRC governmental authorities may have wide discretion
in the interpretation and enforcement of these laws, including the interpretation of the scope of "critical information infrastructure
operators." If the Company or any of its PRC subsidiaries is deemed as a critical information infrastructure operator under the
PRC cybersecurity laws and regulations, we and our PRC subsidiaries must fulfill certain obligations as required under the PRC cybersecurity
laws and regulations, including, among others, storing personal information and important data collected and produced within the PRC territory
during our operations in China, which we and our PRC subsidiaries have fulfilled in our business, and we and our PRC subsidiaries may
be subject to review when purchasing internet products and services. We and our PRC subsidiaries may be subject to review when conducting
data processing activities, and may face challenges in addressing its requirements and make necessary changes to our internal policies
and practices in data processing. As of the date of this annual report, we and our PRC subsidiaries have not been involved in any investigations
on cybersecurity review made by the CAC on such basis, and we and our PRC subsidiaries have not received any inquiry, notice, warning,
or sanctions in such respect.
11
On November 14, 2021, the
CAC released the Regulations on Network Data Security (draft for public comments) and accepted public comments until December 13, 2021.
The draft Regulations on Network Data Security provide more detailed guidance on how to implement the general legal requirements under
legislations such as the Cybersecurity Law, Data Security Law and the Personal Information Protection Law. The draft Regulations on Network
Data Security follow the principle that the state will regulate based on a data classification and multi-level protection scheme. We believe
that we or any of our PRC subsidiaries do not constitute an online platform operator under the draft Regulations on Network Data Security
as proposed, which is defined as a platform that provides information publishing, social network, online transaction, online payment and
online audio/video services. None of our PRC subsidiaries is an online platform operator themselves, nor is any of them required to obtain
an ICP license for their current operations.
On August 20, 2021, the SCNPC
promulgated the Personal Information Protection Law which became effective on November 1, 2021. The Personal Information Protection Law
provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands
data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in
China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing
products and services to, or analyzing and evaluating the behavior of, persons in China. The Personal Information Protection Law also
provides that critical information infrastructure operators and personal information processing entities who process personal information
meeting a volume threshold to be set by Chinese cyberspace regulators are also required to store in China personal information generated
or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal
information. Lastly, the Personal Information Protection Law contains proposals for significant fines for serious violations of up to
RMB 50 million or 5% of annual revenues from the prior year and may also be ordered to suspend any related activity by competent authorities.
We have access to certain information of our customers in providing services and may be required to further adjust our business practice
to comply with new regulatory requirements.
Interpretation, application
and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation,
amendments to existing legislation or changes in enforcement. Compliance with the PRC Cybersecurity Law and the PRC Data Security Law
could significantly increase the cost to us of providing our service offerings, require significant changes to our operations or even
prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future.
Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information
security, it is possible that our practices or service offerings could fail to meet all of the requirements imposed on us by the PRC Cybersecurity
Law, the PRC Data Security Law and/or related implementing regulations. Any failure on our part to comply with such law or regulations
or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized
access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing
types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting
with us or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation,
any of which could materially adversely affect our business, financial condition and results of operations. Even if our practices are
not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely
affect our business, financial condition and results of operations. Moreover, the legal uncertainty created by the Data Security Law and
the recent Chinese government actions could materially adversely affect our ability, on favorable terms, to raise capital, including engaging
in follow-on offerings of our securities in the U.S. market.
12
There are uncertainties regarding the interpretation
and enforcement of PRC laws, rules and regulations. The rules and regulations in China can change quickly with little advance notice and
uncertainties in the interpretation and enforcement of PRC laws, rules and regulations could limit the legal protections available to
you and us.
Substantially all of our operations
are conducted in mainland China, and are governed by PRC laws, rules and regulations. Our PRC subsidiaries are subject to laws, rules
and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike
the common law system, prior court decisions may be cited for reference but have limited precedential value. In 1979, the PRC government
began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general. The overall effect of
legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investment in
China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not sufficiently
cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by PRC regulatory agencies.
In particular, because these laws, rules and regulations, especially those relating to the internet, are relatively new, and because of
the limited number of published decisions and the nonbinding nature of such decisions, and because the laws, rules and regulations often
give the relevant regulator significant discretion in how to enforce them, the interpretation and enforcement of these laws, rules and
regulations involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system is based in part on government
policies and internal rules, some of which are not published on a timely basis or at all, and may have a retroactive effect. As a result,
we may not be aware of our violation of these policies and rules until after the occurrence of the violation. Any administrative and court
proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. The rules
and regulations in China can change quickly with little advance notice and uncertainties in the interpretation and enforcement of PRC
laws, rules and regulations could limit the legal protections available to you and us.
The PRC government has recently
announced its plans to enhance its regulatory oversight of Chinese companies listing overseas. The Opinions on Strictly Cracking Down
on Illegal Securities Activities issued on July 6, 2021 called for:
●
tightening oversight of data security, cross-border data flow and administration of classified information, as well as amendments to relevant regulation to specify responsibilities of overseas listed Chinese companies with respect to data security and information security;
●
enhanced oversight of overseas listed companies as well as overseas equity fundraising and listing by Chinese companies; and
●
extraterritorial application of China's securities laws.
As the Opinions on Strictly
Cracking Down on Illegal Securities Activities were recently issued, there are great uncertainties as to how soon legislative or administrative
regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will
be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on companies like us,
but among other things, our ability and the ability of our subsidiaries to obtain external financing through the issuance of equity securities
overseas could be negatively affected.
CSRC released the Tentative
Measures and five supporting guidelines on February 17, 2023, which became effective on March 31, 2023. The Tentative Measures lay out
the filing regulation arrangement for both direct and indirect overseas listing by PRC domestic companies, and clarify the determination
criteria for indirect overseas listing in overseas markets. Any future securities offerings and listings outside of mainland China by
our Company, including but not limited to follow-on offerings, secondary listings and going private transactions, will be subject to the
filing requirements with the CSRC under the Tentative Measures, and we cannot assure you that we will be able to comply with such filing
requirements in a timely manner, or at all.
13
The PRC government's significant oversight
and discretion over the conduct of our business and may intervene or influence our operations at any time which could result in a material
adverse change in our operation and/or the value of our Common Shares
.
We conduct our business in
mainland China primarily through our PRC subsidiaries. Our operations in mainland China are governed by PRC laws and regulations. The
PRC government's significant oversight and discretion over the conduct of our business and may intervene or influence our operations
at any time which could result in a material adverse change in our operation and/or the value of our Common Shares. Also, the PRC government
has recently indicated an intent to exert more oversight over offerings that are conducted overseas and/or foreign investment in China-based
issuers. Any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors.
In addition, implementation of industry-wide regulations directly targeting our operations could cause our securities to significantly
decline in value or become worthless. Therefore, investors of ReTo face potential uncertainty from actions taken by the PRC government
affecting our business.
The CSRC has published the Tentative Measures
for filing regulation arrangement for both direct and indirect overseas listing, including but not limited to initial public offering,
follow-on offerings, and secondary listings, which could significantly limit or completely hinder our ability to offer or continue to
offer our Common Shares to investors and could cause the value of our Common Shares to significantly decline or become worthless.
On February 17, 2023, the
CSRC published the Tentative Measures, which became effective on March 31, 2023. The Tentative Measures lay out the filing regulation
arrangement for both direct and indirect overseas listing, and clarify the determination criteria for indirect overseas listing in overseas
markets. Among other things, if a domestic enterprise intends to indirectly offer and list securities in an overseas market, the record-filing
obligation is with a major operating entity incorporated in mainland China appointed by the issuer and such filing obligation shall be
completed within three business days after the overseas listing application is submitted. The required filing materials for an initial
public offering and listing should include at least the following: report, commitment from issuer and securities company, the resolutions,
shareholding structure chart and control structure chart, the information of issuer and intermediary project team members, Chinese legal
opinion and commitment of Chinese counsel, the Prospectus, approval and other documents issued by competent regulatory authorities of
relevant industries (if applicable); and security assessment opinion issued by relevant regulatory authorities (if applicable).
In addition, an overseas offering
and listing is prohibited under any of the following circumstances: (1) if the intended securities offering and listing is specifically
prohibited by national laws and regulations and relevant provisions; (2) if the intended securities offering and listing may constitute
a threat to or endangers national security as reviewed and determined by competent authorities under the State Council in accordance with
law; (3) if, in the past three years, the domestic enterprise or its controlling shareholders or actual controllers have committed corruption,
bribery, embezzlement, misappropriation of property, or other criminal offenses disruptive to the order of the socialist market economy,
or are currently under judicial investigation for suspicion of criminal offenses, or are under investigation for suspicion of major violations;
(4) if, the domestic enterprise is being investigated according to law due to suspected crimes or major violations of laws and regulations,
and there is no clear conclusion; (5) if there are material ownership disputes over the equity of the controlling shareholder or shareholders
controlled by controlling shareholders and actual controllers. The Tentative Measures defines the legal liabilities of breaches such
as failure in fulfilling filing obligations or fraudulent filing conducts, imposing a fine between RMB 1 million and RMB 10 million, and
in cases of severe violations, a parallel order to suspend relevant business or halt operation for rectification, revoke relevant business
permits or operational license.
Any future securities offerings
and listings outside of mainland China by our Company, including but not limited to follow-on offerings, secondary listings, and going
private transactions, will be subject to the filing requirements with the CSRC under the Tentative Measures, and we cannot assure you
that we will be able to comply with such filing requirements in a timely manner, or at all. Any failure of us to fully comply with new
regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our Common Shares, cause
significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our
financial condition and results of operations and cause our Common Shares to significantly decline in value or become worthless.
14
Restrictions on currency exchange or outbound
capital flows may limit our ability to utilize our PRC revenue effectively.
Substantially all of our revenue
is denominated in Renminbi. The Renminbi is currently convertible under the "current account," which includes dividends, trade
and service-related foreign exchange transactions, but requires approval from or registration with appropriate government authorities
or designated banks under the "capital account," which includes foreign direct investment and loans, such as loans we may
secure from our onshore subsidiaries. Currently, our PRC subsidiaries, a foreign invested enterprise, may purchase foreign currency for
settlement of "current account transactions," including payment of dividends to us, without the approval of the SAFE by complying
with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase
foreign currencies in the future for current account transactions.
Since 2016, PRC governmental
authorities have imposed more stringent restrictions on outbound capital flows, including heightened scrutiny over "irrational"
overseas investments for certain industries, as well as over four kinds of "abnormal" offshore investments, which are:
●
investments through enterprises established for only a few months without substantive operation;
●
investments with amounts far exceeding the registered capital of onshore parent and not supported by its business performance shown on financial statements;
●
investments in targets that are not related to onshore parent's main business; and
●
investments with abnormal sources of Renminbi funding suspected to be involved in illegal transfer of assets or illegal operation of underground banking.
On January 26, 2017, SAFE
promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification,
which tightened the authenticity and compliance verification of cross-border transactions and cross-border capital flow. In addition,
the Outbound Investment Sensitive Industry Catalogue (2018) lists certain sensitive industries that are subject to NDRC pre-approval requirements
prior to remitting investment funds offshore, which subjects us to increased approval requirements and restrictions with respect to our
overseas investment activity. Since a significant amount of our PRC revenue is denominated in Renminbi, any existing and future restrictions
on currency exchange or outbound capital flows may limit our ability to utilize revenue generated in Renminbi to fund our business activities
outside of mainland China, make investments, service any debt we may incur outside of mainland China or pay dividends in foreign currencies
to our shareholders, including holders of our Common Shares.
PRC regulation on loans to, and direct investment
in, PRC entities by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the
proceeds of our offerings to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and
adversely affect our liquidity and our ability to fund and expand our business.
ReTo is a company incorporated
in the BVI structured as a holding company conducting its operations in mainland China through its PRC subsidiaries. As permitted under
PRC laws and regulations, in utilizing the proceeds of its offerings, ReTo may make loans to its PRC subsidiaries subject to the approval
from governmental authorities and limitation of amount, or ReTo may make additional capital contributions to its PRC subsidiaries. Furthermore,
loans by ReTo to its PRC subsidiaries to finance their activities cannot exceed the difference between their respective total project
investment amount and registered capital or 2.5 times of their net worth and capital contributions to its PRC subsidiaries are subject
to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information System and registration
with other governmental authorities in China.
15
The SAFE promulgated the Notice
of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested
Enterprises, or SAFE Circular 19, effective on June 1, 2015, in replacement of the Circular on the Relevant Operating Issues Concerning
the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, the Notice
from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration of Foreign Exchange Businesses,
and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign
Exchange Businesses. According to SAFE Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered
capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the
repayment of inter-enterprise loans or the repayment of bank loans that have been transferred to a third party. Although SAFE Circular
19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity
investments within mainland China, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of
a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether
the SAFE will permit such capital to be used for equity investments in mainland China in actual practice. The SAFE promulgated the Notice
of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital
Account, or SAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in SAFE Circular 19, but changes
the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company
to issue RMB entrusted loans to a prohibition against using such capital to grant loans to non-associated enterprises. Violations of SAFE
Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit
our ability to transfer any foreign currency we hold, including the net proceeds from our follow-on offering, to our PRC subsidiaries,
which may adversely affect our liquidity and our ability to fund and expand our business in mainland China.
In light of the various requirements
imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we cannot assure you that
we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if
at all, with respect to future loans by us to our PRC subsidiaries or with respect to future capital contributions by us to our PRC subsidiaries.
If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from our offerings and to capitalize
or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability
to fund and expand our business.
The PRC government could prevent the cash
maintained in our bank accounts in mainland China from leaving mainland China, restrict deployment of the cash into the business of its
subsidiaries and restrict the ability to pay dividends to U.S. investors, which could materially adversely affect our operations.
The PRC government controls
the conversion of Renminbi into foreign currencies and the remittance of currencies out of mainland China. We receive substantially all
of our revenues in Renminbi, and most of our cash is in Renminbi. Under our corporate structure, ReTo, a BVI holding company, primarily
relies on dividend payments from our PRC subsidiaries to fund any cash and financing requirements it may have. Under the existing PRC
foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade- and-service-related
foreign exchange transactions, can be made in foreign currencies without prior approval from the SAFE by complying with certain procedural
requirements. As such, under the existing exchange restrictions, cash generated from the operations of our PRC subsidiaries is able to
be paid as dividends in foreign currencies to ReTo without prior approval from the SAFE by complying with certain procedural requirements.
However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign
currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
The PRC government may also at its discretion in the future restrict access to foreign currencies for current account transactions. There
is no assurance that the PRC government will not intervene or impose restrictions on the ability of us, our subsidiaries to transfer cash.
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 from the PRC subsidiaries to the offshore subsidiaries, across borders, and
to our shareholders, including the U.S. investors. These foreign exchange restrictions and limitations could prevent the cash maintained
from leaving mainland China, and restrict our ability to pay dividends to ReTo and the U.S. investors.
16
There are limitations on our
PRC subsidiaries' ability to distribute earnings to their respective shareholders. On the one hand, under the current PRC laws and
regulations, our PRC subsidiaries may pay dividends only out of their accumulated profits. In addition, our PRC subsidiaries are required
to set aside at least 10% of their accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the
aggregate amount of such fund reaches 50% of their registered capital. Our PRC subsidiaries may at their discretion allocate a portion
of their after-tax profits to staff welfare and bonus funds in accordance with relevant PRC rules and regulations. These reserve funds
and staff welfare and bonus funds cannot be distributed as cash dividends. Moreover, if the PRC subsidiaries incur debt on their own behalf
in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.
In addition, any transfer
of funds by ReTo to our PRC subsidiaries, either as a shareholder loan or as an increase in the registered capital, is subject to a series
of procedural requirements imposed by SAFE or its local counterparts. This may hinder or delay our deployment of cash into our subsidiaries'
business, which could result in a material and adverse effect on our operations.
Our Common Shares may be delisted under
the HFCAA if the PCAOB is unable to inspect our auditors. The delisting of our Common Shares, or the threat of their being delisted, may
materially and adversely affect the value of your investment. Furthermore, on December 29, 2022, the Accelerating Holding Foreign Companies
Accountable Act was enacted, which amends the HFCAA and requires 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.
The HFCAA was enacted on December
18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has
not been subject to inspection by the PCAOB for three consecutive years, the SEC shall prohibit our Common Shares from being traded on
a national securities exchange or in the over the counter trading market in the U.S.
On March 24, 2021, the SEC
adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. We will
be required to comply with these rules if the SEC identifies us as having a "non-inspection" year under a process to be subsequently
established by the SEC. The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition
requirements described above. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework
for the PCAOB to use when determining, as contemplated under the HFCAA, 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 December 2, 2021, the SEC
adopted final amendments to its rules implementing the HFCAA. Such final rules establish procedures that the SEC will follow in (i) determining
whether a registrant is a "Commission-Identified Issuer" (a registrant identified by the SEC as having filed an annual report
with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable
to inspect or investigate completely because of a position taken by an authority in that jurisdiction) and (ii) prohibiting the trading
of an issuer that is a Commission-Identified Issuer for three consecutive years under the HFCAA. The SEC began identifying Commission-Identified
Issuers for the fiscal years beginning after December 18, 2020. A Commission-Identified Issuer is required to comply with the submission
and disclosure requirements in the annual report for each year in which it was identified. If a registrant is identified as a Commission-Identified
Issuer based on its annual report for the fiscal year ended, for example, September 30, 2021, the registrant will be required to comply
with the submission or disclosure requirements in its annual report filing covering the fiscal year ended September 30, 2022.
Furthermore, on December 29,
2022, the Accelerating Holding Foreign Companies Accountable Act was enacted, which amends the HFCAA and requires 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.
17
On December 16, 2021, the
PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms
headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB
included in the report of its determination a list of the accounting firms that are headquartered in mainland China or Hong Kong. This
list does not include, YCM CPA Inc.
Our independent registered
public accounting firm, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB,
is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable
professional standards. Our auditor is currently registered under the PCAOB and subject to PCAOB inspections. However, the recent developments
would add uncertainties to our offering and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more
stringent criteria to us after considering the effectiveness of our auditor's audit procedures and quality control procedures, adequacy
of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements.
On August 26, 2022, the PCAOB
signed the Protocol with the CSRC and MOF, 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 without any limitations on scope. However, uncertainties exist with
respect to the implementation of this framework and there is no assurance that the PCAOB will be able to execute, in a timely manner,
its future inspections and investigations in a manner that satisfies the Protocol.
The SEC may propose additional
rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. For example, on August 6, 2020, the President's
Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese
Companies to the then President of the United States. This report recommended the SEC implement five recommendations to address companies
from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate. Some of the concepts of these
recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than the HFCAA.
For example, if a company's auditor was not subject to PCAOB inspection, the report recommended that the transition period before
a company would be delisted would end on January 1, 2022.
On December 15, 2022, the
PCAOB 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 will consider the need to issue a new determination.
The SEC has announced that
the SEC staff is preparing a consolidated proposal for the rules regarding the implementation of the HFCAA and to address the recommendations
in the PWG report. It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any,
of the PWG recommendations will be adopted. The implications of this possible regulation in addition to the requirements of the HFCAA
are uncertain. Such uncertainty could cause the market price of our Common Shares to be materially and adversely affected, and our securities
could be delisted or prohibited from being traded "over-the-counter" earlier than would be required by the HFCAA. If our securities
are unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase
our Common Shares when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact
on the price of our Common Shares.
We may be treated as a resident enterprise
for PRC tax purposes under the EIT Law, and we may therefore be subject to PRC income tax on our global income.
China passed an Enterprise
Income Tax Law (the "EIT Law") and implementing rules, both of which became effective on January 1, 2008, EIT Law was
subsequently amended by the SCNPC and became effective on February 24, 2017. Under the EIT Law, resident enterprises pay income tax at
the rate of 25% for their worldwide income while non-resident enterprises pay 20% for their income generated from China and income generated
overseas but are substantially related to the entities established in China by the non-resident enterprises. As far as the definition
of resident enterprises, according to the EIT Law, an enterprise established outside of China with "de facto management bodies"
within China is considered a "resident enterprise." The implementing rules of the EIT Law define de facto management as "substantial
and overall management and control over the production and operations, personnel, accounting, and properties" of the enterprise.
18
On April 22, 2009, the State
Administration of Taxation of China issued Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered
Enterprises as Resident Enterprises with the Actual Standards of Organizational Management, or Circular 82, further interpreting the application
of the EIT Law and its implementation to offshore entities controlled by a Chinese enterprise or group. Pursuant to the Circular 82, an
enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a "resident
enterprise" with its "de facto management body" located within China if  (i) the place where the senior management
and core management departments that are in charge of its daily operations perform their duties is mainly located in China; (ii) its financial
and human resources decisions are made by or are subject to approval by persons or bodies in China; (iii) its major assets, accounting
books, company seals, and minutes and files of its board and shareholders' meetings are located or kept in China; and (iv) at least
half of the enterprise's directors or senior management with voting rights frequently reside in China. A resident enterprise would
have to pay a withholding tax at a rate of 10% when paying dividends to its non-mainland-China stockholders.
Given that ReTo does not have
a mainland China individual or a mainland China enterprise or group, but a Hong Kong enterprise, as its primary controlling shareholder,
we believe Circular 82 will not apply to us. However, Circular 82 did mention that the facts-oriented recognition is more important than
format in the case of recognizing "de facto management". Although we have never been determined by any competent tax authorities
to be a "resident enterprise", and we have not seen any corporations with similar structures to ours to be determined as a
"resident enterprise", whether or not we will be recognized as a "resident enterprise" is subject to the PRC tax
authorities' discretion and their interpretation of the term "de facto management body".
As for our Hong Kong business,
we do not believe that we meet some of the conditions outlined. As a holding company, the key assets and records of REIT Holdings, 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 mainland China. Accordingly, we believe that REIT Holdings should not be treated as a "resident enterprise"
for PRC tax purposes if the criteria for "de facto management body" as set forth in Circular 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.
If the PRC tax authorities
determine that we are a "resident enterprise" for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences
could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise
income tax reporting obligations. In our case, this would mean that income such as non-mainland-China source income would be subject to
PRC enterprise income tax at a rate of 25%. Second, under the EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries
would qualify as "tax-exempt income." Finally, it is possible that future guidance issued with respect to the new "resident
enterprise" classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC
stockholders and with respect to gains derived by our non-PRC stockholders from transferring our shares.
Fluctuations in
exchange rates could result in foreign currency exchange losses to us and may reduce the value of, and amount in U.S. Dollars of dividends
payable on, our shares in foreign currency terms.
Changes
in the value of the RMB against the U.S. dollar, Euro and other foreign currencies are affected by, among other things, changes in China's
political and economic conditions. Any significant revaluation of the RMB may have a material adverse effect on our revenues and financial
condition, and the value of, and any dividends payable on our shares in U.S. dollar terms. Although we use the United States dollar for
financial reporting purposes, all of the transactions effected by our PRC subsidiaries are denominated in China's currency, the
RMB. The value of the RMB fluctuates and is subject to changes in China's political and economic conditions. We do not currently
engage in hedging activities to protect against foreign currency risks. Even if we choose to engage in such hedging activities, we may
not be able to do so effectively. Future movements in the exchange rate of the RMB could adversely affect our financial condition as we
may suffer financial losses when transferring money raised outside of China into the country or paying vendors for services performed
outside of China. For example, to the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB
against the U.S. dollar would have an adverse effect on RMB amount we would receive from the conversion. Conversely, if we decide to convert
our RMB into U.S. dollars for the purpose of paying dividends on our Common Shares or for other business purposes, appreciation of the
U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations of the RMB
against other currencies may increase or decrease the cost of imports and exports, and thus affect the price-competitiveness of our products
against products of foreign manufacturers or products relying on foreign inputs.
19
Since
July 2005, the RMB is no longer pegged to the U.S. dollar. Although the People's Bank of China regularly intervenes in the foreign
exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly
in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future Chinese authorities may lift
restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.
We
reflect the impact of currency translation adjustments in our financial statements under the heading "Foreign currency translation
gain (loss)." For the years ended December 31, 2022, 2021 and 2020, we had a negative adjustment of $1,183,819, a positive adjustment
of $493,769 and a positive adjustment of $1,923,316, respectively, for foreign currency translations. Very limited hedging transactions
are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions.
While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and
we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by China
exchange control regulations that restrict our ability to convert RMB into foreign currencies.
Besides,
Fluctuation of the Renminbi could materially affect our financial condition and results of operations. The value of the Renminbi against
the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions.
On July 21, 2005, the Chinese government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under
the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies.
This change in policy has resulted in an appreciation of the Renminbi against the U.S. dollar. While the international reaction to the
Renminbi revaluation has generally been positive, there remains international pressure on the Chinese government to adopt an even more
flexible currency policy, which could result in a further and more rapid appreciation of the Renminbi against the U.S. dollar. Any material
revaluation of Renminbi may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of,
and any dividends payable on, our Common Shares in U.S. dollars. For example, an appreciation of Renminbi against the U.S. dollar would
make any new Renminbi denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into
Renminbi for such purposes.
We may be subject to foreign exchange controls
in China, which could limit our use of funds that would be raised in future offerings, which could have a material adverse effect on our
business.
Beijing REIT, REIT Technology
and REIT Ordos are subject to Chinese rules and regulations on currency conversion. In China, SAFE regulates the conversion of the RMB
into foreign currencies. Currently, FIEs are required to apply to SAFE for "Registration of Establishment as FIEs". Beijing
REIT, REIT Technology and REIT Ordos are FIEs. With such registration, Beijing REIT, REIT Technology and REIT Ordos are allowed to open
foreign currency accounts including the "current account" and the "capital account". Currently, conversion within
the scope of the "current account" and general "capital account" can be effected without requiring the approval
of SAFE. However, conversion of currency in some restricted "capital account" (e.g. for capital items such as direct investments,
loans, securities, etc.) still requires the approval of SAFE.
In particular, if Beijing
REIT, REIT Technology or REIT Ordos borrow foreign currency through loans from ReTo or other foreign lenders, these loans must be registered
with SAFE. If Beijing REIT, REIT Technology or REIT Ordos are financed by means of additional capital contributions, reporting to or filings
with certain Chinese government authorities, including MOFCOM, or the local counterparts of SAFE and SAMR or its local counterparts, in
respect of these capital contributions. These restrictions could limit our use of funds which would be raised in our future offerings,
which could have an adverse effect on our business.
20
If we fail to comply
with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans, the PRC plan participants
or we could be subject to fines and other legal or administrative sanctions.
In
February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating
in Stock Incentive Plan of Overseas Publicly Listed Company (the "SAFE Circular 7). Pursuant to SAFE Circular 7, directors, supervisors,
senior management and other employees participating in any stock incentive plan of an overseas publicly listed company who are PRC citizens
or who are non-PRC citizens residing in China for a continuous period of not less than one year, are required to register with SAFE through
a domestic qualified agent, which could be the PRC subsidiary of such overseas-listed company, and complete certain other procedures,
unless certain exceptions are available. In addition, an overseas-entrusted institution must be retained to handle matters in connection
with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees
who are PRC citizens or non-PRC citizens living in China for a continuous period of not less than one year and have been granted options
are subject to these regulations as our company has become an overseas-listed company. Failure to complete SAFE registrations may subject
them to fines of up to RMB50,000 for individuals and may also limit our ability to contribute additional capital into our WFOE and our
WFOE' ability to distribute dividends to us. If any unapproved outflow or inflow of capital occurs and constitutes foreign exchange
evasion or arbitrage, the amount of fine will be higher.
In
addition, the Ministry of Finance and the State Administration of Taxation have issued certain circulars concerning employee share options
and restricted shares. Under these circulars, our employees working in China who exercise share options or are granted restricted shares
will be subject to PRC individual income tax. Our relevant PRC subsidiary has obligations to file documents related to employee share
options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their
share options or are granted restricted share. If our employees fail to pay or we fail to withhold their income taxes according to relevant
laws and regulations, we may face sanctions imposed by the tax authorities or other PRC government authorities.
PRC regulations
relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries
to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries' ability
to increase their registered capital or distribute profits.
SAFE
promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing
and Roundtrip Investment through Special Purpose Vehicles, or the SAFE Circular 37, on July 4, 2014, which replaced the former circular
commonly known as "SAFE Circular 75" promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to register
with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of
overseas investment and financing, with such PRC residents' legally owned assets or equity interests in domestic enterprises or
offshore assets or interests, referred to in SAFE Circular 37 as a "special purpose vehicle". SAFE Circular 37 further requires
amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or
decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event
that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries
of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent
cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital
into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability
under PRC law for evasion of foreign exchange controls.
We
have notified substantial beneficial owners of Common Shares who we know are PRC residents of their filing obligation, and are aware that
all substantial beneficial owners have completed the necessary registration with the local SAFE branch or qualified banks as required
by SAFE Circular 37. However, we may not at all times be aware of the identities of all of our beneficial owners who are PRC residents.
We do not have control over our beneficial owners and cannot assure you that all of our PRC-resident beneficial owners will comply with
SAFE Circular 37 and subsequent implementation rules. The failure of our beneficial owners who are PRC residents to register or amend
their SAFE registrations in a timely manner pursuant to SAFE Circular 37 and subsequent implementation rules, or the failure of future
beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in SAFE Circular 37 and subsequent
implementation rules, may subject such beneficial owners or our PRC subsidiaries to fines and legal sanctions. Furthermore, since SAFE
Circular 37 was recently promulgated and it is unclear how this regulation, and any future regulation concerning offshore or cross-border
transactions, will be interpreted, amended and implemented by the relevant PRC government authorities, we cannot predict how these regulations
will affect our business operations or future strategy. Failure to register or comply with relevant requirements may also limit our ability
to contribute additional capital to our PRC subsidiaries and limit our PRC subsidiaries' ability to distribute dividends to our
company. These risks may have a material adverse effect on our business, financial condition and results of operations.
21
Failure to comply
with the Individual Foreign Exchange Rules relating to the overseas direct investment or the engagement in the issuance or trading of
securities overseas by our Chinese resident stockholders may subject such stockholders to fines or other liabilities.
Other
than Circular 37, 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 Chinese 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. Chinese individuals who fail to make such registrations may be
subject to warnings, fines or other liabilities.
We
may not be fully informed of the identities of all our beneficial owners who are Chinese residents. For example, because the investment
in or trading of our shares will happen in an overseas public or secondary market where shares are often held with brokers in brokerage
accounts, it is unlikely that we will know the identity of all of our beneficial owners who are Chinese residents. Furthermore, we have
no control over any of our future beneficial owners and we cannot assure you that such Chinese residents will be able to complete the
necessary approval and registration procedures required by the Individual Foreign Exchange Rules.
It
is uncertain how the Individual Foreign Exchange Rules will be interpreted or enforced and whether such interpretation or enforcement
will affect our ability to conduct foreign exchange transactions. Because of this uncertainty, we cannot be sure whether the failure by
any of our Chinese resident stockholders to make the required registration will subject our subsidiaries to fines or legal sanctions on
their operations, restriction on remittance of dividends or other punitive actions that would have a material adverse effect on our business,
results of operations and financial condition.
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.
Our
holding company is a company incorporated under the laws of the British Virgin Islands, but we conduct substantially all of our operations
in China and substantially most of our assets are located in China. In addition, most of our senior executive officers are PRC nationals
and reside within China for a significant portion of the time. As a result, it may be difficult for you to effect service of process upon
us or those persons inside mainland China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts
based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who reside and whose
assets are located outside the United States. In addition, there is uncertainty as to whether the courts of the British Virgin 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.
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 reciprocity
with the United States 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 United States.
22
Shareholder
claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue
as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information
needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities
in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement
cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the Unities States
have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law
which took effect in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection
activities within the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities,
no organization or individual may provide the documents and materials relating to securities business activities to overseas parties.
The war in Ukraine could materially and
adversely affect our business and results of operations.
In February 2022, the Russian
Federation commenced a military invasion of Ukraine, and as a result, the United States, the European Union, the United Kingdom and other
jurisdictions have imposed sanctions on certain Russian and Ukrainian persons and entities, including certain Russian banks, energy companies
and defense companies, and have imposed restrictions on exports of various items to Russia and certain regions of Ukraine (including the
self-proclaimed Donetsk People's Republic and Luhansk People's Republic and Crimea). Moreover, on February 22, 2022,
the Office of Foreign Assets Control of the United States issued sanctions aimed at limiting Russia's ability to raise funds through
sovereign debt.
The war in Ukraine has already
affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this conflict
could result in protracted and/or severe damage to the global economy. Russia's invasion of Ukraine has led to, and may continue
to lead to, additional sanctions being levied by the United States, European Union and other countries against Russia. Russia's
military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect the global
markets, our customers or suppliers' businesses and potentially our business, even though we do not conduct any business in Russia
or Ukraine.
As of the date of this annual
report, we do not have any business, operation or assets in Russia or Ukraine, nor do we have any direct or indirect business or contracts
with any Russian or Ukraine entity as a supplier or customer. Additionally, we do not have any knowledge as to whether our customers or
suppliers have any business, operation or assets in Russia or Ukraine, or have any direct or indirect business or contracts with any Russian
or Ukraine entity as a supplier or customer. However, our operations, especially the supply chain, could be adversely impacted as a result
of the dramatic fuel cost increases or delay to international shipping, in particular marine freight, that may be caused by the war.
The extent and duration of
the military action, sanctions and resulting market disruptions of the war in Ukraine are impossible to predict, but could be substantial.
Any such disruptions caused by Russian military actions or resulting sanctions may magnify the impact of other risks described in this
section. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly
developing and beyond our control. Prolonged unrest, intensified military activities or more extensive sanctions impacting the region
could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business,
financial condition, results of operations and prospects.
We may be subject to supply chain disruptions,
which could have a material adverse effect on our business, financial condition and results of operations.
Our operations, in particular
sales of construction materials and equipment, are subject to supply chain disruptions. We have not experienced any suspension of production,
purchase or sale of our products and equipment; however, we have experienced some disruption to our supply chain during the PRC government
mandated lockdown due to the COVID-19 pandemic, including but not limited to, restrictions or suspensions of logistics and shipping
services in certain areas of China and increase in raw material costs.
While all of our major suppliers
are currently fully operational, any future disruption in their operations would impact our ability to produce and deliver our products
to customers. In addition, reductions in commercial airline and cargo flights, disruptions to ports and other shipping infrastructure
resulting from the COVID-19 pandemic are resulting in increased transport times to deliver our products to customers. This has limited
our ability to fulfill orders and we may be unable to satisfy all of the demand for our products and equipment in a timely manner, which
has adversely affected our relationships with our customers. As a result, the supply chain disruptions have materially affected our operations
and may impact our outlook or business goals.
23
We have also experienced higher
costs of raw materials for manufacture and sale of our equipment, primarily steel and certain electronic parts due to limited availability
or increased commodity prices caused by the COVID -19 pandemic. We have expanded our supplier network in order to control the procurement
costs, diversify supply of our raw materials and ensure timely fulfillment of customer orders. As a result, we believe we can still supply
products and equipment at competitive prices amid the COVID-19 impact.
As a result of Russia's
military invasion of Ukraine, the United States, the European Union, the United Kingdom and other jurisdictions have imposed sanctions
on certain Russian and Ukrainian persons and entities, including certain Russian banks, energy companies and defense companies, and have
imposed restrictions on exports of various items to Russian and certain regions of Ukraine. These geopolitical issues have resulted in
increasing global trading uncertainties and thus could potentially affect our supply chain, even though we do not have any business, operation
or assets in Russia or Ukraine, nor do we have any direct or indirect business or contracts with any Russian or Ukraine entity as a supplier
or customer. See " –
The war in Ukraine could materially and adversely affect our business and results of operations
."
Our management has analyzed
the current and future international and domestic political and economic situations and formulated different development strategies and
measures for each of our business segments, with a goal to reduce the existing and potential impact of supply chain disruptions. For the
equipment and construction materials businesses, we have made market development efforts to expand sales and have strengthened the management
of raw material procurement by adding backup suppliers. Moreover, we have focused on production design and processing processes to improve
quality and efficiency as well as reduce costs. We also plan to focus more on the growth of our software development and RSA
services, which are generally less prone to any supply chain disruptions. However, there is no assurance that our efforts to mitigate
the impact of supply chain disruptions will be successful. If our efforts were not successful, our business, financial condition and results
of operations could be materially adversely affected.
Wage increases
in China may prevent us from sustaining our competitive advantage and could reduce our profit margins.
Labor
costs in China have increased with China's economic development. Rising inflation in China is also putting pressure on wages. Wage
costs for our employees form a significant part of our costs. For instance, for the years ended December 31, 2022, 2021 and 2020, our
compensation and benefit costs for our employees were approximately $2.9 million, $3.3 million and $3.4 million, respectively. In addition,
we are required by PRC laws and regulations to pay various statutory employee benefits, including pensions, housing funds, medical insurance,
work-related injury insurance, unemployment insurance and maternity insurance to designated governmental agencies for the benefit of our
employees. We expect that our labor costs, including wages and employee benefits, will continue to increase, particularly as we seek to
expand our operations. In addition, the future issuance of equity-based compensation to our professional staff and other employees would
also result in additional stock dilution for our shareholders. Unless we are able to pass on these increased labor costs to our customers
by increasing prices for our products, services and projects, our profitability and results of operations may be materially and adversely
affected. Furthermore, the PRC government has promulgated new laws and regulations to enhance labor protections in recent years, such
as the Labor Contract Law and the Social Insurance Law. As the interpretation and implementation of these new laws and regulations are
still evolving, our employment practice may not at all times be deemed in compliance with the new laws and regulations. If we are subject
to penalties or incur significant liabilities in connection with labor disputes or investigation, our business and profitability may be
adversely affected.
24
We face risks related
to natural disasters, health epidemics and other outbreaks, such as the COVID-19 pandemic, which could significantly disrupt our operations.
In
recent years, there have been outbreaks of epidemics in China and globally, including the outbreak of COVID-19. In March 2020, the World
Health Organization declared the COVID-19 a pandemic. COVID-19 has resulted in quarantines, travel restrictions, and the temporary closure
of businesses and facilities in China and worldwide.
The
worldwide outbreak of COVID-19 pandemic has resulted in significant disruptions in the global economy. To contain the spread of COVID-19,
the Chinese government has taken certain emergency measures, including extension of the Lunar New Year holidays, implementation of travel
bans, blockade of certain roads and closure of factories and businesses, and encouragement of remote working arrangements and cancellation
of public activities. Recently, there has been a recurrence of COVID-19 outbreaks in certain provinces of China, including Shanghai, due
to the Delta and Omicron variants. As a result, the Chinese government has implemented similar emergency measures to contain further spread
of COVID-19.
As
it has historically, the COVID-19 pandemic may continue to, among other things, (i) disrupt our supply chain, delay our ability to timely
fulfill our customer orders and lead to higher fulfilment expenses, (ii) reduce or curtail our customers' expenditures and overall
demand for our products or services, and increase the volatility of their purchase patterns from period-to-period, (iii) cause delays
in production and collection of accounts receivable, and (iv) require us to take the initiatives in response to COVID-19 and many other
efforts to leverage our technology, products and services to help contain the pandemic, all of which could have a material adverse effect
on our business, financial condition and results of operations.
Our
operations are not located in affected regions, which could however reduce the capacity and efficiency of our operations and negatively
impact normal business operations. Our other measures taken to reduce the impact of this epidemic outbreak included upgrading our telecommuting
system, monitoring our employees' health on a daily basis and optimizing our technology system to support potential growth in user
traffic. We continue to monitor the evolving situation and guidance from government and public health authorities and may take additional
actions based on their recommendations.
There
remains uncertainty around the severity and duration of the COVID-19 pandemic and the measures taken, or may be taken, in response to
the COVID-19 pandemic, which will depend on numerous factors, including, among others, the emergence of new cases of COVID-19 and its
variants, hospitalization and mortality rates, and the availability and distribution of safe and effective treatments and vaccines.
We
are also vulnerable to natural disasters and other calamities. Although we have servers that are hosted in an offsite location and our
backup system is able to capture data on a real-time basis, we may still be unable to recover certain data in the event of a server failure.
We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power
loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise
to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or
corruption of data or malfunctions of software or hardware as well as adversely affect our ability to operate or provide services to our
customers.
Any
future outbreak of contagious diseases, extreme unexpected bad weather or natural disasters would adversely affect our operations and
delivery of our products, services and projects. If there is a recurrence of an outbreak of certain contagious diseases or natural disasters,
our operations may materially be affected and the delivery of our products services and projects may be delayed, which may have a material
adverse effect on our business and operating results.
Our revenue will
decrease if the industries in which our customers operate experience a protracted slowdown.
Our
customers generally operate in the construction industry. Therefore, we are subject to general changes in economic conditions impacting
this segment of the economy. If the construction industry does not grow or if there is a contraction in this industry, demand for our
business would decrease. Demand for our business is typically affected by a number of overarching economic factors, including interest
rates, environmental laws and regulations, the availability and magnitude of private and governmental investment in infrastructure projects
and the health of the overall economy. If there is a decline in economic activity in China or the other markets in which we operate, or
there is a protracted slowdown in industries upon which we rely for our sales, demand for our projects and products and our revenue would
likewise decrease, which could have a materially adverse effect on our business.
25
Any decline in
the availability or increase in the cost of raw materials could materially impact our earnings.
Our
construction material products, manufacturing equipment and projects depend heavily on the ready availability of various raw materials.
The availability of raw materials may decline, and their prices may fluctuate greatly. If our suppliers are unable or unwilling to provide
us with raw materials on terms favorable to us, we may be unable to produce certain products, equipment or complete projects. The inability
to produce certain products or projects for customers could result in a decrease in profit and damage to our corporate reputation. In
the event our raw material costs increase, we may not be able to pass these higher costs on to our customers in full or at all.
We rely on a limited
number of vendors, and the loss of any significant vendor could harm our business, and the loss of any one of such vendors could have
a material adverse effect on our business.
We
consider our major vendors to be those vendors that accounted for more than 10% of overall purchases in any given fiscal period. For the
years ended December 31, 2022, 2021 and 2020, the Company purchased approximately 19%, 53% and 43% of its raw materials from one major
supplier, respectively. We have not entered into long-term contracts with all of our significant vendors and instead rely on individual
contracts with such vendors. Although we believe that we can locate replacement vendors readily on the market for prevailing prices, any
difficulty in replacing a vendor on terms acceptable to us could negatively affect our company's performance to the extent it results
in higher prices or a slower supply chain.
We face substantial
inventory risk, which if not addressed could have a material adverse effect on our business.
We
must order materials for our products and projects and build inventory in advance of production. We typically acquire materials through
a combination of purchase orders, supplier contracts and open orders, in each case based on projected demand.
As
of December 31, 2022, our inventory from continuing operations was $337,798. Inventory turnover associated with our continuing operations
for the fiscal year ended December 31, 2022 was 24 days. As our markets are competitive and subject to rapid technology and price changes,
there is a risk that we will forecast incorrectly and order or produce incorrect amounts of products or not fully utilize firm purchase
commitments. If we were unsuccessful in accurately quantifying appropriate levels of inventory, our business, financial condition and
results of operation may be materially and adversely affected.
Any disruption
in the supply chain of raw materials and our products could adversely impact our ability to produce and deliver products, which could
have a material adverse effect on our business.
In
order to optimize our product manufacturing, we must manage our supply chain for raw materials and delivery of our products. Supply chain
fragmentation and local protectionism within China further increase supply chain disruption risks. Local administrative bodies and physical
infrastructure built to protect local interests may pose transportation challenges for raw material transportation as well as product
delivery. In addition, profitability and volume could be negatively impacted by limitations inherent within the supply chain, including
competitive, governmental, legal, natural disasters, and other events that could impact both supply and price. Any of these occurrences
could cause significant disruptions to our supply chain, manufacturing capability and distribution system that could adversely impact
our ability to produce and deliver products. If we are unsuccessful in maintaining efficient operation of our supply chain, our business,
financial condition and results of operation may be materially and adversely affected.
We do not maintain
a reserve for warranty or defective products and installation claims. Our costs could increase if we experience a significant number of
claims, which could have a material adverse effect on our business.
We
generally obtain customers' acceptance when we deliver products, equipment or projects. In practice, we allow our customers to reserve
approximately 5-20% of the agreed purchase or installation price as a security retention for a period of one or two years after we deliver
or implement a solution. We consider this one or two year term to be a warranty period for our products or projects sold. Historically,
we have not experienced significant customer complaints concerning our products or projects, and none of our customers have claimed damages
for any loss incurred due to quality problems. In addition to our one to two year reserve, China's Product Quality Law generally
allows customers two years to seek compensation for damages caused by product quality deficiencies in cases in which a product lacks an
expiration period.
26
We
expect our customer support teams and our quality assurance and manufacturing monitoring procedures to continue to keep claims at a level
that does not support a need for a financial reserve. However, if we experience significant increases in claims or customers' failure
to pay the final 5-20% of a purchase/installation price as a result of quality concerns, our financial results could be adversely affected.
We face certain
risks in collecting our accounts receivable, the failure to collect could have a material adverse effect on our business.
As
of December 31, 2022, 2021 and 2020, our net accounts receivable associated with our continuing operations were
$
2,234,186
(including accounts receivable from third party customers of $2,150,450 and accounts receivable from related party customers of $83,736),
$535,292 (including accounts receivable from third party customers of $441,703 and accounts receivable from related party customers of
$93,589) and $3,056,104 (including accounts receivable from third party customers of $2,856,105 and accounts receivable from related party
customers of approximately $199,999), respectively. These amounts represented 35%, 15% and 37% of our total revenues from continuing operations
in 2022, 2021 and 2020, respectively. For the years ended December 31, 2022, 2021 and 2020, our accounts receivable turnover associated
with our continuing operations was 154 days, 182 days and 222 days, respectively.
Although
we believe that we have developed a robust receivables management system and have not incurred a situation where an account receivable
has become uncollectable, as our business continues to scale, we believe that our accounts receivable balance will continue to grow. This,
in turn, increases our risks for bad debts and uncollectible receivables. To the extent we incur additional bad debts and/or uncollectible
receivables, our business, financial condition and results of operation may be materially and adversely affected.
Our return on investment
in client projects may be different from our projections.
Our
return on investment in client projects will take some time to materialize. At the initial stages of project investment and construction,
the depreciation of newly added materials and fixed assets will negatively affect our operating results. In addition, the projects may
be subject to changes in market conditions during the installation and implementation phases. Changes in industry policy, the progress
of the projects, project management, raw materials supply, market conditions and other variables may affect the profitability and the
time in which we profit on projects, which may be different from our initial forecast, thus affecting the actual return on investment
of the projects.
The sales of our
eco-friendly construction materials are subject to geographic market risks, which could adversely affect our revenues and profitability.
Currently,
our eco-friendly construction materials are sold in China. Accordingly, we are subject to risks related to the economy of China. In addition
to economic conditions, the geographic concentration suggests that regional specific legislation, taxes and disasters such as earthquakes
could disproportionately affect us and our financial performance. For example, a downturn in the demand for eco-friendly construction
materials or economic conditions in Hainan Province could result in a material decline in our business, financial condition and results
of operation.
The report of our
independent registered public accounting firm on our financial statements for the years ended December 31, 2022, 2021 and 2020 includes
an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern, and if our business is unable
to continue it is likely investors will lose all of their investment.
As
discussed in Note 3 to the consolidated financial statements to this annual report, we have suffered significant losses from operations
and has a significant decrease in working capital that raises substantial doubt about our ability to continue as a going concern. Our
auditor, YCM CPA Inc., has indicated in their report on our financial statements for the fiscal year ended December 31, 2022 that there
is a substantial doubt about our ability to continue as a going concern for the next 12 months from the issuance of the consolidated financial
statements. A "going concern" opinion could impair our ability to finance our operations through the sale of equity, incurring
debt, or other financing alternatives.
27
Management's
plan to alleviate the substantial doubt about our ability to continue as a going concern include working to improve our liquidity and
capital sources mainly through cash flow from its operations, renewal of bank borrowings, equity or debt offering and borrowing from related
parties. In order to fully implement its business plan and recover from continuing losses, we may also seek equity financing from outside
investors. At the present time, however, we do not have commitments of funds from any potential investors. There can be no assurance that
additional financing, if required, would be available on favorable terms or at all and/or that these plans and arrangements will be sufficient
to fund our ongoing capital expenditures, working capital, and other requirements.  If we are unable to achieve these goals, our
business will be jeopardized and we may not be able to continue. If we ceased operations, it is likely that all of our investors will
lose their investment.
We cannot assure
you that our growth strategy will be successful, which may result in a negative impact on our growth, financial condition, results of
operations and cash flow.
We
intend to grow by expanding our business, increasing market penetration of our existing products, developing new products and increasing
our targeting of domestic and international markets. However, many obstacles to this expansion exist, including increased competition
from similar businesses, our ability to improve our products and product mix to realize the benefits of our research and development efforts,
unexpected costs and costs associated with marketing efforts. As such, we cannot assure you that we will be able to successfully overcome
these potential challenges and establish our business in additional markets. Our inability to implement this growth strategy successfully
may have a negative impact on our growth, future financial condition, and results of operations or cash flows.
If we fail to protect
our intellectual property rights, it could harm our business and competitive position.
We
own an aggregate of 123
patents (ten of which are owned jointly with Luoyang
Water-Conservancy Surveying & Design Co., Ltd. ("Luoyang"), an independent third party), three of which were awarded
Gold and Silver Prize of International Exhibition of Inventions of Geneva. We also have 73 pending patent applications in China. In
addition, we own 25 software copyrights in China.  We rely on a combination of patent, trademark and trade secret laws and
non-disclosure agreements and other methods to protect our intellectual property rights.
The
process of seeking patent protection on future patents can be lengthy and expensive, our patent applications may fail to result in patents
being issued, and our existing and future patents may be insufficient to provide us with meaningful protection or commercial advantage.
Our patents and patent applications may also be challenged, invalidated or circumvented.
Implementation
of Chinese intellectual property-related laws have historically been lacking, primarily because of ambiguities in PRC laws and enforcement
difficulties. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United
States or other western countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we
may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our
proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could result in substantial
costs and diversion of resources and management attention, which could harm our business and competitive position.
28
We may be exposed
to intellectual property infringement and other claims by third parties which, if successful, could disrupt our business and have a material
adverse effect on our financial condition and results of operations.
Our
success depends, in large part, on our ability to use and develop our technology and know-how without infringing third party intellectual
property rights. We face a high risk of being the subject of claims for intellectual property infringement, invalidity or indemnification
relating to other parties' proprietary rights because we sell our products and manufacturing equipment internationally and litigation
is becoming more common in China. Our current or potential competitors, many of which have substantial resources and have made substantial
investments in competing technologies, may have or may obtain patents that will prevent, limit or interfere with our ability to make,
use or sell our branded products in either China or other countries, including the United States and other countries in Asia. In addition,
the defense of intellectual property suits, including patent infringement suits, and related legal and administrative proceedings can
be costly, time consuming and may significantly divert the efforts and resources of our technical and management personnel. Furthermore,
an adverse determination in any such litigation or proceedings to which we may become a party could cause us to:
●
pay damage awards;
●
seek licenses from third parties;
●
pay ongoing royalties;
●
redesign our branded products; or
●
be restricted by injunctions.
Each
of these events could effectively prevent us from pursuing some or all of our business and result in our customers or potential customers
deferring or limiting their purchase or use of our branded products, which could have a material adverse effect on our financial condition
and results of operations.
Confidentiality
agreements with employees and third parties may not prevent unauthorized disclosure of proprietary information and trade secrets.
In
addition to patents, we rely on confidentiality agreements to protect our technical know-how and other proprietary information. In addition,
our officers and each of our main technical and management employees have signed a confidentiality agreement. Nevertheless, there can
be no guarantee that an employee or a third party will not make an unauthorized disclosure of our proprietary confidential information.
This might happen intentionally or inadvertently. It is possible that a competitor will make use of such information, and that our competitive
position will be compromised, in spite of any legal action we might take against persons making such unauthorized disclosures.
The use of unqualified
individual subcontractors may result in substantial liability.
Beijing
REIT Ecological Engineering Technology Co., Ltd. ("Beijing REIT Ecological") subcontracts portions of its projects to third
parties. According to Construction Law and Qualification Standard for Labor Subcontracting in Construction Business of China, individual
contractors are not in a position to obtain any qualification of labor subcontracting. Accordingly, contracts subcontracted out by Beijing
REIT Ecological to individual contractors may be declared void and unenforceable by applicable courts. Article 29 of the Construction
Law requires that "the overall contractors and subcontractors shall bear joint responsibilities to project owners for the subcontracted
projects". It is possible that Beijing REIT Ecological may subcontract projects to individuals or parties without required qualifications.
If the construction completed by unqualified individual subcontractors does not meet required quality standards and an accident occurs,
we may jointly bear the consequences pursuant to Article 67 of the Construction Law. Also, according to Article 54 of the Regulation on
the Quality Management of Construction Projects, the liabilities for the consequences could be indemnifying the damages and paying a penalty
ranging from RMB 500,000 (approximately $72,000) up to RMB 1.0 million (approximately $144,000).
If we experience
a significant disruption in, or a breach in security of, our information technology systems or if we fail to implement, manage or integrate
new systems, software and technologies successfully, it could harm our business.
Our
information technology ("IT") systems are an integral part of our business. We depend on our IT systems to process transactions,
manage logistics, keep financial records, prepare our financial reporting and operate other critical functions. Security breaches, cyber-attacks
or other serious disruptions of our IT systems can create systemic disruptions, shutdowns or unauthorized disclosure of confidential information.
If we are unable to prevent or adequately respond to such breaches, attacks or other disruptions, our operations could be adversely affected
or we may suffer financial or reputational damage.
29
In
addition, our ability to effectively implement our business plan in a rapidly evolving market requires effective planning, reporting and
analytical processes and systems. We are improving and expect that we will need to continue to improve and further integrate our IT systems,
reporting systems and operating procedures on an ongoing basis. If we fail to do so effectively, it could adversely affect our ability
to achieve our objectives.
Product defects
and unanticipated use or inadequate disclosure with respect to our products could adversely affect our business, reputation and financial
performance.
Manufacturing
or design defects (including in products or components that we source from third parties), unanticipated use of, or inadequate disclosure
of risks relating to, the use of products or equipment that we make and sell may lead to personal injury, death or property damage. These
events could lead to recalls or alerts relating to our products, result in the removal of a product or equipment from the market or result
in product liability claims being brought against us. Product and equipment recalls, removals and liability claims can lead to significant
costs, as well as negative publicity and damage to our reputation that could reduce demand for our products and equipment.
Outstanding bank
loans may reduce our available funds.
We
had approximately $1.3 million in bank loans loan outstanding as of December 31, 2022 (all short-term bank loans). The loans are held
at multiple banks, and all of the debt is guaranteed by third-party guaranty companies and certain company officers. There can be no guarantee
that we will be able to pay all amounts when due or refinance the amounts on terms that are acceptable to us or at all. If we are unable
to make our payments when due or to refinance such amounts, our property could be foreclosed and our business could be negatively affected.
A financial intermediary
may have acquired investment funds from investors to invest in our Company's business before reaching a final mutual agreement with
us to obtain such investments, which may subject us to on-going or future litigation, which could have a material adverse effect on our
financial condition.
In
2018, a financial intermediary and REIT New Materials Xinyi Co., Ltd. ("Xinyi REIT") began negotiations towards a potential
cooperation where the financial intermediary would introduce potential investors to facilitate investment in Xinyi REIT's business.
In December 2018, an investor invested RMB1,000,000 (approximately $0.15 million) in Xinyi REIT through this financial intermediary. Xinyi
REIT rejected this investment and returned the total investment funds it received to the investor and informed the financial intermediary
to cease facilitating investments from other investors. In addition, despite there not being a final mutual agreement between the parties,
it appears the financial intermediary may have acquired investment funds in the aggregate amount of RMB15,450,000 (approximately $2.15
million) from certain investors, and Xinyi REIT did not receive any funds from these investments.
Mr.
Hengfang Li, the Company's Chief Executive Officer and Chairman, has agreed to assume full responsibility for liabilities, if any,
and assume the creditor's rights for these claims on behalf of the Company for any legal claims or lawsuits against the Company
due to these investments. In May 2020, Mr. Li paid RMB 300,000 (approximately $44,000) to an investor in a lawsuit against Xinyi REIT
to return the investment funds. In 2022 and 2023, a few other investors brought legal actions against Xinyi REIT for the same claim and
judgments were rendered in their favor. Subsequently, Xinyi REIT appealed these judgments, and the appeals are still pending in higher
courts as of the date of this annual report. The Company does not believes that any liability resulting from the outcome of such proceedings,
if any, will have a material adverse effect on the Company's consolidated financial position or results of operations or liquidity.
However,
in the event that Mr. Li personally fails to satisfy any losses related to the investments on our behalf, the Company may be required
to repay related liabilities, which although is remote, could have a material adverse effect on our financial condition
.
Our future growth
depends on new products, environmental solutions and new technology innovation, and failure to invent and innovate could adversely impact
our business prospects.
Our
future growth depends in part on maintaining our competitive advantage with current products in new and existing markets, as well as our
ability to develop new products, and technologies to serve such markets. To the extent that competitors develop competitive products,
and technologies, or new products, or technologies that achieve higher customer satisfaction, our business prospects could be adversely
impacted. In addition, regulatory approvals for new products, equipment or technologies may be required, and these approvals may not be
obtained in a timely or cost-effective manner, which could adversely impact our business prospects.
30
Changes in demand
for our products, equipment and business relationships with key customers and suppliers may negatively affect operating results.
To
achieve our objectives, we must develop and sell products and equipment that are subject to the demands of our customers. This is dependent
on many factors, including managing and maintaining relationships with key customers, responding to the rapid pace of technological change
and obsolescence, which may require increased investment by us or result in greater pressure to commercialize developments rapidly or
at prices that may not fully recover the associated investment, and the effect on demand resulting from customers' research and
development, capital expenditure plans and capacity utilization. If we are unable to keep up with our customers' demands, our sales,
earnings and operating results may be negatively affected.
We may be unable
to deliver our backlog on time, which could affect future sales and profitability and our relationships with customers.
Our
ability to meet customer delivery schedules for backlog is dependent on a number of factors including sufficient manufacturing plant
capacity, adequate supply channel access to raw materials and other inventory required for production, an adequately trained and capable
workforce, project engineering expertise for certain large projects and appropriate planning and scheduling of manufacturing resources.
Many of the contracts we enter into with our customers require long manufacturing lead times. Failure to deliver in accordance with customer
expectations could subject us to contract cancellations and financial penalties, and may result in damage to existing customer relationships
and could have a material adverse effect on our business, financial condition and results of operations. We cannot assure you that our
backlog will result in revenue on a timely basis or at all, or that any cancelled contracts will be replaced.
Our operations
are subject to various hazards that may cause personal injury or property damage and increase our operating costs, and which may exceed
the coverage of our insurance.
There
are inherent risks to our operations. Our workers are subject to the usual hazards associated with providing services on construction
sites, while our plant personnel are subject to the hazards associated with moving and storing large quantities of heavy raw materials
and finished products. Operating hazards can cause personal injury and loss of life, damage to or destruction of property, plant and
equipment and environmental damage. Although we conduct training programs designed to reduce these risks, we cannot eliminate these risks.
We rely on state mandated social insurance for work-related injuries of our employees. However, any claim that exceeds the scope of our
insurance coverage, if successful and of sufficient magnitude, could result in the incurrence of substantial costs and the diversion
of resources, which could have a material adverse effect on us. In addition, we do not have any business liability, disruption, litigation
or property insurance coverage for our operations. Any uninsured occurrence of loss or damage to property, or litigation or business
disruption may also materially and adversely affect our ability to operate.
We may incur material
costs and losses as a result of claims our products do not meet regulatory requirements or contractual specifications.
Our
operations involve providing products that must meet building code or other regulatory requirements and contractual specifications for
durability, stress-level capacity, weight-bearing capacity and other characteristics. If we fail or are unable to provide products meeting
these requirements and specifications, we may face economic penalties, including price adjustments, rejection of deliveries and/or termination
of contracts, and our reputation could be damaged. If a significant product-related claim or claims are made and resolved against us
in the future, such resolution may have a material adverse effect on our business, financial condition, results of operations and cash
flows.
31
Our operations
may incur substantial liabilities to comply with environmental laws and regulations.
Our
construction materials manufacturing operations are subject to laws and regulations relating to the release or disposal of materials
into the environment or otherwise relating to environmental protection. Our failure to have complied with the applicable laws may result
in the assessment of administrative, civil and criminal penalties, the incurrence of investigatory or remedial obligations and the imposition
of injunctive relief. Resolution of these matters may require considerable management time and expense. In addition, changes in environmental
laws and regulations occur frequently and any changes that result in more stringent or costly manufacturing, storage, transport, disposal
or cleanup requirements could require us to make significant expenditures to reach and maintain compliance and may otherwise have a material
adverse effect on our industry in general and on our own results of operations, competitive position or financial condition.
We depend on our
key personnel, and our business and growth prospects may be severely disrupted if we lose their services.
Our
future success depends heavily upon the continued service of our key executives. In particular, we rely on the expertise and experience
of Hengfang Li, our founder, Chairman and Chief Executive Officer. We rely on his industry expertise and experience in our business operations,
and in particular, his business vision, management skills, and working relationship with our employees, our other major shareholders,
the regulatory authorities, and many of our clients. If he became unable or unwilling to continue in his present position, or if he joined
a competitor or formed a competing company in violation of his employment agreement, we may not be able to replace him easily, our business
may be significantly disrupted and our financial condition and results of operations may be materially adversely affected.
We
do not maintain key man life insurance on any of our senior management or key personnel. The loss of any one of them would have a material
adverse effect on our business and operations. Competition for senior management and our other key personnel is intense and the pool
of suitable candidates is limited. We may be unable to locate a suitable replacement for any senior management or key personnel that
we lose. In addition, if any member of our senior management or key personnel joins a competitor or forms a competing company, they may
compete with us for customers, business partners and other key professionals and staff members of our Company. Although each of our senior
management and key personnel has signed a confidentiality and non-competition agreement in connection with his or her employment with
us, we cannot assure that we will be able to successfully enforce these provisions in the event of a dispute between us and any member
of our senior management or key personnel.
In
addition, we compete for qualified personnel with other industry competitors, and we face competition in attracting skilled personnel
and retaining the members of our senior management team. These personnel possess technical and business capabilities, including expertise
relevant to the construction materials industry, which are difficult to replace. There is intense competition for experienced senior
management with technical and industry expertise in the construction materials industry, and we may not be able to retain our key personnel.
Intense competition for these personnel could cause our compensation costs to increase, which could have a material adverse effect on
our results of operations. Our future success and ability to grow our business will depend in part on the continued service of these
individuals and our ability to identify, hire and retain additional qualified personnel. If we are unable to attract and retain qualified
employees, we may be unable to meet our business and financial goals.
We have limited
business insurance coverage. Any future business liability, disruption or litigation we experience might divert management focus from
our business and could significantly impact our financial results.
Availability
of business insurance products and coverage in China is limited, and most such products are expensive in relation to the coverage offered.
We have determined that the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurances
on commercially reasonable terms make it impractical for us to maintain such insurances. As a result, we do not have any business liability,
disruption or litigation insurance coverage for our operations in China. Accordingly, a business disruption, litigation or natural disaster
may result in substantial costs and divert management's attention from our business, which would have an adverse effect on our
results of operations and financial condition.
32
We may require
additional financing in the future and our operations could be curtailed if we are unable to obtain required additional financing when
needed.
We
may need to obtain additional debt or equity financing to fund future capital expenditures. Any additional equity financing may result
in dilution to the holders of our outstanding shares of capital stock. Additional debt financing may put us in situations that would
restrict our freedom to operate our business, such as situations that:
●
limit our
    ability to pay dividends or require us to seek consent for the payment of dividends;
●
increase our vulnerability to general adverse economic and industry
    conditions;
●
require us to dedicate a portion of our cash flow from operations to
    payments on our debt, thereby reducing the availability of our cash flow to fund capital expenditures, working capital and other
    general corporate purposes; and
●
limit our flexibility in planning for, or reacting to, changes in our
    business and our industry.
We
cannot guarantee that we will be able to obtain additional financing on terms that are acceptable to us, or any financing at all, and
the failure to obtain sufficient financing could adversely affect our business operations.
Potential disruptions
in the capital and credit markets may adversely affect our business, including the availability and cost of short-term funds for liquidity
requirements, which could adversely affect our results of operations, cash flows and financial condition.
Potential
changes in the global economy may affect the availability of business and consumer credit. We may need to rely on the credit markets,
particularly for short-term borrowings from banks in China, as well as the capital markets, to meet our financial commitments and short-term
liquidity needs if internal funds from our operations are not available to be allocated to such purposes. Disruptions in the credit and
capital markets could adversely affect our ability to draw on such short-term bank facilities. Our access to funds under such credit
facilities is dependent on the ability of the banks that are parties to those facilities to meet their funding commitments, which may
be dependent on governmental economic policies in China. Those banks may not be able to meet their funding commitments to us if they
experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from us and other borrowers
within a short period of time.
Long-term
disruptions in the credit and capital markets could result from uncertainty, changing or increased regulations, reduced alternatives
or failures of financial institutions could adversely affect our access to the liquidity needed for our business. Any disruption could
require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for
our business needs can be arranged. Such measures may include deferring capital expenditures, and reducing or eliminating discretionary
uses of cash. These events would adversely impact our results of operations, cash flows and financial position.
Changes in China's
environmental laws and policies may affect our financial condition.
Our
eco-friendly construction materials are primarily used in the construction industry. Our business is in line with China's current
focus on environmental protection policies, specifically the 14
th
Five-Year Plan (2021-2025). However, should China alter
its environmental policies towards less regulation, we believe demand for our eco-friendly construction materials and equipment will
decrease, adversely impacting our results of operations, cash flows and financial position.
Our business benefits
from certain government subsidies and incentives. Expiration, reduction or discontinuation of, or changes to, these incentives will increase
our burden and reduce our net income, which could have a material adverse effect on our business and operations.
We
have received subsidies from some governmental agencies after meeting certain conditions, such as developing certain technologies, which
are chosen as annual key research and development, or obtaining certain technological certifications. For the years ended December 31,
2022, 2021 and 2020, we included government subsidies of $235,084, $261,197 and $269,061, respectively, in other income.
33
Beijing
REIT obtained the High-New Technology Enterprise ("HNTE") Certificate and is entitled to a preferential income tax rate of
15% for the three years from December 2020 to December 2022. Such HNTE Certificate has been renewed for another three years from December
2022 to December 2025. Hainan Yile IoT obtained an HNTE Certificate and is entitled to a preferential income tax rate of 15% for the
three years from October 2020 to October 2023. Hainan Yile IoV Technology Research Institute Co., Ltd. ("IoV Technology Research")
obtained an HNTE Certificate and is entitled to a preferential income tax rate of 15% for the three years from October 2022 to October
2025. The 15% tax rate is less than the standard 25% income tax rate in China. The estimated tax savings as a result of the Company's
tax benefits for the years ended December 31, 2022, 2021 and 2020 amounted to nil, nil  and $164,071, respectively. In the event
any of Beijing REIT, Hainan Yile IoT or IoV Technology Research is unable to renew its HNTE status, its applicable tax rate will increase
from 15% to 25%, the standard business income tax rate in China. In addition, the termination of any one-time subsidies for eco-friendly
construction materials could increase the burden of manufacturing and selling these materials in the future. The reduction or discontinuation
of any of these economic incentives could negatively affect our business and operations.
Failure to make
adequate contributions to certain employee benefit plans as required by PRC regulations may subject us to penalties.
We
are required under PRC law to participate in various government sponsored employee benefit plans, including social security insurance,
housing provident funds and other welfare-oriented payments, and contribute to the plans in amounts equal to certain percentages of salaries,
including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations
where we operate our businesses. We have not made adequate employee benefit payments to the housing provident fund. We may be required
to pay the shortage of our contributions. If we are subject to late fees or fines in relation to the underpaid employee benefits, our
financial condition and results of operations may be adversely affected.
Since the majority
of our operations and assets are located in China, shareholders may find it difficult to enforce a U.S. judgment against the assets of
our Company, our directors and executive officers.
Other
than REIT India, our operations and assets are located in China. In addition, a majority of our executive officers and directors are
non-residents of the U.S., and substantially all the assets of such persons are located outside the U.S. As a result, it could be difficult
for investors to effect service of process in the U.S., or to enforce a judgment obtained in the U.S. against us or any of these persons.
Substantial uncertainties
exist with respect to the interpretation and implementation of the framework rules of the PRC Foreign Investment Law, and its application
may require further rules to be issued by the PRC government, which may incur and increase our compliance costs and expenses and accordingly
our financial condition and operation will be adversely affected.
On
Mach 15, 2019, the National People's Congress of China promulgated the Foreign Investment Law of the PRC aiming to replace the
major existing laws governing foreign investment in China. The Foreign Investment Law became effective on January 1, 2020. The Foreign
Investment Law applies to PRC enterprises established, acquired or otherwise invested wholly or partially by foreign investors in a manner
prescribed under applicable PRC laws and regulations. It also governs investment projects and activities in China by foreign investors.
Accordingly, as our company qualifies as a "foreign investor" for these purposes, our PRC subsidiaries are subject to the
Foreign Investment Law.
Under
the Foreign Investment Law, a "negative list' promulgated or approved by the State Council will set forth industries that
are prohibited industries and restricted industries. A foreign investor is prohibited to invest in any prohibited industry included therein.
If a foreign investor is found to invest in any prohibited industry set forth under the "negative list", such foreign investor
may be required to, among other aspects, cease its investment activities, dispose of its equity interests in or assets of the "foreign-invested
enterprise" ("FIE") and have its income confiscated. A foreign investor may be permitted to invest in a FIE that is
in a restricted industry set forth in the "negative list", provided that relevant conditions are satisfied and certain approvals
are acquired from relevant PRC governmental authorities. With respect to industries in which foreign investment is not prohibited or
restricted, domestic and foreign investors will be equally treated. On December 27, 2021, the MOFCOM and the NDRC jointly issued the
latest version of Negative List (Edition 2021). Currently, our business falls within the permitted category. However, we cannot assure
you that our current operations or any newly-developed business in the future will still deemed to be "permitted" in the
"negative list", which may be promulgated or be amended from time to time by the MOFCOM and the NDRC.
34
Some
of our PRC subsidiaries are as FIEs. Once an entity is determined to be a FIE and its business operations fall within a restricted industry
under the "negative list", in order for a foreign investor to invest in the FIE, such entity will be required to obtain entry
clearance and approvals from the MOFCOM or its local counterparts and other relevant PRC government agencies. Our main products currently
manufactured by us, including eco-friendly construction materials and equipment used for the production of these eco-friendly construction
materials, the RSA services and software products and solutions services do not fall in the prohibited or restricted industries under
"negative list" that is currently effective.
The
Foreign Investment Law also requires that the entity form, main organizations and business activities of an FIE established before the
enactment of the Foreign Investment Law and in accordance with the Chinese-Foreign Equity Joint Venture Enterprise Law, the Chinese-Foreign
Cooperative Joint Venture Enterprise Law or the Wholly Foreign-Owned Enterprise Law comply with the PRC Company Law, the PRC Partnership
Law and other laws (as the case might be) and there is a five-year transition period from January 1, 2020 for FIEs to fully comply with
such requirements.
The
relevant business carried out by our PRC subsidiaries and our investment in the PRC subsidiaries currently are not subject to the national
security review under applicable PRC laws and regulations. However, if our future business operations or potential mergers and acquisitions
we enter into in the PRC are related to national security sensitive areas or industries involving certain key technologies, national
security review requirements will likely apply and the review result that is in compliance with PRC laws should be definitive. It remains
unclear when the specific implementation measures of the Foreign Investment Law will be issued by the State Council. Given the uncertainties
exist with respect to the interpretation and implementation of the Foreign Investment Law, its application may require further rules
to be issued by PRC government, which may incur and increase our compliance costs and expenses and accordingly our financial condition
and operation will be adversely affected.
The integration of newly acquired businesses
may not provide the benefits anticipated at the time of acquisition.
In
line with our strategy to expand our operations and services in markets in which we currently operate as well as into new and emerging
markets, leveraging our existing know-how and infrastructure, in December 2021, we acquired REIT Mingde, and we may make future acquisitions.
We are required to devote management attention and resources to integrating business practices and operations of REIT Mingde. Potential
difficulties we may encounter in the integration process include the following:
●
the inability to successfully integrate the businesses, including operations,
    technologies, products and services, in a manner that permits us to achieve the anticipated cost savings, revenue synergies and business
    growth, which could result in the anticipated benefits of the Acquisition not being realized partly or wholly in the time frame currently
    anticipated or at all;
●
lost sales and customers as a result of certain customers of any of
    the businesses deciding not to do business with us, or deciding to decrease their amount of business in order to reduce their reliance
    on a single company;
●
the necessity of coordinating geographically separated organizations,
    systems and facilities;
●
potential unknown liabilities and unforeseen increased expenses, delays
    or regulatory conditions following the Acquisition;
●
integrating personnel with diverse business backgrounds and business
    cultures, while maintaining focus on providing consistent, high-quality products and services;
●
consolidating and rationalizing information technology platforms and
    administrative infrastructures as well as accounting systems and related financial reporting activities and difficulty implementing
    effective internal controls over financial reporting and disclosure controls and procedures in particular; and
●
preserving important relationships of the Company and REIT Mingde and
    resolving potential conflicts that may arise.
35
Furthermore,
it is possible that the integration process could result in the loss of key employees or skilled workers of REIT Mingde. The loss of
key employees and skilled workers could adversely affect our ability to successfully conduct the newly acquired business because of their
experience and knowledge of REIT Mingde's businesses. In addition, we could be adversely affected by the diversion of management's
attention and any delays or difficulties encountered in connection with the integration of REIT Mingde's businesses. The process
of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of our operations. If
we experience difficulties with the integration process, the anticipated benefits of the Acquisition may not be realized fully or at
all, or may take longer to realize than expected. These integration matters could have an adverse effect on our business, results of
operations, financial condition or prospects during this transition period and for an undetermined period after completion of the Acquisition.
We have a limited
operating history in the newly acquired businesses and may be unable to achieve or sustain profitability or accurately predict the future
results of such businesses.
Hainan
Yile IoT commenced the RSA services operations in 2020 and the development and sales of software solutions in May 2019. Because its businesses
and the market for its services are both new and evolving, evaluating the current business and its future performance is difficult and
based upon limited historical data, a changing market, and its ability to influence the market. This applies to predictions of both revenue
and expenses.
Building
its businesses to date, Hainan Yile IoT has accumulated losses. The continued investment in new technology and services will add to its
operating expenses. We cannot assure you that Hainan Yile IoT will be profitable, that it will be able to sustain profitability, or of
the magnitude of its profitability. Our financial performance may be adversely impacted if we fail to address the "
Risk Factors
"
described in this section, or any other risks and challenges that we may face. If its assumptions for addressing the risks that Hainan
Yile IoT has identified and other business conditions are incorrect, our plans for operating the business may be impacted and it may
not achieve our planned and expected results.
Growing the newly
acquired businesses requires us to continue investing in technology, resources, and new business capabilities; these investments may
contribute to losses, and we cannot guarantee that any will be successful or contribute to profitability.
Our
plans for operating the newly acquired businesses and leading further growth of its RSA services and software solution offerings. These
plans include developing new products and services. These investments could contribute to losses, and we cannot guarantee whether or
when any of the new products and services will become operational, be successful with customers, or whether they will be profitable.
Any failure to
offer high quality services and support may adversely affect our relationships with our customers and prospective customers, and adversely
affect our business, results of operations and financial condition.
Our
software solutions clients depend on our customer support team to assist them in deploying the solutions effectively, to help them to
resolve post-deployment issues quickly, and to provide ongoing support. If we do not devote sufficient resources or are otherwise unsuccessful
in assisting our customers effectively, it could adversely affect our ability to retain existing customers and could discourage prospective
customer from purchasing and using our software solutions. We may be unable to respond quickly enough to accommodate short-term increases
in demand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support to compete with
changes in the support services provided by our competitors. Increased demand for customer support, without corresponding revenue, could
increase costs and adversely affect our business, results of operations and financial condition. Any failure to maintain high quality
customer support, or a market perception that we do not maintain high quality customer support, could erode customer trust and adversely
affect our reputation, business, results of operations and financial condition.
36
The software and
information technology service market in which we participate is competitive, and if we do not compete effectively, our business, results
of operations and financial condition could be harmed.
The
software and information technology service market is competitive and rapidly evolving. The principal competitive factors in our market
include completeness of product offerings, level of customization of solutions, credibility with developers, global reach, ease of integration
and programmability, product features, platform scalability, reliability, security and performance, brand awareness and reputation, the
strength of sales and marketing efforts, customer support, as well as the cost of deploying and using our products.
Some
of our existing competitors and potential competitors have larger scale, greater brand name recognition, longer operating histories,
more established customer relationships and greater resources than we do. As a result, our competitors may be able to respond more quickly
and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. In addition, some competitors
may offer products, solutions or services that address one or a limited number of functions at lower prices, with greater depth than
our products or in different geographies. Our current and potential competitors may develop and market new products, solutions and services
with comparable functionality to ours, and this could force us to decrease prices in order to remain competitive. With the introduction
of new products, solutions and services and new market entrants, we expect competition to intensify in the future. In addition, some
of our customers may choose to use our products and solutions and our competitors' products and solutions at the same time.
Hainan Yile IoT
receives a substantial portion of its revenues from a limited number of customers, and the loss of, or a significant reduction in usage
by, one or more of its customers would result in lower revenues and could harm our business.
Our future success is dependent on establishing and maintaining successful
relationships with a diverse set of customers. Hainan Yile IoT currently receives a substantial portion of its revenues from a limited
number of customers, i.e. four insurance companies. In the years ended December 31, 2022, 2021 and 2020, total revenues generated from
the four insurance company customers accounted for 42%, 54.3% and 8.5% of the total revenues of Hainan Yile IoT in the same periods,
respectively. It is likely that we will continue to be dependent upon a limited number of customers for a significant portion of our revenues
for the foreseeable future and, in some cases, the portion of our revenues attributable to one single customer may increase in the future.
The loss of one or more significant customers or a reduction in usage by any significant customers would reduce our revenues. If we fail
to maintain existing customers or develop relationships with new customers, our business would be harmed.
We operate in
an emerging and evolving market. If our market does not grow as we expect, or if we fail to adapt and respond effectively to rapidly
changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements or preferences, our
products and solutions may become less competitive.
The
software and information technology service market in China is at an early stage of development. There are uncertainties over the size
and rate at which this market will grow, as well as whether our solutions and products will be widely adopted. Moreover, the industry
is subject to rapid technological change, evolving industry standards, changing regulations, as well as changing customer needs, requirements
and preferences. The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on
a timely basis. If we are unable to develop new solutions and products that satisfy our customers and provide enhancements and new features
for our existing products that keep pace with rapid technological and industry change, our business, results of operations and financial
condition could be adversely affected. If new technologies emerge that are able to deliver competitive products and services at lower
prices, more efficiently, more conveniently or more securely, such technologies could adversely impact our ability to compete effectively.
Our
solutions must also integrate with a variety of network, hardware, software platforms and technologies, and we need to continuously modify
and enhance our products and solutions to adapt to changes and innovation. For example, if customers adopt new software platforms or
infrastructure, we may be required to develop new versions of our products to be compatible with those new software platforms or infrastructure.
This development effort may require significant resources, which would adversely affect our business, results of operations and financial
condition. Any failure of our products and solutions to operate effectively with evolving or new software platforms and technologies
could reduce the demand for our products and solutions. If we are unable to respond to these changes in a cost-effective manner, our
products and solutions may become less marketable and less competitive or obsolete, and our business, results of operations and financial
condition could be adversely affected.
37
Security incidents
and attacks on our products or solutions could lead to significant costs and disruptions that could harm our business, financial results,
and reputation.
Our
business is dependent on providing our customers with safe, reliable and high-quality software solutions. Maintaining the security and
availability of our systems, network, and the security of information we hold is a critical issue for us and our customers. Attacks on
our customers and our own network are frequent and take a variety of forms. Malicious actors can attempt to fraudulently induce employees
or suppliers to disclose sensitive information through spamming, phishing, or other tactics. We may be subject to cyber-attacks from
third parties. If attacks like these were to occur in the future and if we do not have the systems and processes in place to respond
to them, our business could be harmed.
The
costs incurred by us to avoid or alleviate cyber or other security problems and vulnerabilities may be significant. However, our efforts
to address these problems and vulnerabilities may not be successful. Any significant breach of our security measures could:
●
lead to the dissemination of proprietary information or sensitive,
    personal, or confidential data about us, our employees, or our customers—including personally identifiable information of individuals
    involved with our customers and their end-users;
●
lead to interruptions or degradation of performance in our products
    and solutions;
●
threaten our ability to provide our customers with access to our products
    and solutions, and negatively affect our abilities to retain existing customers;
●
generate negative publicity about us;
●
result in litigation and increased legal liability or fines; or
●
lead to governmental inquiry or oversight.
The
occurrence of any of these events could harm our business or damage our brand and reputation, lead to customer credits, loss of customers,
higher expenses, and possibly impede our present and future success in retaining and attracting new customers. Security incidents or
attacks on our infrastructure would be damaging to our reputation and could harm our business.
Similar
security risks exist with respect to our business partners and our third-party suppliers for information technology support services
and administrative functions. As a result, we are subject to the risk that cyber-attacks on our business partners and third-party suppliers
may adversely affect our business even if an attack or breach does not directly impact our systems. It is also possible that security
breaches sustained by our competitors could result in negative publicity for our entire industry that indirectly harms our reputation
and diminishes demand for our platform.
A significant
portion of our RSA service revenues were derived from customers in the insurance industry. The intensifying competition, change in sector
trend and landscape and government policies may have a direct impact on the insurance industry and negatively affect the stability of
our clients, which may subsequently have negative impact on our business.
A
significant portion of our RSA service revenues were derived from insurance companies in Hainan province. Any change in the competitive
landscape, market trend or user behaviors in such sector may have a negative impact on our customers, thus harm their ability to make
payments and maintain and increase the usage of our services. In addition, the insurance industry in China is highly regulated by the
PRC government and numerous regulatory authorities of the central PRC government are empowered to issue and implement regulations governing
various aspects of the industry. As the laws and regulations are evolving and some of them are relatively new, changes to the current
laws and regulations may harm our business and results of operation. In addition, interpretation and enforcement of such laws and regulations
involve significant uncertainty. As a result, in certain circumstances it may be difficult to determine what actions or omissions may
be deemed to be in violations of applicable laws and regulations. If these laws and regulations or the uncertainty associated with their
interpretation negatively impact the insurance industry where our customers operate, our business may be adversely affected as well.
38
Changes in practices
of insurance companies in the markets in which we provide, and sell, our RSA services could adversely affect our revenues and growth
potential.
We
depend on the practices of insurance companies in the markets in which we provide our RSA services. The majority of our RSA customers
are insurance companies, which in turn sell our RSA services to their policy holders as policy benefits. Other customers of our RSA services
are drivers without any insurance coverage for RSA services. Therefore, we rely on insurance companies' continued practice of offering
RSA services as benefits under its policies and accepting our RSA services.
If
any of these policies or practices change, for regulatory or commercial reasons, or if market prices for these services fall, revenues
from our RSA services could decline, which could adversely affect our revenues and growth potential.
Defects or errors
in our products or solutions could diminish demand for our products or solutions, harm our business and results of operations and subject
us to liability.
Our
customers use our products or solutions for important aspects of their businesses, and any errors, defects or disruptions to our products
and solutions and any other performance problems with our products or solutions could damage our customers' businesses and, in
turn, hurt our brand and reputation. We provide regular updates to our products or solutions, which have in the past contained, and may
in the future contain, undetected errors, failures, vulnerabilities and bugs when first introduced or released. Real or perceived errors,
failures or bugs in our products or solutions could result in negative publicity, loss of or delay in market acceptance of our products
or solutions, loss of competitive position, lower customer retention or claims by customers for losses sustained by them. In such an
event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct
the problem. In addition, we do not carry insurance to compensate us for any losses that may result from claims arising from defects
or disruptions in our products. As a result, our reputation and our brand could be harmed, and our business, results of operations and
financial condition may be adversely affected.
In
addition, our solutions and products must interoperate with our customers' existing internal networks and infrastructure. These
complex internal systems are developed, delivered, and maintained by the customer and a myriad of vendors and service providers. As a
result, the components of our customers' infrastructure have different specifications, rapidly evolve, utilize multiple protocol
standards, include multiple versions and generations of products, and may be highly customized. We must be able to interoperate and provide
products to customers with highly complex and customized internal networks, which requires careful planning and execution between our
customers, our customer support teams and, in some cases, our channel partners. Further, when new or updated elements of our customers'
infrastructure or new industry standards or protocols are introduced, we may have to update or enhance our technologies and infrastructure
to allow us to continue to provide our products or solutions to customers. Our competitors or other vendors may refuse to work with us
to allow their products to interoperate with our products and solutions, which could make it difficult for our products and solutions
to function properly in customer internal networks and infrastructures that include these third-party products.
We
may not deliver or maintain interoperability quickly or cost-effectively, or at all. These efforts require capital investment and engineering
resources. If we fail to maintain compatibility of our solutions and products with our customers' internal networks and infrastructures,
our customers may not be able to fully utilize our solutions and products, and we may, among other consequences, lose or fail to increase
our market share and experience reduced demand for our products or solutions which would materially harm our business, results of operations,
and financial condition.
A severe or prolonged downturn in the global
or Chinese economy could materially and adversely affect our business and our financial condition.
The Chinese economy has slowed
down since 2012 and such slowdown may continue. There is considerable uncertainty over the long-term effects of the expansionary monetary
and fiscal policies adopted by the central banks and financial authorities of some of the world's leading economies, including
the United States and China. There have been concerns over unrest and terrorist threats in the Middle East, Europe and Africa, which
have resulted in volatility in oil and other markets, and over the conflicts involving Ukraine and Syria. There have also been concerns
on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial
disputes. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political
policies and the expected or perceived overall economic growth rate in China.
39
Due to the impact of the
COVID-19 pandemic, the global economy has slowed down, especially in infrastructure construction. Therefore, in the past two years, the
market and sales of our equipment and building materials have declined and we have experienced declines in demand of our products and
services. Entering into 2022, with the weakening of the pandemic situation, we expect that the international and domestic demand for
equipment will gradually resume.
Any severe or prolonged slowdown
in the global or Chinese economy may materially and adversely affect our business, results of operations and financial condition. In
addition, continued turbulence in the international markets may adversely affect our ability to access capital markets to meet liquidity
needs.
We face challenges from the evolving regulatory
environment and user attitude toward data privacy and protection. Actual or alleged failure to comply with data privacy and protection
laws and regulations could materially and adversely affect our business and results of operations.
We operate in a regulatory
environment in which data privacy and protection is evolving. We cannot assure you that relevant governmental authorities will not interpret
or implement the laws or regulations in ways that negatively affect the software and information technology service industry, our clients
and us. Regulatory investigations, restrictions, penalties and sanctions, whether targeted at us or not, may negatively affect the market
environment in which we operate, our existing or potential clients, and our products and services, which may in turn have a material
adverse effect on our business, results of operations and financial condition. It is also possible that we may become subject to additional
or new laws and regulations regarding data privacy and protection in connection with the data we have access to and the data products
and services we provide to our clients. Moreover, we may become subject to regulatory requirements as a result of utilization of our
products and services by residents of, or travelers who visit, certain jurisdictions, such as the General Data Protection Regulation
of the European Union, or the GDPR. Complying with additional or new regulatory requirements could force us to incur substantial costs
or require us to change our business practices. Moreover, if a high-profile security breach occurs with respect to our competitors, people
may lose trust in the security of software solutions providers generally, including us, which could damage the reputation of the industry,
result in heightened regulation and strengthened regulatory enforcement and adversely affect our business and results of operations.
Our business partners and
customers may be subject to regulations related to the handling and transfer of certain types of sensitive and confidential information.
Any failure of our partners or customers to comply with applicable laws and regulations would harm our business, results of operations
and financial condition.
Our business partners and
customers that use our products may be subject to privacy- and data protection-related laws and regulations that impose obligations in
connection with the collection, processing and use of personal data, financial data, health data or other similar data.
Any failure or perceived
failure by our business partners or customers to comply with applicable laws and regulations could result in their reputational damage
or governmental investigations, inquiries, enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity,
which may harm our business partnership and have a negative impact on our business.
We could be harmed
by data loss or other security breaches.
Because
we process, store, and transmit data, including personal information, failure to prevent or mitigate risks of data loss or other security
breaches, including breaches of our vendors' or customers' technology and systems, could expose us or our customers to a
risk of loss or misuse of such information, adversely affect our operating results, result in litigation or potential liability for us,
deter customers from using our products and services, and otherwise harm our business and reputation. We use third-party technology and
systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery
to customers, back-office support, and other functions. Some of our systems have experienced past security breaches, and, although they
did not have a material adverse effect on our operating results, there can be no assurance of a similar result in the future. Although
we have developed systems and processes that are designed to protect customer information and prevent data loss and other security breaches,
including systems and processes designed to reduce the impact of a security breach at a third-party vendor or customer, such measures
cannot provide absolute security. Moreover, in the event of a major system disruption, hardware malfunction or damages to data centers
and servers caused by technologies failures, natural disasters or man-made problems, we may experience significant loss of data which
would materially and adversely affect our business, financial condition and results of operations.
40
Changes in laws
and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our products and
solutions, and could adversely affect our business, results of operations and financial condition.
The
future success of our business depends upon the continued use of the internet as a primary medium for commerce, communications and business
applications. PRC or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations
affecting the use of the internet as a commercial medium. Changes in these laws or regulations could require us to modify our products
and solutions in order to comply with these changes. In addition, government agencies or private organizations have imposed and may impose
additional taxes, fees or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could
limit the growth of internet-related commerce or communications generally, or result in reductions in the demand for internet-based products
and services such as our products and solutions. In addition, the use of the internet as a business tool could be adversely affected
due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity, security,
reliability, cost, ease-of-use, accessibility and quality of service. The performance of the internet and its acceptance as a business
tool has been adversely affected by "viruses," "worms," and similar malicious programs. If the use of the internet
is reduced as a result of these or other issues, then demand for our products or solutions could decline, which could adversely affect
our business, results of operations and financial condition.
Our services rely
on the stable performance of servers, and any disruption to our servers due to internal and external factors could diminish demand for
our products or solutions, harm our business, our reputation and results of operations and subject us to liability.
We
rely in part upon the stable performance of our servers for provision of our solutions, products and services. Any disruption to our
servers may happen due to internal and external factors, such as inappropriate maintenance, defects in the servers, cyber-attacks targeted
at us, occurrence of catastrophic events or human errors. Such disruption could result in negative publicity, loss of or delay in market
acceptance of our solutions and products, loss of competitive position, lower customer retention or claims by customers for losses sustained
by them. In such an event, we may need to expend additional resources to help with recovering. In addition, we may not carry insurance
to compensate us for any losses that may result from claims arising from disruption in servers. As a result, our reputation and our brand
could be harmed, and our business, results of operations and financial condition may be adversely affected.
Our use of open
source or third-party software could negatively affect our ability to sell our products and solutions, and subject us to possible litigation.
Our
products and solutions incorporate open-source software, and we expect to continue to incorporate open source software in our products
and solutions in the future. Courts have interpreted few of the licenses applicable to open source software, and there is a risk that
these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize
our products and solutions. Moreover, although we have implemented policies to regulate the use and incorporation of open source software
into our products and solutions, we cannot be certain that we have not incorporated open source software in our products or solutions
in a manner that is inconsistent with such policies. If we or our employees fail to comply with open source licenses, we may be subject
to certain requirements, including requirements that we offer our products that incorporate the open source software for no cost, that
we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software
and that we license such modifications or derivative works under the terms of applicable open source licenses. If an author or other
third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of
these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant
damages, enjoined from generating revenues from customers using products that contained the open source software and required to comply
with onerous conditions or restrictions on these products. In any of these events, we and our customers could be required to seek licenses
from third parties in order to continue offering our products and solutions and to re-engineer our products or solutions or discontinue
offering our products to customers in the event re-engineering cannot be accomplished on a timely basis. Any of the foregoing could require
us to devote additional research and development resources to re-engineer our products or solutions, could result in customer dissatisfaction
and may adversely affect our business, results of operations and financial condition.
41
We could incur
substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual property could
adversely affect our business, results of operations and financial condition.
Our
success depends, in part, on our ability to protect our brand and the proprietary methods and technologies that we develop under patent
and other intellectual property laws in China so that we can prevent others from using our inventions and proprietary information. As
of the date of this annual report, we have registered 123 patents, 73 pending patent applications, 39 trademarks, 25 software copyrights,
and 10 domain names in China related to our newly acquired businesses. There can be no assurance that any patents that have been issued
or that may be issued in the future will provide significant protection for our intellectual property. If we fail to protect our intellectual
property rights adequately, our competitors might gain access to our technology and our business, results of operations and financial
condition may be adversely affected. There can be no assurance that the particular forms of intellectual property protection that we
seek, including business decisions about when to file trademark applications and patent applications, will be adequate to protect our
business. We may have to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary
in the future to enforce our intellectual property rights, determine the validity and scope of our proprietary rights or those of others,
or defend against claims of infringement or invalidity. Such litigation could be costly, time-consuming and distracting to management,
result in a diversion of significant resources, the narrowing or invalidation of portions of our intellectual property and have an adverse
effect on our business, results of operations and financial condition. Our efforts to enforce our intellectual property rights may be
met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights or alleging
that we infringe the counterclaimant's own intellectual property. Any of our patents, copyrights, trademarks or other intellectual
property rights could be challenged by others or invalidated through administrative process or litigation.
We
also rely, in part, on confidentiality agreements and non-compete agreements with our business partners, employees, consultants, advisors,
customers and others in our efforts to protect our proprietary technology, processes and methods. These agreements may not effectively
prevent disclosure of our confidential information, and it may be possible for unauthorized parties to copy our software or other proprietary
technology or information, or to develop similar software independently with us lacking an adequate remedy for unauthorized use or disclosure
of our confidential information. In addition, others may independently discover our trade secrets and proprietary information, and in
these cases, we would not be able to assert any trade secret rights against those parties. Costly and time-consuming litigation could
be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection
could adversely affect our competitive business position. In addition, to the extent we expand our international activities, our exposure
to unauthorized copying, transfer and use of our proprietary technology or information may increase.
We
cannot be certain that our means of protecting our intellectual property and proprietary rights will be adequate or that our competitors
will not independently develop similar technology. If we fail to meaningfully protect our intellectual property and proprietary rights,
our business, results of operations and financial condition could be adversely affected.
42
Risks Related to Our Common Shares
The market price of our Common Shares has
recently declined significantly, and our Common Shares could be delisted from the Nasdaq or trading could be suspended.
The listing of our Common
Shares on the Nasdaq Capital Market is contingent on our compliance with the Nasdaq Capital Market's conditions for continued listing.
On June 9, 2022, we announced that we received written notification, or the Notification Letter, from the Nasdaq Stock Market LLC on
June 3, 2022 that we were not in compliance with the minimum bid price requirement of US$1.00 per share under the Nasdaq Listing Rules.
In accordance with Nasdaq Listing Rules, we must regain compliance within 180 calendar days, or by November 30, 2022. To regain compliance,
our Common Shares need to have a closing bid price of at least US$1.00 for a minimum of 10 consecutive business days. In the event we
do not regain compliance by November 30, 2022, we could be eligible for additional time to regain compliance or may face delisting.
We have also received a written
notification from the Nasdaq on December 1, 2022, notifying us that we are eligible for an additional 180 calendar day period, or until
May 30, 2023, to regain compliance with Nasdaq's continued listing requirement to maintain a minimum bid price of US$1.00 per share.
During the second 180-day extension period, we intend to monitor the price of our Common Shares, and intend to effect a reverse share
split of our Common Shares at a ratio which will be sufficient to increase the price of our Common Shares above $1.00. We plan to effect
the reverse share split in a timely manner, only if the closing bid price of our Common Shares does not increase above a minimum bid
price of at least $1.00 per share for 10 consecutive trading days prior to the end of the second 180-day extension period. There can
be no assurance that we will be able to regain compliance with the minimum bid price requirement, without having to effect a reverse
share split, or maintain compliance with the minimum bid price requirement, after we have regained compliance, even if we implement a
reverse share split.
We cannot assure you that
we will be able to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules, or that we will not receive
other deficiency notifications from Nasdaq in the future. A decline in the closing price of our Common Shares could result in a breach
of the requirements for listing on the Nasdaq Capital Market. If we do not maintain compliance, Nasdaq could commence suspension or delisting
procedures in respect of our Common Shares. The commencement of suspension or delisting procedures by an exchange remains at the discretion
of such exchange and would be publicly announced by the exchange. If a suspension or delisting were to occur, there would be significantly
less liquidity in the suspended or delisted securities. In addition, our ability to raise additional necessary capital through equity
or debt financing would be greatly impaired. Furthermore, with respect to any suspended or delisted Common Shares, we would expect decreases
in institutional and other investor demand, analyst coverage, market making activity and information available concerning trading prices
and volume, and fewer broker-dealers would be willing to execute trades with respect to such Common Shares. A suspension or delisting
would likely decrease the attractiveness of our Common Shares to investors and cause the trading volume of our Common Shares to decline,
which could result in a further decline in the market price of our Common Shares.
In the event that our Common Shares are
delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in our Common Shares because they may be considered
penny stocks and thus be subject to the penny stock rules.
The SEC has adopted a number
of rules to regulate "penny stock" that restricts transactions involving stock which is deemed to be penny stock. Such
rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These rules may
have the effect of reducing the liquidity of penny stocks. "Penny stocks" generally are equity securities with a price of
less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on Nasdaq if current price
and volume information with respect to transactions in such securities is provided by the exchange or system). Our Common Shares could
be considered to be a "penny stock" within the meaning of the rules. The additional sales practice and disclosure requirements
imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our Common Shares, which
could severely limit the market liquidity of such Common Shares and impede their sale in the secondary market.
A U.S. broker-dealer selling
a penny stock to anyone other than an established customer or "accredited investor" (generally, an individual with a net
worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale,
unless the broker-dealer or the transaction is otherwise exempt. In addition, the "penny stock" regulations require the U.S.
broker-dealer to deliver, prior to any transaction involving a "penny stock", a disclosure schedule prepared in accordance
with SEC standards relating to the "penny stock" market, unless the broker-dealer or the transaction is otherwise exempt.
A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and
current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price
information with respect to the "penny stock" held in a customer's account and information with respect to the limited
market in "penny stocks".
43
The market for "penny
stocks" has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask
differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market
or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the
described patterns from being established with respect to our securities.
If we are classified
as a passive foreign investment company, United States taxpayers who own our Common Shares may have adverse United States federal income
tax consequences.
Based
on the nature of our business activities, we may be classified as a passive foreign investment company ("PFIC"), by the U.S.
Internal Revenue Service ("IRS"), for U.S. federal income tax purposes. Such characterization could result in adverse U.S.
tax consequences to you if you are a U.S. investor. For example, if we are a PFIC, a U.S. investor will become subject to burdensome
reporting requirements. The determination of whether or not we are a PFIC is made on an annual basis and will depend on the composition
of our income and assets from time to time. Specifically, we will be classified as a PFIC for U.S. tax purposes if either:
●
75% or more of our gross income in a taxable year is passive
    income; or
●
the average percentage of our assets by value in a taxable year that
    produce or are held for the production of passive income (which includes cash) is at least 50%.
The
calculation of the value of our assets is based, in part, on the then market value of our Common Shares, which is subject to change.
In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raised in our prior
public offerings. We cannot assure that we will not be a PFIC for any taxable year. See "
Taxation – Material United States
Federal Income Tax Considerations – Passive Foreign Investment Company
."
Securities analysts
may not publish favorable research or reports about our business or may publish no information at all, which could cause our stock price
or trading volume to decline.
If
a trading market for our Common Shares develops, the trading market will be influenced to some extent by the research and reports that
industry or financial analysts publish about us and our business. We do not control these analysts. As a young public company, we may
be slow to attract research coverage and the analysts who publish information about our Common Shares will have had relatively little
experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely
that we fail to meet their estimates. In the event any of the analysts who cover us provide inaccurate or unfavorable research or issue
an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of us or
fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading
volume to decline and result in the loss of all or a part of your investment in us.
44
We have identified
material weaknesses in our internal control over financial reporting. If we are unable to implement and maintain effective internal control
over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price
of our Common Shares may decline.
As
a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such
internal control. In addition, we are required to furnish a report by management on the effectiveness of our internal control over financial
reporting pursuant to Section 404 of the Sarbanes-Oxley Act. 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 in connection with this
annual report, we identified 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, or PCAOB, and other control deficiencies. The material weaknesses
identified relate to (i) a lack of full-time accounting and financial reporting personnel with appropriate knowledge of U.S. GAAP and
SEC reporting and compliance requirements; and (ii) a lack of an effective review by management for the year ended accounting close and
reporting.  As a result, our management has concluded that our internal control was not effective as of December 31, 2022.
Following the identification of the material weaknesses and
control deficiencies, we have taken remedial measures, including (i) hiring external financial consultants with experience in U.S.
GAAP and SEC reporting obligations; and (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting
training programs for our accounting and financial reporting personnel. We plan to continue implementing the above remedial
initiatives including engaging more qualified accounting personnel and consultants with relevant U.S. GAAP and SEC reporting
experience and qualifications to strengthen the financial reporting and U.S. GAAP training and to set up a financial and system
control framework. See "
Item 15. Controls and Procedures
."
However,
the implementation of these measures may not fully address the material weaknesses in our internal control over financial reporting.
Our failure to correct the material weaknesses or our failure to discover and address any other material weaknesses or control deficiencies
could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting
requirements and related regulatory filings on a timely basis. Moreover, ineffective internal control over financial reporting significantly
hinders our ability to prevent fraud.
Our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial
reporting in this annual report on Form 20-F as we are no longer an "emerging growth company." However, as long as we remain
a "smaller reporting company" as defined in Rule 10(f)(1) of Regulation S-K, we are not required to comply with the independent
registered public accounting firm attestation requirement on our internal control over financial reporting. If we are unable to implement and maintain effective internal control
over financial reporting, investors may lose
confidence in the accuracy and completeness of our financial reports and the market price of our Common Shares could be negatively affected,
and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory
authorities, which could require additional financial and management resources.
General Risk Factors
Our disclosure
controls and procedures may not prevent or detect all errors or acts of fraud.
Our
disclosure controls and procedures must provide reasonable assurance that information we are required to disclose in reports we file
or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well-conceived
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more
people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements
due to error or fraud may occur and not be detected.
45
Our classified
board structure may prevent a change in control of our Company.
Our
board of directors is divided into three classes of directors. Class B directors hold office for a term expiring at the 2024 annual
meeting of shareholders, Class C directors hold office for a term expiring at the 2025 annual meeting of shareholders and Class A directors
hold office for a term expiring at the 2023 annual meeting of shareholders. Directors of each class are elected for three-year terms
upon the expiration of their current terms. The staggered terms of our directors may reduce the possibility of a tender offer or an attempt
at a change in control, even though a tender offer or change in control might be in the best interest of our shareholders.
Shares eligible
for future sale may adversely affect the market price of our Common Shares, as the future sale of a substantial amount of outstanding
Common Shares in the public marketplace could cause the price of our Common Shares to decrease.
The
market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception
that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings
of our Common Shares.
As the rights
of stockholders under British Virgin Islands law differ from those under U.S. law, you may have fewer protections as a shareholder
.
Our
corporate affairs are governed by (among other things) our constitutional documents (consisting of our M&A) and the British Virgin
Island's primary corporate legislation, the British Virgin Islands Business Companies Act, 2004 (as amended) (the "BVI Act").
The British Virgin Islands has a common law legal system based on the English model, comprising statute law and binding case precedents
influenced by the laws of England and other Commonwealth jurisdictions, with a right of final appeal to the Privy Council in London.
The rights of shareholders to take legal action against our directors, actions by minority stockholders and the fiduciary responsibilities
and duties of our directors under British Virgin Islands law are to a large extent found under common law and the BVI Act. While decisions
of the BVI courts are treated as precedents in the usual way, reference often needs to be made to decided cases in other jurisdictions.
While the common law of England is recognised in the jurisdiction by way of statutory enactment, this is subject to local conditions
that give the court a degree of flexibility. However, in practice, the courts ordinarily treat English judgments as highly persuasive
(although in certain cases, the BVI courts have declined to follow English precedents, which is normally justified by distinguishing
on the basis that the position is modified in the BVI by statute). The BVI forms part of the wider jurisdiction of the Eastern Caribbean
Supreme Court, so judgments from other courts in the same jurisdiction are normally persuasive, even though they are not technically
binding upon the court. Judgments from other leading Commonwealth jurisdictions, particularly Australia and Hong Kong, are also often
considered by the BVI courts. The rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin
Islands law may not be as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United
States. In particular, the British Virgin Islands may have a less developed body of securities laws as compared to the United States,
and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law.
British Virgin
Islands companies may not be able to initiate shareholder derivative actions in a federal court of the United States and may have to
proceed with such action in the British Virgin Islands, thereby limiting shareholders' ability to protect their interests
.
Whether
a British Virgin Islands company has standing to initiate a shareholder derivative action in a federal court of the United States is
a matter of United States law and in such case, that company may have to proceed with such action in the British Virgin Islands. Permission
is required from the BVI Court in order for a shareholder of a BVI company to bring a derivative action in the BVI. The circumstances
in which any such action may be brought, and the procedures and defenses that may be available with respect to any such action, may result
in the rights of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized
in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing
has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce against us judgments of courts in the United
States based on certain liability provisions of U.S. securities law; and to impose liabilities against us, in original actions brought
in the British Virgin Islands, based on certain liability provisions of U.S. securities laws that are penal in nature. There is no statutory
recognition in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin Islands
will generally recognize and enforce the non-penal monetary judgment of a foreign court of competent jurisdiction without retrial on
the merits.
46
The laws of the
British Virgin Islands provide little protection for minority shareholders, so minority shareholders will have little or no recourse
if the shareholders are dissatisfied with the conduct of our affairs
.
Under
the law of the British Virgin Islands, there is little statutory law for the protection of minority shareholders other than the provisions
of the BVI Act dealing with shareholder remedies. The principal protection under statutory law is that shareholders may bring an action
to enforce the constituent documents of the corporation, in our case, our M&A. Shareholders are entitled to have the affairs of the
Company conducted in accordance with the general law and the Memorandum and Articles.
We are a "foreign
private issuer," and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not
provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make
it more difficult for you to evaluate our performance and prospects.
We
are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange
Act, we are subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting
companies. For example, we are not required to issue quarterly reports or proxy statements and we do not intend to file quarterly reports.
We are not required to disclose detailed individual executive compensation information and we do not intend to disclose detailed executive
compensation information. Furthermore, our directors and executive officers are not required to report equity holdings under Section
16 of the Exchange Act and are not subject to the insider short-swing profit disclosure and recovery regime and we do not intend to file
Section 16 reports for officers and directors.
As
a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to
ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we do plan
to disclose material information to all investors at this time
.
In addition, we are still subject to the anti-fraud and anti-manipulation
rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private
issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us
and at the same time as the information provided by U.S. domestic reporting companies.
We are subject to changing law and regulations
regarding regulatory matters, corporate governance and public disclosure that have increased both our costs and the risk of non-compliance.
We are subject to rules and
regulations by various governing bodies, including, for example, the SEC, which are charged with the protection of investors and the
oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable law, including
the laws of the BVI. Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to
result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities
to compliance activities.
Moreover, because these laws,
regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance
becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated
by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent
changes, we may be subject to penalty and our business may be harmed.
Mail addressed to the Company at its registered
office may be delayed due to forwarding practice.
Mail addressed to the Company
and received at its registered office will be forwarded unopened to the forwarding address supplied by the Company to be dealt with.
None of the Company, its directors, officers, advisors or service providers (including the organization which provides registered office
services in the BVI) will bear any responsibility for any delay howsoever caused in mail reaching the forwarding address.
47
Item 4. Information on the Company
A.
History and development of the company.
Corporate
History
ReTo is a BVI business company
with limited liability, established under the laws of the BVI on August 7, 2015 as a holding company to develop business opportunities
in China.
On November 29, 2017, ReTo
completed its IPO of 3,220,000 Common Shares at a public offering price of $5.00 per share. In connection with the IPO, the Company's
Common Shares began trading on the Nasdaq Capital Market beginning on November 29, 2017 under the symbol "RETO."
ReTo owns 100% equity interest
of REIT Holdings, a limited liability company established in Hong Kong. Beijing REIT was established on May 12, 1999 under the laws of
PRC. Over the years, Beijing REIT established four subsidiaries consisting of: Gu'an REIT Machinery Manufacturing Co., Ltd. ("Gu'an
REIT"), which was incorporated on May 12, 2008; Beijing REIT Ecological, which was incorporated on April 24, 2014; Langfang Ruirong
Mechanical and Electrical Equipment Co., Ltd., which was incorporated on May 12, 2014 and was subsequently dissolved in 2021; and REIT
Technology Development (America), Inc., a California corporation, which was incorporated on February 27, 2014 and was dissolved in March
2022.
On February 7, 2016, Beijing
REIT and its individual original shareholders entered into an equity transfer agreement, pursuant to which these shareholders agreed
to transfer all of their ownership interests in Beijing REIT with a carrying value of RMB 24 million (or $3,466,260) to REIT Holdings.
After this equity transfer, Beijing REIT became a wholly foreign-owned enterprise and amended the registration with the State Administration
of Market Regulation on March 21, 2016.
REIT Changjiang was incorporated
in Hainan Province, China, on November 22, 2011 with the original registered capital of RMB 100 million (approximately $15.7 million).
REIT Changjiang was engaged in hauling and processing construction and mining waste, with which it produces recycled aggregates and bricks
for environmental-friendly uses prior to the disposition of REIT Changjiang in December 2021.
On June 1, 2015, REIT Construction
was incorporated as a wholly owned subsidiary of REIT Changjiang.
On July 15, 2015, Beijing
REIT established a joint venture, Xinyi REIT, together with Xinyi City Transportation Investment Co., Ltd. ("Xinyi TI"),
a third party. Beijing REIT owns 70% equity interest of Xinyi REIT, with the remaining 30% owned by Xinyi TI.
On September 20, 2015, Beijing
REIT acquired 100% of the equity interest of Nanjing Dingxuan Environment Protection Technology Development Co., Ltd. ("Nanjing
Dingxuan") from a third party for no consideration given the company's registered capital was not paid and had no assets
or operations. Nanjing Dingxuan was engaged in providing technical support and consulting services for environmental protection projects
but its operation was suspended in 2021 and the company was further dissolved on August 30, 2022.
In February 2016, Beijing
REIT established a joint venture, REIT Q GREEN Machines Private Limited ("REIT India"), together with an Indian company,
Q Green Techcon Private Limited ("Q Green"). Beijing REIT owns 51% equity interest of REIT India with the remaining 49% owned
by Q Green.
On October 22, 2018, REIT
Ordos was incorporated as a wholly owned subsidiary of REIT Holdings.
On August 29, 2019, Datong
Ruisheng Environmental Engineering Co., Ltd. ("Datong Ruisheng") was incorporated as a wholly owned subsidiary of Beijing
REIT. Datong Ruisheng is engaged in potential ecological restoration projects in Datong, Shanxi Province.
48
On November 11, 2019, Yangbi
Litu Ecological Technology Co., Ltd. ("Yangbi Litu") was jointly established by REIT Ordos and Yunnan Litu Technology Development
Co., Ltd. ("Yunnan Litu"). REIT Ordos owned 55% of the ownership interest in Yangbi Litu, with the remaining 45% equity interest
owned by Yunnan Litu. Because the Company's ownership interest in Yunnan Litu was 55%, the Company held an aggregate 79.75% equity
interest in Yangbi Litu, directly and indirectly. Yangbi Litu will be engaged in providing services in comprehensive ecological restoration
and sales of environmentally friendly equipment and new materials. On July 13, 2020, REIT Ordos transferred its 55% equity interest in
Yunnan Litu to a third-party individual and two third-party companies for a nominal price. As a result, the Company's equity ownership
interest in Yangbi Litu decreased from 79.75% to 55%. On July 13, 2020, ReTo transferred its 55% equity interests in Yunnan Litu to third
parties for a nominal price given the inactivity of Yunnan Litu's business operations since its inception and ReTo's ongoing
focus on its own organic business growth.
On January 2, 2020, Beijing
REIT signed a share transfer agreement with third party, Hebei Huishitong Techonology Inc. ("Huishitong") and sold 100% of
its ownership interest in Gu'an REIT to Huishitong for total consideration of RMB 39.9 million (approximately $5.7 million).
On September 7, 2020, Beijing
REIT entered into a share transfer agreement with the original shareholder of Shexian Ruibo Environmental Science and Technology Co.,
Ltd. ("Shexian Ruibo") for the acquisition of 41.67% of the equity interests in Shexian Ruibo for a total consideration of
$3.6 million (RMB 25 million), including a cash payment of $2.7 million (RMB 18.5 million) and non-cash contribution of six patents valued
at $0.9 million (RMB 6.5 million). Beijing REIT made cash payment of $2.7 million (RMB 18.5 million) on October 20, 2020 and the six
patents had been transferred to Shexian Ruibo prior to September 15, 2020.
In December 2020, we incorporated
Guangling REIT Ecological Cultural Tourism Co., Ltd. ("Guangling REIT") in mainland China as a wholly owned subsidiary of
REIT Ordos. Guangling REIT will be engaged in the business of ecological restoration and management, and construction and operation of
health and cultural tourism projects.
On November 12, 2021, Beijing
REIT and REIT Holdings entered into an equity transfer agreement to sell 100% equity interest in REIT Changjiang to the purchasers, in
exchange for a total consideration of RMB 60,000,000 (approximately $9.4 million) in cash. The purchasers have issued to Beijing REIT
and REIT Holdings a promissory note in the principal amount of RMB 60,000,000, reflecting the purchase price to be paid in accordance
with the equity transfer agreement. As of December 31, 2022, we received a total of RMB 53.5 million (approximately US$7.76 million)
from the purchasers with the remaining RMB 7.4 million (approximately US$1.1 million) expected to be paid by the purchasers by June 30,
2024. In December 2021, we completed the disposition of REIT Changjiang following the approval of our shareholders and board of directors.
On December 27, 2021, REIT
Technology acquired 100% equity interest of REIT Mingde, as more fully described under the heading "
Recent Developments
"
below. As a result of this acquisition, the Company also acquired, indirectly through RETI Mingde, 100% of the equity interest of Yangpu
Fangyuyuan and 61.548% of the equity interest of Hainan Yile IoT, which, in turn, owns 90% of the equity interest of IoV Technology Research,
85% of the equity interest of Shanxi Global Travel Co., Ltd. and 45% of the equity interest of Hainan Beiqi Yinjian Yile Smart Travel
Technology Co., Ltd. Yangpu Fangyuyuan is engaged in facilitating logistic services through its cloud based platform in China. IoV Technology
Research provides RSA services in Hainan Province, China.
On December 27, 2021, Yangpu
Fangyuyuan and Shanghai Ruida Fenghe Management Consulting Partnership (Limited Partnership) incorporated Hainan Kunneng as a limited
liability company to engage in the development of an international commodity trading platform for the Hainan International Trade Zone,
using digital supply chain technologies. Yangpu Fangyuyuan owns 51% of Hainan Kunneng's equity interest while Shanghai Ruida Fenghe
Management Consulting Partnership (Limited Partnership) owns 49%. Hainan Kunneng commenced operations in January 2022.
On August 24, 2022, due to
the addition of a new shareholder, REIT Mingde became a 90% owner of Yangpu Fangyuyuan's equity interest.
49
On August 25, 2022, Hainan
Coconut was incorporated as a wholly owned subsidiary of Yangpu Fangyuyuan. Hainan Coconut plans to build an online freight and logistics
platform to provide logistics and transportation services. As of the date of this annual report, Hainan Coconut has not commenced its
operations.
On September 30, 2022, Gansu
Ruishi Tongda Ecological Management Co., Ltd. was incorporated as a limited liability company in mainland China and REIT Ecological owns
70% of its equity interest. Its business scope includes project management, project investment and financing, and other ecological management
projects. It was dissolved on March 7, 2023.
On November 29, 2022, Honghe
REIT Ecological Technology Co., Ltd. was incorporated as an operating limited liability company in mainland China and a wholly-owned
subsidiary of REIT Ordos. Its business scope includes EOD projects and related ecological restoration projects.
On February 9, 2023, REIT Construction was dissolved.
Corporate
Structure
The chart below summarizes
our corporate structure as of the date of this report:
50
B.
Business overview.
Overview
We, through our operating
subsidiaries in China, are engaged in the manufacture and distribution of eco-friendly construction materials (aggregates, bricks, pavers
and tiles), made from mining waste (iron tailings), as well as equipment used for the production of these eco-friendly construction materials.
In addition, we provide consultation, design, project implementation and construction of urban ecological protection projects through
our operating subsidiaries in China. We also provide parts, engineering support, consulting, technical advice and service, and other
project-related solutions for our manufacturing equipment and environmental protection projects. As more fully described below under
the heading "Our Products and Services," through the newly acquired subsidiaries, we expand our product and service offerings
to include RSA services, and software development services and solutions utilizing Internet of Things ("IoT")
technologies.
We currently provide a full
spectrum of products and services related to recycling and reuse of solid wastes, from producing eco-friendly construction materials
and manufacturing equipment used to produce construction materials, to project installation. We differentiate us from our competitors
through strong research and development capabilities and advanced technologies and systems.
Our products are eco-friendly,
as they contain approximately 70% of reclaimed iron tailings in place of traditional cement. The use of reclaimed iron tailings assists
in the protection of the environment by saving space in landfills used for the disposal of these materials, and assisting in the remediation
and reclamation of abandoned or closed mining sites. In addition, we believe less energy is consumed when manufacturing our eco-friendly
construction materials as compared with other traditional building materials. We believe our eco-friendly construction materials, with
superior water permeability and competitive prices, are in greater demand than traditional materials as governments and others increase
their focus on reducing the environmental impact of their activities.
Due to China's recent
emphasis on environmental protection, we believe there is a unique opportunity to grow our company, which we expect will be driven by
demand for our eco-friendly construction materials and equipment used to produce these materials as well as our project construction
expertise. We believe our technological know-how, production capacity, reputation and offerings of products and services will enable
us to seize this opportunity.
Our clients are located throughout
mainland China, and internationally in Middle East, Southeastern Asia, Africa, Europe and North America. We are actively pursuing additional
clients for our products, equipment and projects, internationally in the Bangladesh, North America and in additional provinces of China.
We seek to establish long-term relationships with our clients by producing and delivering high-quality products and equipment and then
providing technical support and consulting services after equipment is delivered and projects are completed.
Recent Developments
Spinoff of REIT Changjiang
On November 12, 2021, Beijing
REIT and REIT Holdings entered into an equity transfer agreement to sell 100% equity interest in REIT Changjiang to Zhixin Group (Hong
Kong) Co., Ltd. and Xiamen Zhixin Building Materials Co., Ltd. (collectively, the "Purchasers") in exchange for a total consideration
of RMB 60,000,000 (approximately $9.4 million) in cash. The Purchasers have issued to Beijing REIT and REIT Holdings a promissory note
in the principal amount of RMB 60,000,000, reflecting the purchase price to be paid in accordance with the equity transfer agreement.
The parties entered into a supplemental agreement on December 24, 2021, providing for a revised payment schedule for the purchase price.
As of December 31, 2022, we received a total of RMB 53.5 million (approximately US$7.76 million) from the purchasers with the remaining
RMB 7.4 million (approximately US$1.1 million) expected to be paid by the purchasers by June 30, 2024. On December 17, 2021, we completed
the disposition of REIT Changjiang following the approval of our shareholders and board of directors.
51
Acquisition of REIT Mingde
On December 27, 2021, REIT
Technology entered into an Equity Transfer Agreement (the "Agreement") with REIT Mingde, Xiaoping Li and Jing Peng, former
shareholders of REIT Mingde and owning 99% and 1% of the equity interest of REIT Mingde prior to the Acquisition (as defined below),
respectively, and together with Hainan Yile IoT, a limited liability company incorporated in mainland China and subsidiary of REIT Mingde,
and Yangpu Fangyuyuan United Logistics Co., Ltd., a limited liability company incorporated in mainland China and subsidiary of REIT Mingde
("Yangpu Fangyuyuan"). REIT Mingde owned 90% of the equity interest of Yangpu Fangyuyuan and 61.55% of the equity interest
of Hainan Yile IoT.
Pursuant to the Agreement,
among other things, REIT Technology acquired 100% of the equity interest of REIT Mingde for a total consideration of RMB10,000,000 (approximately
US$1.6 million) in cash or cash equivalents (the "Acquisition"). After the closing of the Acquisition, Xiaoping Li, who is
also the legal representative of REIT Mingde, will be appointed as a director and Executive Vice President of ReTo.
On February 22, 2022, ReTo
issued an aggregate of 2,580,000 Common Shares to Xiaoping Li and Jing Peng (and/or their designees), at $0.61 per share, in lieu of
the cash payment of an aggregate of RMB 10 million payable to Xiaoping Li and Jing Peng under the Acquisition. The 2,580,000 Common Shares
represented approximately 8.45% of the issued and outstanding Common Shares of ReTo immediately prior to the issuance.
Convertible Note Financing
On March 10, 2022, ReTo entered
into a Securities Purchase Agreement pursuant to which ReTo issued an unsecured convertible promissory note (the "Note")
to Streeterville Capital, LLC, an institutional accredited investor (the "Investor"). The Note will mature 12 months after
the purchase price of the Note is delivered from the Investor to ReTo (the "Purchase Price Date"). The Note has an original
principal amount of $3,105,000 and Investor gave consideration of $3,000,000, reflecting an original issue discount of $90,000 and $15,000
for Investor's fees, costs and other transaction expenses incurred in connection with the purchase and sale of the Note. The transaction
contemplated under the Securities Purchase Agreement was closed on March 11, 2022 and the Company anticipates using the proceeds for
general working capital purposes.
On March 28, 2022, ReTo and
Investor entered into an amendment to the Note, pursuant to which ReTo has agreed to satisfy any conversion request from Investor by
making a cash payment equal to 110% of any converted amount if, at the time of the conversion, the Floor Price (as defined in the Note)
is higher than the then current conversion price.
On October 13, 2022, the
Company entered into a standstill agreement with the Investor. Pursuant to the standstill agreement, the Investor agreed not to seek
to convert any portion of the Note until December 10, 2022 (the "Standstill Period"). Balance of the Note was increased by
$310,500 (the "Standstill Fee") as of the date of the standstill agreement. The parties have agreed to extend the Note and are in the process of negotiating the terms of the extension as of the date of this annual
report.
Industry and Market Opportunities
Construction and Construction Materials
Markets
From 2011 to 2020, the total
output value of China's construction industry showed an upward trend year by year. Although China's economic growth has slowed
in recent years, it is believed China is, and will continue to be, the world's largest construction market for a number of years
despite the decline of its share of the global construction industry.
The slowdown in China's
urbanization process since 2020 has a significant impact on the construction industry. However, we believe our eco-friendly construction
materials will be in greater demand than traditional materials as the PRC construction market continues to grow and the PRC government
increases its focus on reducing the environmental impact of construction activities, which includes, among other things, recent environmental
initiatives.
52
Sponge city
.
The concept of the "sponge city" proposed by PRC scientists and politicians is equivalent to the "Sustainable Drainage
Systems" (SuDS) in the United Kingdom as well as the "Low Impact Development" in the United States. Sponge cities are
being constructed nationwide in China, not only in new urban (town) areas, but also in the transformation of existing urban (town) areas.
In the "14th Five-Year Plan" (2021-2025) announced by China in March 2021, "sponge city construction" will remain
one of the PRC government's investment focuses for the next few years, which will not only lead to changes in materials for municipal
pavement, pond slope protection and other construction purposes, but also create an ongoing need for these materials.
Water ecological restoration
and high-standard farmland construction.
In China's 14th Five-Year Plan, water conservation continues to be the top priority
of the national infrastructure network, with emphases on water resource management, water ecological restoration and environmental water
protection. In 2021, the Ministry of Agriculture and Rural Affairs of China issued the
National High-standard Farmland Construction
Plan (2021-2030)
, and provide for some specific indicators for the farmlands, water and roads. We believe this will create higher
demands for construction projects such as ecological slope protection (retaining walls), dry barrier walls (SRWs), and drainage trenches
and thereby bring us new market from molding equipment and small precast concrete products.
"Rural revitalization"
and "urban renewal".
In January 2022, the
Opinions of the Central Committee of the Communist Party of China and
the State Council on Doing a Good Job in Comprehensively Promoting the Key Work of Rural Revitalization in 2022
was issued by the
Central Committee of the Communist Party of China and the State Council. Also known as "Document No. 1," the Opinions is
the first official policy document issued by the PRC government in the new year that traditionally focuses on rural issues with this
year's focus on the advancement of rural revitalization. Rural revitalization calls for high standard farmland construction, advancement
of agricultural infrastructure, and improvement of the implementation of rural conduction system, among other things.
In addition, in November
2021, the General Office of the Ministry of Housing and Urban-Rural Development of the PRC issued the
Notice on Launching the First
Batch of Urban Renewal Pilot Work
, and decided to carry out the first batch of urban renewal pilot work in a two-year period in 21
cities (districts) including Beijing. The connotation of "urban renewal" is to "promote the optimization of urban structure,
function improvement and quality improvement". It is believed that "Urban renewal" is fundamentally different from
the previous "old city renovation" and includes the renovation of the old city, with a higher level and a wider scope, including
house renovation (demolition) and road renovation, as well as preservation of urban culture and customs, and division of functional areas.
We believe the rural revitalization and urban renewal policies of the PRC government will create demand for construction materials, in
particular in the concrete blocks (bricks) industry, which will bring opportunities to increase product value and competition for product
differentiation, optimize product structures and improve the equipment functionalities.
Eco-friendly raw materials
and low carbon products.
The current
Industrial Structure Adjustment Guidance Catalogue (2019 Version)
issued by the National
Development and Reform Commission of the PRC, list pavement bricks (boards), pavement permeable bricks (boards), square permeable bricks
(boards), decorative bricks (blocks), antique bricks, slope protection ecological bricks (blocks), hydraulic ecological bricks (blocks)
and other green building materials in the Encouraged Category: Building Materials. The catalogue proposes in "Encouraged Categories:
Environmental protection and comprehensive utilization of resource conservation, the comprehensive utilization of tailings, waste residues
and other resources and the manufacture of supporting equipment" as well as the "construction waste recycling project and
industrialization." As China aims to achieve peak carbon dioxide emission before 2030 and achieve carbon neutrality before 2060,
certification of green buildings in China continues to advance. The government commitment and related policies to support green buildings
development will create growth opportunities for eco-friendly construction materials, including the concrete blocks (bricks) which are
one of our main products.
53
As a result of the above
government initiatives and market trends, we expect the demand for equipment for manufacturing eco-friendly building materials to recover
and increase. In response, we have improved our existing equipment and technologies to meet the market demands. Specifically, we have
improved the degree of automation of our equipment, further optimized the technology to use solid waste, realized timely customer services
through use of Internet technology and developed production lines with a larger output. We plan to leverage our advanced production and
advanced research and development research capabilities to take advantages of the opportunities created by these government initiatives
and market demands and provide high quality eco-friendly construction materials.
Automotive After-Sales Market
According to the data reported
by Xinhua News Agency in 2020, the automotive after-sales market continues to recover and was estimated to exceed a total consumption
amount of RMB one trillion (approximately $157.1 billion ) for 2020. The automotive after-sales refers to the transactions or services
during the use of sold cars. In the automotive after-sales market, fuel is the largest segment with an average annual market size of
RMB 2.6 trillion (approximately $408.5 billion ) from 2019 to 2021, and insurance is the second largest segment with an average annual
market size of about RMB 800 billion (approximately $125.7 billion ), which is our targeted segment.
In September 2020, the China
Banking and Insurance Regulatory Commission formulated and issued the
Guiding Opinions on Implementing Comprehensive Reform of Auto
Insurance
, requiring insurance companies to achieve the reform goals of "reducing prices, increasing coverage and improving
quality" of auto insurance. The Guiding Opinion also call for development of new insurance products, including the vehicle mileage
insurance. As a result, it is expected that the growth of the segment will slow down and market size will decrease in the near future.
With the explosive growth
of new energy vehicle production and sales, traditional auto insurance no longer meets the demand, and relevant insurance companies have
launched corresponding new energy vehicle insurance. The initial market size is expected to be RMB 17 billion (approximately $2.8 billion).
According to the "New Energy Vehicle Industry Development Plan (2021-2035)" issued by Ministry of Industry and Information
Technology, by 2025, China sets the goal to have its new energy vehicle sales account for about 20% of the total vehicle sales. New energy
vehicle insurance market in China is therefore expected to expand further.
However, after years of expansion,
China's auto insurance market has started to experience a significant slowdown in the increase in premiums, as a result of the
reform and saturation of the auto insurance market and the resulting decrease in average premium per policy and increase marketization
of auto insurance. Auto insurance premiums in China showed an increasing growth trend during 2013 to 2020 and reached an aggregate of
RMB 824.5 billion (approximately $129.6 million) in 2020, representing an increase of 0.7% from the prior year. During the first three
quarters of 2021, China's auto insurance premiums were RMB562.2 billion (approximately $88.3 million), showing a cumulative decrease
of 9.44% as compared to the same period in the prior year.
According to the s data released
by the Hainan Insurance Industry Association, there was a total of approximately 108,100 and 120,500 car accidents (involving solely
the mandatory liability insurance cases that occurred and closed during the relevant year, excluding single-vehicle accidents) in Hainan
province, representing an average of approximately 296 and 330 accident per day, respectively.
Software and Information Technology Service
Industry
In recent years, with the
rapid expansion of China's software and information technology service industry and the significant advancement in technologies,
the industry has become an important part of the strategic emerging industries. According to the 14th Five-Year Plan Software and Information
Technology Service Industry Development Plan, during the 13th Five-Year Plan period, the revenue of the software and information technology
service industry increased from RMB4.28 trillion (approximately $672.5 billion) in 2015 to RMB8.16 trillion (approximately $128.2 billion)
in 2020, with an average annual growth rate of 13.8%, and its share of the information industry has increased from 28% in 2015 to 40%
in 2020. The total profit of the software and information technology service industry has increased from RMB576.6 billion (approximately
$90.6 billion) in 2015 to RMB1,067.6 billion (approximately $16.7 billion) in 2020, with an average annual growth rate of 13.1% and its
share of the information industry has increased from 51% in 2015 to 64% in 2020. The information technology services revenue increased
from 51.2% of the information technology in 2015 to 61.1% in 2020. Emerging platform software, industrial application software, and embedded
software has developed rapidly while revenue from basic software and industrial software products has continued to grow. According to
the Analysis Report on Market Prospects and Investment Strategic Planning of China's Software Industry released by the Prospective
Industry Research Institute, in 2021, there were more than 40,000 enterprises above designated size in the software and information technology
service industries in China, and the accumulated software business revenue was RMB9,499.4 billion (approximately $149.3 billion), representing
a year-on-year increase of 17.7%. The 14th Five-Year Plan for Software and Information Technology Service Industry Development Plan sets
out the development goals, i.e., the software business revenue of enterprises above designated size will exceed RMB14 trillion (approximately
$220 billion), with an average annual growth rate of more than 12%.
54
Our Competitive Strengths
We believe the following
competitive strengths differentiate us from our competitors and contribute to our ongoing success.
Eco-friendly products
.
Unlike
many of our competitors, who still use traditional materials, we use reclaimed iron tailings to manufacture our construction materials.
In doing so, we help reduce environmental waste. In addition, the equipment we used to produce construction materials can recycle disposed
building materials, including, without limitation, waste clay bricks and waste concrete, to manufacture construction materials.
Effective operational
management
. The consistent quality of our products and manufacturing equipment is achievable only through effective management
in all aspects of our operations, from purchasing to production and sales. In every step, we have fully trained, experienced and skilled
employees to ensure the quality of our construction materials and manufacturing equipment. In addition, we have a committed and qualified
management team who fully understand our corporate culture and effectively implement our business strategy.
Proprietary
technologies and strong research and development capabilities
. We have developed key technologies and knowhow in the manufacture
of various types of construction materials and manufacturing equipment. We own an aggregate of 123 PRC patents (ten of which are owned
jointly with Luoyang Water-Conservancy Surveying & Design Co., Ltd. ("Luoyang"), an independent third party), including
31 design patents, 82 utility model patents and ten invention patents. Three of our patents were awarded Gold and Silver Prize of International
Exhibition of Inventions of Geneva. In addition, we own 25 software copyrights in China.
We
are committed to the research and development of new construction materials and the equipment used to produce these materials. As of
the date of this annual report, our research and development team consists of an aggregate of 41 staff, accounting for approximately
40% of our total employees. Of all our research and development staff, 25 hold bachelor's degree or higher degrees. Our team has
an average of five years of experience in research and development in relevant industries.
Full range of eco-friendly
project solutions.
We are able to provide consultation, design and implementation of projects such as sponge city and hydraulic
ecological projects for customers, in addition to manufacturing and sales of eco-friendly construction materials and equipment. Our one-stop
solution allows us to capture revenue from all stages of a project and serve more types of customers, such as municipalities and governments.
Experienced management
team and work force
. Our management team, led by Hengfang Li, our Chief Executive Officer, who has extensive industry experience,
deep knowledge of our business and a demonstrated track record of managing costs, adapting to changing market conditions, and developing
new products. In addition, Mr. Li has a vast network and understating of the market. In addition, following the acquisition of REIT Mingde,
we expect to leverage the expertise of Mr. Li Xiaoping, Chairman of REIT Mingde, in the field of mobile communication and IoT and his
extensive experience in business management and operations, to grow and expand our businesses related to the application of the IoT technologies.
Mr. Li has more than 20 years of experience in the communication and IoT industry. He worked and held senior positions at Nokia Corporation
Asia Pacific, and Huawei Technology Services Co., Ltd. successively before he founded his own businesses, including Hainan Yile IoT,
among others.
We also maintain a well-trained
workforce that is highly skilled and capable to address complex and individualized client issues.
55
Our Strategies
Our objective is to become
the leading provider of eco-friendly construction materials and equipment. Following our acquisition of REIT Mingde, we also aim to expand
the application of our IoT solutions and products for commercial use vehicles, build smart environmental protection solutions and logistics
and supply chain services. To achieve these goals, we are pursuing the following strategies:
Market Opportunity
.
China's 14th Five-Year Plan (2021-2025) promotes a cleaner and greener economy, with strong commitments to environmental management
and protection, clean energy and emissions controls, ecological protection and security, and the development of renewable energy industry.
This demonstrates a clear focus on charting a sustainable course for the economy in the long-term. The 14th Five-Year Plan offers opportunities
for the private sector to support China's environmental goals of water resource management, water ecology remediation and environmental
protection of water, such as through the construction of sponge cities and the use of eco-friendly construction materials. Presently,
we are able to serve all facets of sponge city construction through our construction materials that are used in construction, our equipment
that can produce the construction materials and our general contracting expertise.
The 14th Five-Year Plan also
calls for the strengthening of the innovation and application of key digital technologies, the acceleration of digitalization development
in China and the promotion of transition of industry digitalization. The plan lists the IoT industry as one of the key industries of
a digital economy. We plan to take advantages of the resources and support available under the 14th Five-Year Plan and promote the in-depth
integration of the IoT technologies with the equipment manufacturing industry, the ecological restoration market and the automotive after-sales
market based our existing experience and expertise in the IoT technologies and RSA services.
Expand our remediation
projects in mining regions
. We believe there are thousands of former mining locations in China that need to be remediated and
reclaimed. Abandoned ore mines contain tailings and abandoned or closed mines are normally associated with environmental concerns such
as contaminated water and soil. As part of the remediation and reclamation process, we are able to assist mining companies with the disposal
of tailings, and municipalities creating viable villages in former mining areas. For example, in 2015, we completed a sponge city project
in Hainan Province where a village located in a former mining area was built with our eco-friendly construction materials made from iron
tailings. We will continue to focus on using iron tailings in our eco-friendly construction materials and seek reclamation projects in
former mining areas.
Continue to develop
new products.
We are committed to the research and development of new products for specific customer needs. We plan to develop
advanced technologies and devices for our equipment and innovate the new type of the construction products for sponge cities, water ecological
restoration and high-standard farmland construction. We believe scientific and technological innovations will help our Company achieve
its long-term strategic objectives.
Increase our revenue
and market share by expanding our business network internationally
. In order to expand our international market share, we plan
to add four to five distributors in America, Southeast Asia, and the Middle East. We plan to change our advertising strategies to reach
new customers through new methods, such as digital marketing. We also plan to participate in targeted international marketing events,
such as seminars, workshops, and trade shows, where we can meet potential customers, promote our products and deepen our network to further
expand our sales.
Take advantage of the
Hainan Free Trade Port policy.
Hainan province government recently promulgated the
Hainan Province's Three-Year Action
Plan to Win the Battle of Science and Technology Innovation by Extraordinary Means (2021-2023)
(Qiong Fu Ban [2021] No. 24) and the
Hainan Province Science and Technology Planning System Optimization and Reform Plan
(Qionke [2021] No. 250)in an aim to promote
the technology innovation-driven development of enterprises. The government is promoting the establishment of the Haikou City Research
and Development Center for Internet of Things Digitalization Application Engineering and Technology" and gathers resources for
and renovation and development of high technologies. The government offers subsidies, tax incentives as well as support for introducing
talents to the province, such as housing subsidies and bonuses. We plan to take advantages of the government resources and support of
the Hainan Free Trade Port to further the development of our technologies and our business operations.
56
Pursue Strategic Acquisitions
.
We
intend to continue to pursue expansion opportunities in existing and new markets, as well as in core and adjacent categories through
strategic acquisitions. Specifically, we are seeking to acquire construction material or construction material manufacturing equipment
companies in areas of China with more established economies. We believe the demand for eco-friendly construction materials and manufacturing
equipment used to produce these materials are and will continue to be in greater demand in these established economies.
Our Products and Services
Eco-Friendly Construction Materials
We manufacture eco-friendly construction materials (aggregates, bricks,
pavers and tiles) through our subsidiary, Xinyi REIT, which operates our plant in Xinyi, Jiangsu Province. We refer to our construction
materials as eco-friendly because we produce them from reclaimed iron mine tailings. Tailings are the materials left over after the process
of separating the valuable fraction from the worthless fraction of an ore. Iron ore tailings generally consist of hard rock and sand.
Waste rock and tailings constitute the largest (by volume) industrial solid waste generated in the mining process. Xinyi REIT has utilized construction and demolition waste (which is the disposed bricks and/or concrete after the old building is dismantled) as the
raw materials to produce the products. By recycling iron tailings and utilizing the construction and demolition waste, we believe that
our construction materials manufacturing process is a viable and environmentally friendly solution to disposal problems associated with
these materials.
Traditional bricks in China consist primarily of clay, which is mixed
with water and silt, pressed into a mold for shaping, then fired in a kiln, or furnace. We use reclaimed iron tailings or construction
and demolition waste primarily as a substitute for rocks. Through vibration technology, with these raw materials inputted, the finished
products can come out with different shape and types. Since the whole production is cured without fire, this process has the benefits
of less space required for production and less pollution generated to the environment. We believe iron tailings or construction and demolition
waste reduce both the density and heat conductivity of our construction materials without sacrificing their durability and strength. Our
construction materials' density and strength meet or exceed China national standards. In addition, because we use iron tailings
or construction and demolition waste in the manufacturing process, we believe our construction materials are consistent with China's
recent environmental protection policies, such as energy conservation included in the 2016 China's 14th Five-Year Plan (2021-2025).
In addition to iron tailings
and construction and demolition waste, our construction materials contain river sand and granite. Our eco-friendly construction materials
are produced on a fully automatic production line primarily based upon our proprietary technology.
Our eco-friendly construction materials
include, without limitation, the following:
●
Ground works materials
. Essential materials for sponge
    cities to assist in water absorption, flood control and water retention. These construction materials can be used for urban roads,
    pedestrian streets and sidewalks, city squares, landmarks, parking lots, and docks.
●
Landscape retaining materials
. These construction materials
    are mainly used for gardens, roads, bridges, city squares, retaining walls and slope construction.
●
Hydraulic engineering materials
. Construction material
    for sponge city construction, they can be used for hydraulic ecological projects such as slope protection and river transformation.
●
Wall materials
. These construction materials are used
    for insulation, decoration, and for building walls.
57
Eco-friendly Construction Materials Manufacturing
Equipment
We produce manufacturing equipment
used to create eco-friendly construction materials. We sell our equipment to customers in China, South Asia, North America, the Middle
East, North Africa and Southeast Asia. The equipment consists of large-scale fully automated production equipment with hydraulic integration.
The equipment can be used to produce various types of eco-friendly construction materials that can be used for a variety of projects such
as ground works, hydraulic engineering, landscape retention and wall projects.
Our equipment used to manufacture
construction materials include, without limitation, the following:
●
REIT-Classic RT9A, RT9B, RT15A, RT15B
. These are fully
    automated block production lines and can be universally used for the manufacture of bricks, tiles, pavers with and without face mix,
    curbstones, hollow blocks and similar construction materials.
●
REITRT10 Series Equipment
. REITRT10 series equipment is used to produce bricks, tiles, pavers
    with and without face mix, curbstones, hollow blocks and similar construction materials.
●
Horizontal Pull Holes Device
. Horizontal Pull Holes Device
    is used to produce interlocking bricks, water conservancy blocks and slope protection blocks.
●
REIT-I Concrete Block Splitter
. Synchronized concrete
    block cutting machine with four blades. The blades are guided by ultra-wear resistant guide leads and driven by a large bore hydraulic
    drive, which lowers the operating pressure of the hydraulic unit and increases the splitting force.
●
REIT Foam Insert Device
. This
    device is used to insert a foam plate into the mold and produce thermal insulation blocks.
●
Gravity Separator for Iron Mine.
Gravity
separator is used to collect iron from the mine.
Roadside Assistance Services
Following the acquisition of REIT Mingde, we, through Hainan Yile IoT,
provide RSA services to drivers within Hainan Province, China, through our network of RSA
services providers of tow providers and automotive repair services. Our RSA services include towing, jump start, tire change, automobile
repair services, and other services. We do not directly provide the RSA services but coordinate with our contracted RSA service providers
who are licensed to provide such services. Our RSA services area covers the entire island of Hainan province, including 18 cities and
counties. Upon receipt of a request for RSA services, we will contact our tow providers and other RSA service providers in close proximity
to the vehicles and arrange the vehicles to be towed or repaired. We operate a proprietary platform, which connects insurance companies,
tow providers, automobile repair services, and other service providers as well as the drivers. The platform is accessible to users via
web interface and mobile applications, consisting of a central management system, a mobile application for RSA service providers to accept
orders and dispatch service teams, a mobile application for drivers to send requests and monitor status, and a mobile application for
insurance companies to monitor and review the request status.
Our RSA services are available
to insured drivers and uninsured drivers. Our services to insured drivers are based on the type of insurance policy they have with their
insurance company as well as the terms of our service contract with their insurance companies. Uninsured drivers pay our services fee
based our prevailing rates at the time of services. We maintain a 24/7 service team to ensure timely responses to RSA services requests.
Our RSA services commenced
in 2020 and we have established a network of an aggregate of 38 RSA services providers. Hainan Yile IoT has signed written agreements
with all of its RSA services providers and settles payments to these service providers on a periodical basis.
We are paid by the drivers
receiving RSA services or if they are insured, by their insurance companies. Hainan Yile IoT has entered into annual agreements with
four major insurance companies in China, including, without limitation, China Life Property & Casualty Insurance Company Limited
and China Pacific Insurance (Group) Co., Ltd. Pursuant to these agreements, we agree to provide RSA services to the insured drivers of
these insurance companies upon requests and receive fees based on the services provided.
58
Software Solutions
Through Hainan Yile IoT,
we are also engaged in the design, development and sales of customized software solutions based on the client specifications. We have
developed the following software solutions for our clients during the fiscal years ended December 31, 2022, 2021 and 2020:
-
Logistics management system –
comprehensive software solutions
    for the management of multimodal logistics, encompassing functions including customer management, supplier management, order
    management, and vehicle management.
-
Retail management system -
comprehensive software solutions
    for retail management, including functions such as invoicing, reporting, data statistics, online marketing.
-
Fleet management system
– comprehensive software solutions
    providing client with capabilities to manage its fleet including functions such as vehicle management, vehicle application, vehicle
    alarm, and location control.
-
Vehicle rental management system
- comprehensive software solutions
    providing client with capabilities to manage its car rental services, including functions such as vehicle management, vehicle rental
    (rental renewal), and remote fuel and electricity disconnection.
In connection with the sales
of software solutions, we also include hardware sales and/or service subscriptions based on the clients' requirements, which are
charged separately.
Our Projects
We have acted as general contractor and consultant
for the construction of sponge cities since 2014 And as general contractor for ecological restoration projects since 2019. We are also
responsible for the planning, construction and design of such projects.
Representative Projects
Sponge City – Changjiang County, Hainan
Province
We were the general contractor
for a sponge city project where an entire village was relocated and constructed in a former mining area. The project took 16 months to
complete resulting in revenue of approximately RMB 14 million ($2.2 million) for us. We made all construction materials out of recycled
iron tailings. A total of 86 single-family homes were built with a total construction area of 9,400 square meters (101,000 square feet).
An estimated 1,810,000 pieces of bricks were used for walls, 90,000 roof tiles, and 4,200 square meters (approximately 45,000 square
feet) of ground was covered with our construction materials. The completed project has won recognitions at various government levels
in Hainan Province, and has been designated as a demonstration or model project for promotion of sponge city construction.
Sponge City – Haikou City, Hainan Province
We acted as a consultant
for a sponge city project in Haikou City, Hainan Province. We also paved 50,000 square meters for this project. To assist with the
nationwide efforts to promote pilot cities in sponge city construction, we will collaborate with international institutions in
sponge city construction such as Jude Technology Corporation located in Germany. By gradually increasing our efforts, and expanding
the scale in the planning, design and construction of sponge cities, we aim to become a key enterprise in sponge city
construction.
59
Ecological Restoration Projects – Datong
City, Shanxi Province
Pursuant to a strategic cooperation
agreement entered into with Hunyuan County People's Government, we have acted as the general contractor in connection with the
restoration of abandoned coal mines and disposal of solid wastes in Hunyuan County, Datong City, Shanxi Province. We commenced the project
in November 2019 and are in charge of the project feasibility study, design, implementation and supervision of the project. This project
covers several affected villages and has an aggregate area of approximately 386 acres. We expect to complete this project by the end
of 2023. We believe the completion of the project is expected to enable the local government to complete geological disaster prevention
and control of an area of approximately 329 acres and reclaim land for agricultural use of approximately 133 acres, among other restoration
to the environment. Upon completion of the project, we will be paid our fees upon receipt of proceeds from the sale of restored lands.
Customers
Our eco-friendly construction
materials are sold only in China. Sales of construction materials accounted for $0.8 million, $1.7 million and $1.8 million of our total
revenues for the years ended December 31, 2022, 2021 and 2020, respectively.
Our primary customers for software development services are state-owned
petroleum companies and telecommunications companies. The primary customers for RSA services are insurance companies with the rest being
individual customers. The majority of our customers for software development services and RSA services are located in Hainan Province.
We have international customers
located in Asia, India, the Middle East, North Africa and North America for our manufacturing equipment. The following is a summary of
our total revenues from our continuing operations by geographic market for each of the last three years for our manufacturing equipment
used to produce construction materials.
Region
2022
2021
2020
Middle East
$
556,867
$
50,573
$
-
India
261,922
491,192
2,120,381
Pakistan
837
12,457
-
China
3,458,528
1,212,824
3,603,587
Malaysia
-
20,656
-
Maldives
20,495
-
804,112
Total
$
4,298,649
$
1,787,702
$
6,528,080
For the year ended December
31, 2022, one customer accounted for 21% of the Company's total revenue. For the year ended December 31, 2021, one customer accounted
for 11% of the Company's total revenue. For the year ended December 31, 2020, no single customer accounted for more than 10% of
the Company's total revenue.
Sales and Marketing
We are increasing our marketing
and sales efforts, including a directed focus on online marketing. Online marketing allows us to efficiently educate prospective customers
about the products and services we have to offer and assists us in expanding the reach of our market, both in China and internationally.
We will also participate in exhibitions, trade shows, conferences to introduce our equipment and machineries in China and internationally.
In order to expand our international
market, we plan to add four to five distributors in the Americas, Southeast Asia, and the Middle East by the end of 2023. We will transform
our advertising strategies to reach new and existing customers through new methods, such as digital marketing. We also plan to participate
in targeted international marketing events, such as seminars, workshops, and trade shows, where we can meet potential customers, promote
our products and deepen our network to further expand our sales.
We have obtained new customers
by word-of-mouth referrals and have found that satisfied customers are loyal customers. We believe quality products and excellent services
are a good marketing tool to retain and expand our customer base and as such we will improve the performance and quality of our equipment
and combine the internet technology to our equipment to improve our after-sale services and satisfy the customers' needs. In addition,
the introduction of new products, such as permeable floor tiles for sponge city construction and slope and damn protection blocks in
water conservancy construction have helped open new markets. In addition, we have developed the equipment to reuse waste rock wool products
for manufacturing of construction materials. We believe that this approach has been crucial in winning and retaining clients and increasing
our ability to withstand competition.
Our current market for software development and RSA services is Hainan
Province. We plan to expand our offering of those services to other provinces in China through client referrals and targeted marketing.
60
Competition
We face significant competition
in both our manufacturing equipment and construction materials markets. We have both domestic and international competitors in our manufacturing
equipment market. In the international market for our manufacturing equipment our main competition is from German made manufacturing
equipment. We believe our competitive strength against these competitors is the lower cost of our equipment with the same technical standards
and high-quality service. Our disadvantage is that the German-made equipment has a better aesthetic appearance as compared to the equipment
we manufacture. To improve the appearance of our equipment, we have collaborated with Tsinghua University and have jointly developed
an aesthetic one-piece soundproof cover on our equipment and obtained patents for the design.
Our construction materials
are manufactured by Xinyi REIT, which is located in Xuzhou City, the transportation hub connecting five neighboring provinces. The main
competitors of our building materials are the small workshops in the region, who primarily rely on low-price competition to seize the
market. However, we believe we can effectively compete with them based on large-scale automatic production lines, wide recognition by
local governments and customers and strong research and development capabilities.
Our main competitors in the
PRC market for our manufacturing equipment are small PRC companies located in Fujian Province. We believe our competitive strength against
these competitors is the quality of our equipment while our competitive disadvantage is the higher cost of our equipment. There is an
increased demand for fully automated construction materials production lines due to the increase of PRC labor costs. We are positioned
to take advantage of the increased demand for fully automated construction lines due to our current ability to manufacture such equipment.
In both the domestic and
international markets we are increasing our research and development of technology for construction materials manufacturing equipment.
In addition, we are researching a variety of construction materials that can be made with our manufacturing equipment. We believe that
a continued focus on a broad array of products and product designs coupled with our engineering and manufacturing expertise will enable
us to provide customers with differentiated product performance and customer support.
In Hainan, our primary competitors
for providing RSA services are the tow providers and other RSA service providers who may also be our contracted service providers. We
believe we effectively compete with other RSA service providers in the following aspects:
●
Proprietary platform that can be customized and offered
    to different customers, enabling broader outreach to potential customers;
●
Streamlined service process fully supported by our operation, technology
    and customer support teams;
●
Efficiency and responsiveness of service requests; and
●
Province wide service coverage.
61
The rapidly evolving market
for our software solutions is competitive and highly fragmented in certain of our regions, particularly by geography and customer segment.
We compete with other developers of software solutions and services locally in Hainan and nationwide in China, such as Digital Hainan
Co., Ltd., Inspur Group Co., Ltd., and Neusoft Group Co., Ltd.  Some of our actual and potential competitors may enjoy competitive
advantages over us, such as greater name recognition, longer operating histories, more varied services, and larger marketing budgets,
as well as greater financial, technical, and other resources. We believe that the key competitive factors in our market include:
●
ease of onboarding, initial setup and use;
●
platform functionality, performance and reliability (speed and stability);
●
relevant features that best meet the needs of clients' operators;
●
business intelligence capabilities;
●
technology architecture scalability; and
●
cost.
We believe that our patented
technologies, focus on segments with high demand as well as dedication to customers in Hainan province enable us to compete effectively
in Hainan province.
Research and Development
Soon after its establishment,
we set up a research and development center in Xi'an. We believe scientific and technological innovation will help our Company
achieve its long-term strategic objectives. We conduct research and development in the following areas:
●
Manufacturing equipment;
●
Recycling and utilization of solid wastes;
●
New construction materials; and
●
Urban ecological construction (sponge cities).
We conduct our research and
development according to strategic objectives, the market and customer needs. Combining application research and advanced research, we
will not only improve current products, but also develop future strategic products, realizing technology development in line with the
market demand.
Our research and development
activities mainly focus on solid waste utilization and recycling, ecological environmental friendly construction materials, technology
and equipment, thermal insulation products and related production equipment.
We accounted for the payments
as research and development expenses in accordance with ASC 730-20 for the related periods. For the years ended December 31, 2022, 2021,
and 2020, we spent $960,598, $346,951 and $334,904, respectively, on research and development associated with our continuing operations.
We expect to increase our allocation of research and development funds in the future in an effort to enhance our core competence.
Quality control is an important
aspect of our research and development department's work and ensuring quality at every stage of the process has been as key driver
in maintaining and developing our brand value. We have set up a separate research and development division to account for our investment
in research and development. As of December 31, 2022, we employed 41 professionals in research and technology development. We expect
to increase our allocation of research and development funds in an effort to enhance its core competence.
Sample research and development projects from
2020 to 2022 include the following:
Year 2020
●
A automatic palletizing system
62
Year 2021
●
A servo control system for cubing plant V1.0
●
A control system V1.0 for finger cart
●
An environmentally friendly permeable concrete PC brick
●
A porous sound-absorbing and noise-reducing PC brick
●
A production, processing, positioning and cutting device for PC bricks
●
A weather-resistant PC brick
●
A permeable PC brick surface layer and chamfer grinding device
●
A self-compensating shrink PC brick
Year 2022
●
A squirrel cage concrete product turning machine
●
An extra-thick surface layer bulk concrete product forming device
●
A control system and software for 3D printing V1.0
●
REITRT10 Series equipment
●
Gravity separator for iron mine
Sources of Raw Materials
Our primary raw materials
are steel for our manufacturing equipment and iron tailings, fly-ash and cement for our construction materials. We purchase from a variety
of suppliers and believe these raw materials are widely available.
We have efficient access
to all of the raw materials necessary for the production of our manufacturing equipment and construction materials. We believe our relationships
with the suppliers of these raw materials are strong. We do not expect the prices of such raw materials to vary greatly from their current
prices, as there has traditionally been little price volatility for such materials.
For the years ended December
31, 2022, 2021, and 2020, the Company purchased approximately 19%, 53%, and 43%, respectively, of its raw materials from one major supplier.
If we are unable to purchase from this supplier, we do not expect we would face difficulties in locating other suppliers at substantially
the same prices because alternative suppliers are readily available on the market.
Intellectual Property
We regard our patents, copyrights,
trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our businesses, and we
rely on patent, copyrights, trademark and trade secret law and confidentiality, invention assignment and non-compete agreements with
our employees and others to protect our proprietary rights. However, we do not believe that our business, as a whole, is dependent on,
or that its profitability would be materially affected by the revocation, termination, expiration or infringement upon any particular
patent. We own an aggregate of 123 PRC patents (ten of which are owned jointly with Luoyang Water-Conservancy Surveying & Design
Co., Ltd. ("Luoyang"), an independent third party), including 31 design patents, 82 utility model patents and ten invention
patents. Three of our patents were awarded Gold and Silver Prize of International Exhibition of Inventions of Geneva. In addition, we
own 25 software copyrights in China.
Pursuant to Article 15 of
Patent Law of China if there is any agreement between the joint owners of the right to apply for a patent or a patent right regarding
the exercise of the relevant right, the agreement shall be followed. If there is no such agreement, any of the joint owners may exploit
the patent independently or license others to exploit the patent by means of ordinary license. In the case of licensing to others to
exploit the patent, royalties charged shall be distributed among the joint owners.
In order to minimize our
liabilities or loss from the seven joint patents referenced above, Beijing REIT entered into an agreement with Luoyang on January 7,
2017, regarding the use, licensing, and transfer rights for the joint patents. The agreement, among other terms, provides Beijing REIT
with sole use and exclusive right of licensing of the joint patents and prohibits Luoyang and Beijing REIT from transferring the joint
patents to any other third parties without each parties' consent. Subsidiaries of Beijing REIT also have the right to use the joint
patents under the agreement. In addition, the parties will share any fees generated from any licensing of the joint patents.
63
REGULATION
Regulations Relating to the Manufacturing Industry
Our manufacturing activities
are regulated by the Law of China on Work Safety, or the Work Safety Law, which was adopted in 2002 and latest amended in 2021. The State
Administration of Work Safety is responsible for the supervision and administration of work safety nationwide. Pursuant to the Work Safety
Law, production units which are engaged in producing and operating activities in China shall meet the conditions of work safety stipulated
by relative law and regulations or national standards or industry standards; otherwise, those production units are not allowed to undertake
manufacturing activities in China.
Our major products are regulated
by the Law of China on Product Quality, which was promulgated in 1993 and latest amended in 2018, which require our products to comply
with national standards and industry standards during the process of manufacturing and selling. Our products will be defined as defective
products if they fail to comply with such standards. Meanwhile if our products cause personal injuries or other product damages, we shall
be responsible for applicable compensation. The statute of limitation of legal proceedings for injuries or damages caused by defective
products will be two years, commencing from the date of awareness of injuries or damages. Our products are mainly divided into two categories,
which are eco-friendly construction materials and equipment used to produce construction materials, respectively. Under the Law of China
on Product Quality, our products manufacturing shall be in compliance with five national standards and four industry standards, including
but not limited to the GB/T 8533-2008 (national standard) and the JC/T 920-2011 (industry standard) for our manufacturing equipment,
and the GB/T 21144-2007 (national standard) and the NY/T 1253-2006 (industry standard) for our construction materials.
Regulations Relating to Foreign Investment
The Foreign Investment Law
On March 15, 2019, the National
People's Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced three existing laws on
foreign investments in China, namely, the PRC Sino-foreign Equity Joint Venture Law, the PRC Sino-foreign Cooperative Joint Venture Law
and the PRC Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations. On December 26,
2019, the Regulation on the Implementation of the Foreign Investment Law of the People's Republic of China, was issued by the State
Council and came into force on January 1, 2020. The organization form, organization and activities of foreign-invested enterprises shall
be governed, among others, by the PRC Company Law and the PRC Partnership Enterprise Law. Foreign-invested enterprises established before
the implementation of this Law may retain the original business organization and so on within five years after the implementation of
this Law. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime
in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign
and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework for the access to, and the promotion,
protection and administration of foreign investments in view of investment protection and fair competition.
According to the Foreign
Investment Law, "foreign investment" refers to investment activities directly or indirectly conducted by one or more natural
persons, business entities, or otherwise organizations of a foreign country (collectively referred to as "foreign investor")
within China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with
other investors establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares,
shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively
with other investors, invests and establishes new projects within China; and (iv) a foreign investor invests through other approaches
as stipulated by laws, administrative regulations, or otherwise regulated by the State Council.
According to the Foreign
Investment Law, the State Council will publish or approve to publish the "negative list" for special administrative measures
concerning foreign investment. The Foreign Investment Law grants national treatment to foreign-invested entities, or FIEs, except for
those FIEs that operate in industries deemed to be either "restricted" or "prohibited" in the "negative
list". The Foreign Investment Law provides that FIEs operating in foreign restricted or prohibited industries will require market
entry clearance and other approvals from relevant PRC governmental authorities. If a foreign investor is found to invest in any prohibited
industry in the "negative list", such foreign investor may be required to, among other aspects, cease its investment activities,
dispose of its equity interests or assets within a prescribed time limit and have its income confiscated. If the investment activity
of a foreign investor is in breach of any special administrative measure for restrictive access provided for in the "negative list",
the relevant competent department shall order the foreign investor to make corrections and take necessary measures to meet the requirements
of the special administrative measure for restrictive access. On December 27, 2021, MOFCOM and NDRC jointly issued the latest version
of Negative List (Edition 2021). See "
Item 4. Information on the Company – B. Business Overview
–
Regulation
— Regulations relating to Foreign Investment — The Guidance Catalogue of Industries for Foreign Investment
."
64
Besides, the PRC government
will establish a foreign investment information reporting system, according to which foreign investors or foreign-invested enterprises
shall submit investment information to the competent department for commerce concerned through the enterprise registration system and
the enterprise credit information publicity system, and a security review system under which the security review shall be conducted for
foreign investment affecting or likely affecting the state security.
Furthermore, the Foreign
Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may
maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law.
In addition, the Foreign
Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including,
among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions,
profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully
acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign
investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance
with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access
restrictions and exit conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances,
in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation
or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.
The Guidance Catalogue of Industries for
Foreign Investment
Investment activities in
the PRC by foreign investors are subject to the Catalogue for the Guidance of Foreign Investment Industry, or the Catalogue, which was
promulgated and is amended from time to time by the MOFCOM and the NDRC. The Foreign Investment Catalogue which was promulgated jointly
by MOFCOM and the NDRC, on June 28, 2017 and became effective on July 28, 2017, classifies industries into three categories with regard
to foreign investment: (1) "encouraged", (2) "restricted", and (3) "prohibited". The latter two categories
are included in a negative list, which was first introduced into the Foreign Investment Catalog in 2017 and specified the restrictive
measures for the entry of foreign investment.
On June 28, 2018, MOFCOM
and NDRC jointly promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access, or the Negative List
(Edition 2018), which replaced the negative list attached to the Foreign Investment Catalogue in 2017. On June 30, 2019, MOFCOM and NDRC
jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Access, or the Negative List (Edition 2019),
which replaced the Negative List (Edition 2018), and the Catalogue of Industries for Encouraging Foreign Investment (Edition 2019), or
the Encouraging Catalogue (Edition 2019), which replaced the encouraged list attached to the Foreign Investment Catalogue in 2017. On
June 23, 2020, MOFCOM and NDRC jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Access, or the
Negative List (Edition 2020), which replaced the Negative List (Edition 2019). On December 27, 2021, MOFCOM and NDRC jointly issued the
Special Administrative Measures (Negative List) for Foreign Investment Access, or the Negative List (Edition 2021), which replaced the
Negative List (Edition 2020).
65
Pursuant to the Negative
List (Edition 2021) effective on January 1, 2022, any industry that is not listed in any of the restricted or prohibited categories is
classified as a permitted industry for foreign investment. Establishment of wholly foreign-owned enterprises is generally allowed for
industries outside of the Negative List. For the restricted industries within the Negative List, some are limited to equity or contractual
joint ventures, while in some cases PRC partners are required to hold the majority interests in such joint ventures. In addition, restricted
category projects are subject to higher-level government approvals and certain special requirements. Foreign investors are not allowed
to invest in industries in the prohibited category. Industries not listed in the Negative List are generally open to foreign investment
unless specifically restricted by other PRC regulations.
The Encouraging Catalogue
(Edition 2022) effective on January 1, 2023, is divided into two parts, namely the Nationwide Catalogue of Encouraged Industries for
Foreign Investment and the Catalogue of Priority Industries for Foreign Investment in Central and Western China. The Nationwide Catalogue
of Encouraged Industries for Foreign Investment lists a total of 519 industry sectors that encourage foreign investments; the Catalogue
of Priority Industries for Foreign Investment in Central and Western China lists industry sectors that each province and city wish to
introduce.
In October 2016, the MOFCOM
issued the Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises or FIE Record-filing
Interim Measures, which was revised in June 2018. Pursuant to FIE Record-filing Interim Measures, the establishment and change of FIE
are subject to record-filing procedures, instead of prior approval requirements, provided that the establishment or change does not involve
special entry administration measures. If the establishment or change of FIE matters involves the special entry administration measures,
the approval of the MOFCOM or its local counterparts is still required. Pursuant to the Announcement [2016] No. 22 of the NDRC and the
MOFCOM dated October 8, 2016, the special entry administration measures for foreign investment apply to restricted and prohibited categories
specified in the Catalogue, and the encouraged categories are subject to certain requirements relating to equity ownership and senior
management under the special entry administration measures.
On January 1, 2020, the Foreign-invested
Information Reporting Measures or FIE Reporting Measures came into force which replaced the FIE Record-filing Interim Measures. Pursuant
to FIE Reporting Measures, foreign investors or FIEs are required to submit initial report, change report, deregistration report and
annual report through enterprises registration system.
Currently, our business falls
within the permitted category.
Company Law
Pursuant to the PRC Company
Law, promulgated by the SCNPC on December 29, 1993, effective as of July 1, 1994, and as revised on December 25, 1999, August 28, 2004,
October 27, 2005, December 28, 2013 and October 26, 2018, the establishment, operation and management of corporate entities in the PRC
are governed by the PRC Company Law. The PRC Company Law defines two types of companies: limited liability companies and companies limited
by shares.
Each of our PRC subsidiaries
is a limited liability company. Unless otherwise stipulated in the related laws on foreign investment, foreign invested companies are
also required to comply with the provisions of the PRC Company Law.
Regulations on Tax
See "
Item 10. Additional
Information —E. Taxation—People's Republic of China Taxation."
Regulation of Foreign Currency Exchange and
Dividend Distribution
Foreign Currency Exchange.
The
principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended
on August 5, 2008, the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) and the Measures on Administration
of Foreign Debts Registration (2013). Under these regulations, Renminbi are freely convertible for current account items, including the
distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for most capital account
items, such as direct investment, loans, repatriation of investment and investment in securities outside China, unless the prior approval
of SAFE or its local counterparts is obtained. In addition, any loans to an operating subsidiary in China that is a foreign invested
enterprise, cannot, in the aggregate, exceed the difference between its respective approved total investment amount and its respective
approved registered capital amount or 2.5 times of its net assets, at the discretion of such company.
66
Any increase in the amount
of the total investment and registered capital must be reported to and filed with the China Ministry of Commerce or its local counterpart
and SAMS or its local counterparts. We may not be able to report to or file with these government authorities on a timely basis, if at
all, which could result in a delay in the process of making these loans.
Pursuant to the Circular
of the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration
Policies, or the SAFE Notice 13, which was promulgated on February 13, 2015 and with effect from June 1, 2015, the foreign exchange registration
under domestic direct investment and the foreign exchange registration under overseas direct investment is directly reviewed and handled
by banks in accordance with the SAFE Notice 13, and the SAFE and its branches shall perform indirect regulation over the foreign exchange
registration via banks.
Dividend Distribution.
According
to the PRC Company Law and Foreign Investment Law, enterprises in China may pay dividends only out of their retained profits, if any,
determined in accordance with PRC accounting standards and regulations. In addition, enterprises in China are required to allocate at
least 10% of their respective retained 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, and an enterprise is not permitted
to distribute any profits until losses from prior fiscal years have been offset. Furthermore, under the Enterprise Income Tax Law, or
the EIT Law, which became effective in January 2008 and latest amended in 2018, the maximum tax rate for the withholding tax imposed
on dividend payments from PRC foreign invested companies to their overseas investors that are not regarded as "resident"
for tax purposes is 20%. The rate was reduced to 10% under the Implementing Regulations for the EIT Law issued by the State Council.
However, a lower withholding tax rate might be applied if there is a tax treaty between China and the jurisdiction of the foreign holding
companies, such as tax rate of 5% in the case of Hong Kong companies that holds at least 25% of the equity interests in the foreign-invested
enterprise, and certain requirements specified by PRC tax authorities are satisfied.
Circular 37.
On
July 4, 2014, SAFE issued Notice on Relevant Issues concerning Foreign Exchange Administration for Domestic Residents Engaging in
Overseas Financing and Investing through Round-Trip Investment via Special Purpose Companies, or Circular 37, which became effective
as of July 4, 2014. According to Circular 37, PRC residents shall apply to SAFE and its branches for going through the procedures
for foreign exchange registration of overseas investments before contributing the domestic assets or interests to a SPV. An amendment
to registration or filing with the local SAFE branch by such PRC resident is also required if the registered overseas SPV's basic
information such as domestic individual resident shareholder, name, operating period, or major events such as domestic individual resident
capital increase, capital reduction, share transfer or exchange, merger or division has changed. Although the change of overseas funds
raised by overseas SPV, overseas investment exercised by overseas SPV and non-cross-border capital flow are not included in Circular
37, we may be required to make foreign exchange registration if required by SAFE and its branches.
Moreover, Circular 37 applies
retroactively. As a result, PRC residents who have contributed domestic assets or interests to a SPV, but failed to complete foreign
exchange registration of overseas investments as required prior to implementation of Circular 37, are required to send a letter to SAFE
and its branches for explanation. Under the relevant rules, failure to comply with the registration procedures set forth in Circular 37
may result in receiving a warning from SAFE and its branches, and may result in a fine of up to RMB 300,000 (approximately $46,000) for
an organization or up to RMB 50,000 (approximately $8,000) for an individual.
PRC residents who control
our Company are required to register with SAFE in connection with their investments in us. If we use our equity interest to purchase
the assets or equity interest of a PRC company owned by PRC residents in the future, such PRC residents will be subject to the registration
procedures described in Circular 37.
Circular 19 & Circular
16.
On March 30, 2015, SAFE issued the Circular Concerning the Reform of the Administration of the Settlement of Foreign
Currency Capital of Foreign-Invested Enterprises, or Circular 19, which became effective on June 1, 2015. Circular 19 regulates the conversion
of foreign currency capital funds into RMB by a foreign-invested enterprise, and limits how the converted RMB may be used.
67
Furthermore, SAFE promulgated
a circular on June 9, 2016, Circular on Reforming and Regulating Policies on the Administration over Foreign Exchange Settlement under
Capital Accounts, or Circular 16, which further revises several clauses in Circular 19. Both Circular 19 and Circular 16 regulate that
foreign exchange incomes of a domestic enterprise under their capital account shall not be used in the ways stated below:
●
For expenditures that are forbidden by relevant laws and regulations,
    or for purposes which are not included in the business scope approved by relevant government authority;
●
For direct or indirect securities investments within China, or for
    any other kinds of investments except banks' principal-guaranteed wealth-management products, unless otherwise prescribed by
    other laws and regulations;
●
For issuing RMB entrusted loans directly or indirectly (except those
    included in the business scope), or for repaying inter-enterprise loans (including advances by the third party), or for repaying
    bank loans which has been lent to third parties;
●
For issuing RMB loans to non-affiliated enterprises, unless expressly
    permitted in the business scope;
●
For purchasing or constructing real estate which is not for personal
    use, in addition to those real estate enterprises.
In addition, SAFE supervises
the flow and use of those RMB capital converted from foreign currency capital funds of a foreign-invested company by further focusing
on ex post facto supervisions and violations, and the use of the net proceeds from our initial public offering to invest in or acquire
any other PRC companies in China is subject to the provisions under both Circular 19 and Circular 16.
M&A Regulations and Overseas Listings
On August 8, 2006, six
PRC regulatory agencies, including the MOFCOM, the State Assets Supervision and Administration Commission, the State Administration for
Taxation, the State Administration for Industry and Commerce, CSRC and SAFE, jointly issued the Regulations on Mergers and Acquisitions
of Domestic Enterprises by Foreign Investors, or the New M&A Rule, which became effective on September 8, 2006 and was amended
on June 22, 2009. This New M&A Rule, among other things, includes provisions that purport to require that an offshore special
purpose vehicle formed for purposes of overseas listing of equity interests in PRC companies and controlled directly or indirectly by
PRC companies or individuals should obtain the approval of CSRC prior to the listing and trading of such special purpose vehicle's
securities on an overseas stock exchange.
On September 21, 2006,
CSRC published on its official website the Provisions on Indirect Issuance of Securities Overseas by a Domestic Enterprise or Overseas
Listing of Its Securities for Trading, which specify procedures regarding CSRC's approval for overseas listings by special purpose
vehicles. The CSRC approval procedures require the filing of a number of documents with the CSRC and it would take several months to
complete the approval process. The application of this new PRC regulation remains unclear with no consensus currently existing among
leading PRC law firms regarding the scope of the applicability of the CSRC approval requirement.
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 which became effective 30 days thereafter, the Rules on Implementation
of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors issued by the MOFCOM on August
25, 2011 and which 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 the 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.
68
On July 6, 2021, the State
Council and General Office of the CPC Central Committee issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance
with the Law. The opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision
on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant
regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
In December 2019, the newly
revised Securities Law of the PRC clarified that direct and indirect overseas issuances and listings should comply with the relevant regulations
of the State Council.
On February 17, 2023, the
CSRC published the Tentative Measures and five supporting guidelines, which became effective on March 31, 2023. The Tentative Measures
lay out the filing regulation arrangement for both direct and indirect overseas listing, and clarify the determination criteria for indirect
overseas listing in overseas markets. Among other things, if a domestic enterprise intends to indirectly offer and list securities in
an overseas market, the record-filing obligation is with a major operating entity incorporated in mainland China which appointed by the
issuer and such filing obligation shall be completed within three business days after the overseas listing application is submitted. The
required filing materials for an initial public offering and stock exchange listing shall include, but are not limited to: record-filing
report and related undertakings; regulatory opinions, record-filing, approval and other documents issued by competent regulatory authorities
of relevant industries (if applicable); security assessment opinion issued by relevant regulatory authorities (if applicable); PRC legal
opinion; and prospectus. In addition, an overseas offering and listing is prohibited under any of the following circumstances: (1) if
the intended securities offering and listing is specifically prohibited by national laws and regulations and relevant provisions; (2)
if the intended securities offering and listing may constitute a threat to or endangers national security as reviewed and determined by
competent authorities under the State Council in accordance with law; (3) if, in the past three years, the domestic enterprise or its
controlling shareholders or actual controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other
criminal offenses disruptive to the order of the socialist market economy, or are currently under judicial investigation for suspicion
of criminal offenses, or are under investigation for suspicion of major violations; (4) if, the domestic enterprise is being investigated
according to law due to suspected crimes or major violations of laws and regulations, and there is no clear conclusion; or (5) if there
are material ownership disputes over the equity of the controlling shareholder or shareholders controlled by controlling shareholders
and actual controllers. The Tentative Measures provide directional guidance to the PRC's reform plan for the supervision of overseas listings.
The Tentative Measures adopt an "ex-post filing mechanism" where the filer completes its filing obligation within three business
days after it submits its listing application to the regulator in the place of intended listing. With respect to the domestic enterprises,
non-compliance with the Tentative Measures or an overseas listing completed in breach of it may result in a warning or a fine ranging
from RMB 1 million to RMB10 million. Furthermore, the directly responsible executives and other directly responsible personnel of the
domestic enterprises may be warned, or fined between RMB 500,000 and RMB 5 million and the controlling shareholder, actual controllers,
and other legally appointed persons of the domestic enterprises may be warned, or fined between RMB 1 million and RMB 10 million. If,
during the filing process, the domestic enterprises conceal important factors or the content is materially false, and securities are not
issued, they are subject to a fine of RMB1 million to RMB10 million. With respect to the directly responsible executives and other directly
responsible personnel of the domestic enterprises, they are subject to a warning and fine between RMB 500,000 and RMB 5 million, and with
respect to the controlling shareholder, actual controllers, and other legally appointed persons of the domestic enterprises, they are
subject to a warning and fine between RMB 1 million and RMB 10 million.
On February 24, 2023, the
CSRC published the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering
and Listing by Domestic Enterprises, or the Confidentiality and Archives Administration, and, which became effective on March 31, 2023.
The Confidentiality and Archives Administration requires that, in the process of overseas issuance and listing of securities by domestic
entities, the domestic entities, and securities companies and securities service institutions that provide relevant securities service
shall strictly implement the provisions of relevant laws and regulations and the requirements of these provisions, establish and improve
rules on confidentiality and archives administration. Where the domestic entities provide with or publicly disclose documents, materials
or other items related to the state secrets and government work secrets to the relevant securities companies, securities service institutions,
overseas regulatory authorities, or other entities or individuals, the companies shall apply for approval of competent departments with
the authority of examination and approval in accordance with law and report the matter to the secrecy administrative departments at the
same level for record filing. Where there is unclear or controversial whether or not the concerned materials are related to state secrets,
the materials shall be reported to the relevant secrecy administrative departments for determination.
69
Regulations on Offshore Parent Holding Companies'
Direct Investment in and Loans to Their PRC Subsidiaries
An offshore company may invest
equity in a PRC company, which will become the PRC subsidiary of the offshore holding company after investment. Such equity investment
is subject to a series of laws and regulations generally applicable to any foreign-invested enterprise in China, which include Foreign
Investment Law of the People's Republic of China, Implementation Regulations for the Foreign Investment Law of the People's
Republic of China, the Administrative Provisions on Foreign Exchange in Domestic Direct Investment by Foreign Investors; and the Notice
of the State Administration on Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct
Investment.
Under the aforesaid laws and
regulations, the increase of the registered capital of a foreign-invested enterprise is subject to prior approval by or filing with the
original approval authority of its establishment. In addition, the increase of registered capital and total investment amount shall both
be registered with SAMS or its local counterpart, report to Ministry of Commerce and a local bank authorized by the SAFE.
Shareholder loans made by
offshore parent holding companies to their PRC subsidiaries are regarded as foreign debts in China for regulatory purpose, which is subject
to a number of PRC laws and regulations, including the PRC Foreign Exchange Administration Regulations, Measures on Administration on
Foreign Debts, the Tentative Provisions on the Statistics Monitoring of Foreign Debts and its implementation rules, and the Administration
Rules on the Settlement, Sale and Payment of Foreign Exchange.
Under these regulations, the
shareholder loans made by offshore parent holding companies to their PRC subsidiaries shall be registered with a local bank authorized
by the SAFE. Furthermore, the total amount of foreign debts that can be borrowed by such PRC subsidiaries, including any shareholder loans,
shall not exceed the difference between the total investment amount and the registered capital amount of the PRC subsidiaries, both of
which are subject to the governmental approval or 2.5 times of the net assets of such subsidiary.
Regulations Relating to Intellectual Property
Rights
Patent.
Patents
in China are principally protected under the Patent Law of China, which was promulgated by the SCNPC in 1984 and latest amended on October
17, 2020. The duration of a patent right is either 10 years (utility model), 15 years (design) or 20 years (invention) from
the date of application, depending on the type of patent right.
Copyright
. Copyright
in China, including software copyright, is principally protected under the Copyright Law of China which was issued by the Standing Committee
of the NPC in 1990 and latest amended on November 11, 2020, and its related rules and regulations. Under the Copyright Law, for a company,
the term of protection for copyright is 50 years from the first publication of its work.
Trademark.
Registered
trademarks are protected under the Trademark Law of China promulgated by the Standing Committee of the NPC in 1982 and latest amended
on April 23, 2019, and its related rules and regulations. Trademarks are registered with the Trademark Office of the State Administration
for Industry and Commerce. Where registration is sought for a trademark that is identical or similar to another trademark that has already
been registered or given preliminary examination and approval for use in the same or similar category of commodities or services, the
application for registration of such trademark could be rejected. Trademark registrations are effective for a renewable ten-year period,
unless otherwise revoked.
Domain names.
Domain
names are protected under the Administrative Measures on the Internet Domain Names promulgated by the MIIT on April 24, 2017 (effective
as of November 1, 2017) and the Registration Implementing Measures on the Domain Names promulgated by the CNNIC. The MIIT is the major
regulatory body responsible for the administration of the PRC Internet domain names, under supervision of which the CNNIC is responsible
for the daily administration of .cn domain names and PRC domain names. MIIT adopts the "first to file" principle with respect
to the registration of domain names.
70
Employee Stock Option Plans
In February 2012, SAFE promulgated
the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of
Overseas Publicly-Listed Company, replacing earlier rules promulgated in March 2007, to regulate the foreign exchange administration of
PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year, with a few exceptions, who participate
in stock incentive plans of overseas publicly-listed companies. Pursuant to these rules, these individuals who participate in any stock
incentive plan of an overseas publicly-listed company, are required to register with SAFE through a domestic qualified agent, which could
be the PRC subsidiaries of such overseas listed company, and complete certain other procedures.
Regulations Relating to Labor
Pursuant to the China Labor
Law, which first took effect on January 1, 1995 and was most recently amended on December 29, 2018, and the China Labor Contract Law,
which became effective on January 1, 2008 and amended in 2012, a written labor contract is required when an employment relationship is
established between an employer and an employee. The China Labor Law stipulates the maximum number of working hours per day and per week
while other labor-related regulations and rules of China stipulate the minimum wages. An employer is required to set up occupational safety
and sanitation systems, implement the national occupational safety and sanitation rules and standards, educate employees on occupational
safety and sanitation, prevent accidents at work and reduce occupational hazards.
An employer is obligated to
sign an indefinite term labor contract with an employee if the employer continues to employ the employee after two consecutive fixed-term
labor contracts, with certain exceptions. The employer also has to pay compensation to the employee if the employer terminates an indefinite
term labor contract, with certain exceptions. Except where the employer proposes to renew a labor contract by maintaining or raising the
conditions of the labor contract and the employee is not agreeable to the renewal, an employer is required to compensate the employee
when a definite term labor contract expires. Furthermore, under the Regulations on Paid Annual Leave for Employees issued by the State
Council in December 2007 and effective as of January 2008, an employee who has served an employer for more than one year and less than
ten years is entitled to a 5-day paid vacation, those whose service period ranges from 10 to 20 years are entitled to a 10-day paid
vacation, and those who have served for more than 20 years are entitled to a 15-day paid vacation. An employee who does not use such
vacation time at the request of the employer must be compensated at three times their normal daily salaries for each waived vacation day.
Regulations Relating to Environmental Protection
The Environmental Protection
Law, which was adopted in 1989 and amended in 2015, effectively established the legal framework for environment protection in China. The
Environmental Protection Law requires the Ministry of Environmental Protection (the "MEP"), to implement uniform supervision
and administration of environmental protection work nationwide and establishes national environmental quality standards and pollutants
discharge standards. Enterprises producing environmental contamination and other public hazards must incorporate environmental protection
work into their planning and establish environmental protection systems.
Through the adoption of the
Environmental Impact Assessment Law of China in 2003 and last amended in 2018 and the Classification Lists for Environmental Impact Assessment
of Construction Projects (latest 2021 Version), the PRC government established a system to appraise the environmental impact of construction
projects and classify the appraisal based on the degree of environmental impact caused by the construction project.
Pursuant to the Order on Ecosystem
by The Ministry of Ecology and Environment, which was issued on July 28, 2017 and most recently amended on December 20, 2019, The Ministry
of Ecology and Environment implements a classification-based management on the environmental impact assessment, or EIA, of pollutants
according to pollutant amount and the impact of the pollutants on the environment as below:
●
For those pollutant discharge
units with large amount of pollutants and significant environmental impacts, the key management on a pollutant discharge permit is required;
71
●
For those pollutant discharge
units with small amount of pollutants and small environmental impacts, the simplified management on a pollutant discharge permit is required;
and
●
For those pollutant discharge
units with very small amount of pollutants and very small environmental impacts, the pollutant discharge registration form is required.
C.
Organizational structure.
Please refer to "
Item
4. Information on the Company– A. History and Development of the Company – Corporate Structure
."
D.
Property, plants and equipment.
Our headquarters is located
at X-702, Runfengdeshangyuan, 60 Anli Road, Chaoyang District, Beijing City, People's Republic of China. We own and lease properties
for our operations in China. We believe our facilities are adequate for our current needs and we do not believe we will encounter any
disputes of property rights or any difficulty in extending the terms of the leases by which we occupy our respective premises. A
summary description of our leased and owned properties is as follows:
Office
Address
Term
Ownership
Space (m
2
)
Office of Beijing REIT
X-702, Runfengdeshangyuan, No. 60 Anli Road, Chaoyang District, Beijing City
April 2023-December 2023
Leased
322.24
Office for the R&D department of Beijing REIT
Room 2304, 5 Building, Luxury Times City, 168 Jixiang Road, Yanta District, Xi'an City
April 2022-March 2025
Leased
126
Office for the R&D department of Beijing REIT
Units 12001-12002, No. 1 Building, West-side of South 2
nd
Ring Road, Beilin District, Xi'an City
Owned
245.38
Office of REIT
22nd Floor, Xinheng Building, No. 123-8, Binhai Avenue, Longhua District, Haikou City, Hainan Province
February 2022 - January 2025
Leased
1,279.66
Land Owned by Xinyi REIT
West Area of Jizheng Avenue, North Area of Tanggang Road, Economic and Technical Development Zone, Xinyi City, Jiangsu Province
February 2017 - February 2067
Owned
74,254.61
Staff dormitory of Beijing REIT
Unit 601, Unit 1, Building 207, Huizhong Beili, Chaoyang District, Beijing City
July 2022-July 2023
Leased
68.74
Staff dormitory of REIT Ordos
Room 401, Unit 1, Building 4, Longxi County Plaza
May 2022-May 2023
Leased
94.95
Office of Hainan Kunneng Direct Supply Chain Management Co., Ltd.
Room 309, 3rd Floor, No. 211 Guoyao Road, Pudong New Area, Shanghai City
February 2022-August 2023
Leased
150
Staff dormitory of Beijing REIT
601, 3rd Floor, Building 216, Datunli, Chaoyang District, Beijing City
October 2022-October 2023
Leased
95.59
Staff dormitory of REIT Ordos
Room 1701, Building 11, Ruijing Famous Garden
October 2022-October 2023
Leased
126.01
Office of Beijing REIT
Room 1611, No.1 Building, No.208, Second Block, Lize Zhongyuan, Wangjing Xinxing Industrial Area, Chaoyang District, Beijing City
January 2023 - January 2024
Leased
42.42
72
Item 4A. Unresolved Staff Comments
Not applicable.
Item 5. Operating and Financial Review and Prospects
The following discussion
and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements
and related notes that appear in this annual report. In addition to historical consolidated financial information, the following discussion
contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below
and elsewhere in this annual report, particularly in "Risk Factors."
A.
Operating Results
Overview
Our business consists of four
business segments, including machinery and equipment sales, construction materials sales, municipal construction projects and technological
consulting and other services, which accounted for 67%, 12%, 8% and 13% of our total revenue from our continuing operations for the year
ended December 31, 2022, respectively, for 50%, 46%, 4% and 0% of our total revenue from our continuing operations for the year ended
December 31, 2021, respectively, and 77%, 21%, 1% and 0% of our total revenue from our continuing operations for the year ended December
31, 2020, respectively. Our technological consulting and other services include the RSA services and software development services conducted
by REIT Mingde which was acquired by us in December 2021.
Our domestic customers are
throughout China and our international customers are mainly located in Asia, the Middle East, North Africa and North America. Sales to
customers in China and internationally from our continuing operations accounted for approximately 91% and 9%, respectively, of our total
sales for the year ended December 31, 2022, approximately 84% and 16%, respectively, of our total sales for the year ended December31,
2021, and approximately 67% and 33%, respectively, of our total sales for the year ended December 31, 2020. As of December 31, 2022, our
equipment and machinery were sold in five countries.
Impact of COVID-19
The Company's operations
are affected by the recent and ongoing outbreak and spread of the COVID-19 which was declared a pandemic by the World Health Organization
in March 2020. The COVID-19 pandemic is causing lockdowns, travel restrictions, and closures of businesses in China and globally. Our
business has been, and may continue to be, materially adversely impacted by the COVID-19 pandemic.
73
From late January 2020 through
March 2020, the Company had to temporarily suspend the manufacturing activities due to government restrictions. During the temporary business
closure period, employees had very limited access to our manufacturing facilities and the shipping services were not available and as
a result, the Company experienced difficulty in delivering the products to customers on a timely basis. In addition, due to the COVID-19,
some of the Company's customers or suppliers experienced financial distress, delayed or defaulted on their payments, reduced the
scale of their business, or suffered disruptions in their business. Our production and sales activities returned to normal after the spread
of COVID-19 had been substantially controlled in China in late 2020. However, since 2021, there has been a resurgence of COVID-19 cases
caused by new variants such as Delta and Omicron in multiple cities in China, as well as across the world. Restrictions have been re-imposed
in certain cities to combat such outbreaks and emerging variants of the virus. The COVID-19 pandemic has had a significant impact on the
construction sector, which is sensitive to economic cycles. The nature of the impacts and extent of the ramifications are in large part
dependent upon the location of the underlying projects. Direct impacts have ranged from a slowdown of available materials and labor to
suspensions and, in some instances, deferral and suspension of entire projects.
On December 7, 2022, China
announced new rules that constitute a relaxation of almost all of its stringent COVID-19 pandemic control measures. Subsequently, local
governments also lifted additional mobility restrictions.   While such measures have effectively reopened business within China,
COVID-19's continued existence may have significant impacts on our industry. The impact of the COVID-19 pandemic on the Company's
future financial results will depend on various factors, such as the length and severity of the crisis, potential resurgences, future
government responses and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among others, all of which
remain highly uncertain and unpredictable. Therefore, 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.
Despite the on-going impact
of COVID-19, our revenue increased by 80%, or approximately $2.9 million, from approximately $3.6 million for the year ended December
31, 2021 to approximately $6.5 million for the year ended December 31, 2022 due to higher machinery and equipment sales resulted from
large contracts for gravity separators and revenue from RSA services and software development services which were acquired in December
2021.
Results of Operations from Our Continuing Operations
Comparison of Operation Results for the
Years Ended December 31, 2022, 2021 and 2020
The following table summarizes
the results of our continuing operations during the fiscal years ended December 31, 2022, 2021 and 2020, and provides information
regarding the dollar and percentage increase or (decrease) during such years.
(All amounts, other than percentages,
in thousands of U.S. dollars)
2022
2021
Statements of Income Data:
Amount
As %
of
Sales
Amount
As %
of
Sales
Amount
Increase
(Decrease)
Percentage
Increase
(Decrease)
Revenues- third party customers
$
6,169
95
%
$
3,318
92
%
$
2,851
86
%
Revenue- related party customers
305
5
%
282
8
%
23
8
%
Total revenues
6,474
100
%
3,600
100
%
2,874
80
%
Cost of revenues- third party customers
5,195
80
%
3,039
84
%
2,156
71
%
Cost of revenues – related parties
472
7
%
175
5
%
297
170
%
Total cost of revenues
5,667
88
%
3,214
89
%
2,453
76
%
Gross profit
807
12
%
386
11
%
421
109
%
Operating expenses:
Selling expenses
3,775
58
%
826
23
%
2,949
357
%
General and administrative expenses
8,593
133
%
4,619
128
%
3,974
86
%
Bad debt expenses
1,711
26
%
2,250
63
%
(539
)
(24
)%
Impairment of long-lived assets
-
-
%
4,344
121
%
(4,344
)
(100
)%
Impairment of goodwill
1,019
16
%
-
-
1,091
-
Research and development expense
961
15
%
347
10
%
614
177
%
Total operating expenses
16,059
248
%
12,387
344
%
3,672
30
%
Loss from operations
(15,252
)
(236
)%
(12,001
)
(333
)%
(3,251
)
27
%
Other income (expenses)
Interest expense, net
(322
)
(5
)%
(103
)
(3
)%
(219
)
211
%
Interest income
3
-
%
2
-
%
1
70
%
Other income (expense), net
178
3
%
(27
)
(1
)%
205
(759
)%
change in fair value in convertible debt
(467
)
(7.2
)%
(1,909
)
53
%
1,441
(76
)%
Loss from disposal of REIT Changjiang
-
-
%
(6,293
)
(175
)%
6,293
(100
)%
Gain from dissolution of subsidiaries
508
8
%
-
-
508
-
%
Share of losses in equity method investments
(46
)
(1
)%
(143
)
(4
)%
97
(68
)%
Total other expenses, net
(146
)
(2
)%
(8,473
)
(235
)%
8,327
(98
)%
Loss before income taxes
(15,398
)
(238
)%
(20,474
)
(569
)%
5,076
(25
)%
Income taxes provision (benefit)
(18
)
-
%
3
-
%
(21
)
(606
)%
Net loss from continuing operations
$
(15,380
)
(238
)%
$
(20,478
)
(569
)%
$
5,098
(25
)%
Net loss from discontinued operations, net of taxes
-
-
(1,596
)
(44
)%
1,596
(100
)%
Net loss
$
(15,380
)
(238
)%
$
(22,074
)
(613
)%
$
6,694
(30
)%
74
2021
2020
Statements of Income Data:
Amount
As %
of
Sales
Amount
As %
of
Sales
Amount
Increase
(Decrease)
Percentage
Increase
(Decrease)
Revenues- third party customers
$
3,318
92
%
$
8,111
97
%
$
(4,793
)
(59
)%
Revenue- related party customers
282
8
%
228
3
%
54
24
%
Total revenues
3,600
100
%
8,339
100
%
(4,739
)
(57
)%
Cost of revenues- third party customers
3,039
84
%
6,194
74
%
(3,154
)
(51
)%
Cost of revenues – related parties
175
5
%
148
2
%
27
18
%
Total cost of revenues
3,214
89
%
6,342
76
%
(3,127
)
(49
)%
Gross profit
386
11
%
1,998
24
%
(1,612
)
(81
)%
Operating expenses:
Selling expenses
826
23
%
1,086
13
%
(259
)
(24
)%
General and administrative expenses
4,619
128
%
3,971
48
%
647
16
%
Bad debt expenses
2,250
63
%
910
11
%
1,340
147
%
Impairment of long-lived assets
4,344
121
%
2,267
27
%
2,077
92
%
Research and development expense
347
10
%
335
4
%
12
4
%
Total operating expenses
12,387
344
%
8,569
103
%
3,818
45
%
Loss from operations
(12,001
)
(333
)%
(6,572
)
(79
)%
(5,429
)
83
%
Other income (expenses)
Interest expense, net
(103
)
(3
)%
(858
)
(10
)%
754
(88
)%
Interest income
2
-
%
1
-
%
1
100
%
Other income (expense), net
(27
)
(1
)%
480
6
%
(507
)
(106
)%
change in fair value in convertible debt
(1,909
)
(53
)%
-
-
%
(1,909
)
-
%
Loss from disposal of REIT Changjiang
(6,293
)
(175
)%
-
-
%
(6,293
)
-
%
Gain from disposal of Gu'an REIT
-
-
2,231
27
%
(2,231
)
(100
)%
Share of losses in equity method investments
(143
)
(4
)%
-
-
%
(143
)
-
%
Total other Income (expenses), net
(8,473
)
(235
)%
1,854
22
%
(10,327
)
(557
)%
Loss before income taxes
(20,474
)
(569
)%
(4,718
)
(57
)%
(15,756
)
334
%
Provision for income taxes
3
-
%
570
7
%
(567
)
(99
)%
Net loss from continuing operations
$
(20,478
)
(569
)%
$
(5,288
)
(63
)%
$
(15,190
)
287
%
Net loss from discontinued operations
(1,596
)
(44
)%
(7,613
)
(91
)%
6,016
(79
)%
Net loss
$
(22,074
)
(613
)%
$
(12,901
)
(155
)%
$
(9,173
)
71
%
(All amounts, other than percentages,
in thousands of U.S. dollars)
75
Revenues
Our total revenues from continuing
operations increased by approximately $2.9 million, or 80%, to approximately $6.5 million for the year ended December 31, 2022 from approximately
$3.6 million for the year ended December 31, 2021. Among our total revenue, revenue from third party customers increased by approximately
$2.9 million or 86% from approximately $3.3 million for the year ended December 31, 2021 to approximately $6.2 million for the year ended
December 31, 2022, while revenue from related party customers increased by $23,091 or 8% from $281,784 for the year ended December 31,
2021 to $304,875 for the year ended December 31, 2022. The significant increase in our total revenue  in the
year ended December 31 2022 compared to the year ended December 31, 2021 was mainly due to higher machinery and equipment sales resulted
from large contracts for gravity separators and revenue from RSA services and software development services which were acquired in December
2021.
Our total revenues  decreased by approximately $4.7 million, or 57%, to approximately $3.6 million for the year ended December 31, 2021 from approximately
$8.3 million for the year ended December 31, 2020. Among our total revenue, revenue from third party customers decreased by approximately
$4.8 million or 59% from approximately $8.1 million in 2020 to approximately $3.3 million in 2021, while revenue from related party customers
increased by $52,970 or 23% from $228,814 in 2020 to $281,784 in 2021. The significant decrease in our total revenue in fiscal 2021 as compared to fiscal 2020 was mainly due to slowdown of construction industry due to financial tightness. Real estate
companies in China faced challenges rolling over their debts and some went bankrupt. Construction investments were cut or delayed due
to financial tightness and market pessimism. Continuous impact of COVID-19 also caused disruption in our supply chains and less demand
for our products. However, we believe our eco-friendly construction materials will be in greater demand than traditional construction
materials as the PRC construction market continues to grow and the PRC government increases its focus on reducing the environmental impact
of construction activities, which includes, among other things, recent environmental initiatives.
The following table summarizes
the results of revenues from our continuing operations by business segments for the fiscal years ended December 31, 2022, 2021 and 2020:
Revenue by Business Segment
(All amounts, other than percentages, in thousands
of U.S. dollars)
December 31, 2022
December 31, 2021
Variance
Amount
% of
Sales
Amount
% of
Sales
Amount
Increase
(Decrease)
Percentage
Increase
(Decrease)
Machinery and equipment
$
4,299
67
%
$
1,800
50
%
$
2,499
139
%
Construction materials
806
12
%
1,658
46
%
(852
)
(51
)%
Municipal construction
527
8
%
142
4
%
385
271
%
Technological consulting and other services
842
13
%
-
-
842
-
%
Total
$
6,474
100
%
$
3,600
100
%
$
2,874
80
%
December 31, 2021
December 31, 2020
Variance
Amount
% of
Sales
Amount
% of
Sales
Amount
Increase
(Decrease)
Percentage
Increase
(Decrease)
Machinery and equipment
$
1,800
50
%
$
6,456
77
%
$
(4,656
)
(72
)%
Construction materials
1,658
46
%
1,777
21
%
(119
)
(7
)%
Municipal construction
142
4
%
107
1
%
35
33
%
Total
$
3,600
100
%
$
8,340
100
%
$
(4,740
)
(57
)%
76
Machinery and Equipment
Revenue from machinery
and equipment sales increased by approximately $2.5 million, or 139%, from approximately $1.8 million for the year ended December
31, 2021 to approximately $4.3 million for the year ended December 31, 2022. The increase is mainly due to increased sales from
large contracts for gravity separators.
Revenue from machinery and
equipment sales in our continuing operations decreased by approximately $4.7 million, or 72%, from approximately $6.5 million for the
year ended December 31, 2020 to approximately $1.8 million for the year ended December 31, 2021. The decrease is mainly due to slowdown
of the construction industry disruption in our supply chains and less demand for our products.
Construction Materials
Sales of our environmental-friendly
construction materials decreased by approximately $0.9 million or 51% to approximately $0.8 million for the
year ended December 31, 2022 as compared to the year ended December 31, 2021 due to the decrease in demand resulting from the downturn
of the national construction market under the impact of COVID-19.
Sales of our environmental-friendly
construction materials in our continuing operations decreased by approximately $0.1 million or 7% for the year ended December 31, 2021
as compared to the year ended December 31, 2020.
Municipal Construction
Municipal construction includes
such projects known as sponge city projects. Our environmental-friendly construction materials such as brick and block may be used in
these municipal construction projects as required by local governments. Revenue from municipal construction projects in our continuing
operations increased by approximately $0.4 million or 271% in the year ended December 31, 2022 as compared to the year ended December
31 2021. The increase is due to overall economy recover in 2022. Revenue from municipal construction projects in our continuing operations
increased by approximately $35,000 in the year ended December 31 2021 as compared to the year ended December 31 2020
.
Technological Consulting
and Other Services
Revenue from technological
consulting and other services was approximately $0.8 million for the year ended December 31, 2022, which was generated by our newly acquired
subsidiary, Hainan Yile IoT Technology Co., Ltd, a PRC limited liability company ("Hainan Yile IoT").
Hainan
Yile IoT provides RSA services to drivers within Hainan Province, China, through our network of RSA services providers of tow providers
and automotive repair services. Through Hainan Yile IoT, we are also engaged in the design, development and sales of customized software
solutions based on the client specifications.
Cost of Revenues
Our total cost of revenues
increased by approximately $2.5 million or 76% to approximately $5.7 million for the year ended December
31, 2022 from approximately $3.2 million for the year ended December 31, 2021. Cost of revenues from third party customers increased by
approximately $2.2 million or 71% from approximately $3.0 million in the year ended December 31, 2021 to approximately $5.2 million in
the year ended December 31, 2022, while cost of revenues from related party customers increased by approximately $0.3 million or 170%
from approximately $0.2 million in the year ended December 31, 2021 to approximately $0.5 million in the year ended December 31, 2022.
The increase in our total cost of revenue was in line with the increase in revenue. As a percentage of revenues, the cost of revenues
decreased to 88% in the year ended December 31, 2022 from 89% in the year ended December 31, 2021.
Our total cost of
revenues decreased by approximately $3.1 million or 49% to approximately $3.2 million for the year ended December 31, 2021 from
approximately $6.3 million for the year ended December 31, 2020. Cost of revenues from third party customers decreased by
approximately $3.2 million or 51% from approximately $6.2 million in the year ended December 31, 2020 to approximately $3.0 million
in the year ended December 31, 2021, while cost of revenues from related party customers increased by $27,019 or 18% from $148,034
in the year ended December 31, 2020 to $175,053 in the year ended December 31, 2021. The decrease in our total cost of revenue was
in line with the decrease in revenue. As a percentage of revenues, the cost of revenues increased to 89% in the year ended December
31, 2021 from 76% in the year ended December 31, 2020 due to increase in purchase price of raw materials and labor costs.
77
Cost of Revenues by Business Segment
(All amounts, other than percentages, in thousands
of U.S. dollars)
For the Year Ended December 31,
Variance
2022
2021
Amount
Percentage
Amount
% of
Costs
Amount
% of
Costs
Increase
(Decrease)
Increase
(Decrease)
Machinery and Equipment
$
3,931
69
%
$
1,501
47
%
$
2,430
162
%
Construction materials
905
16
%
1,563
49
%
(658
)
(42
)%
Municipal construction
486
9
%
150
4
%
336
224
%
Other services
346
6
%
-
-
%
346
-
%
Total
$
5,668
100
%
$
3,214
100
%
$
2,454
76
%
For the Year Ended December 31,
Variance
2021
2020
Amount
Percentage
Amount
% of
Costs
Amount
% of
Costs
Increase
(Decrease)
Increase
(Decrease)
Machinery and Equipment
$
1,501
47
%
$
4,430
70
%
$
(2,929
)
(66
)%
Construction materials
1,563
49
%
1,901
30
%
(338
)
(18
)%
Municipal construction
150
4
%
11
-
%
139
1,264
%
Total
$
3,214
100
%
$
6,342
100
%
$
(3,128
)
(49
)%
Machinery and Equipment
Cost
of revenues for machinery and equipment sales increased by approximately $2.4 million, or 162%, from approximately $1.5 million for the
year ended December 31, 2021 to approximately $3.9 million for the year ended December 31, 2022. The increase was primarily due to the
increase in production volume, as well as increase in costs of raw materials and labor in 2022.
Cost
of revenues for machinery and equipment sales decreased by approximately $2.9 million, or 66%, from approximately $4.4 million for the
year ended December 31, 2020 to approximately $1.5 million for the year ended
December 31, 2021. The decrease was primarily due
to the decrease in
production volume
.
Construction Materials
Cost of
revenues
for
sales of our environmental-friendly construction materials decreased by approximately $0.7 million, or 42%, from approximately
$1.6 million for the year ended December 31, 2021 to approximately $0.9 million for the year ended December 31, 2022. The decrease was
due to decrease in sales volume for construction materials sold in the downturn of the national construction market. Since we had fixed
costs which did not change as a result of the change in sales, the decrease in our cost of revenues is not as significant as the decrease
in the sales of construction materials.
Cost of
revenues
for
sales of our environmental-friendly construction materials decreased by approximately $0.3 million, or 18%, from approximately
$1.9 million for the year ended December 31, 2020 to approximately $1.6 million for the year ended December 31, 2021. The decrease was
due to decrease in sales volume for construction materials sold in downturn of the national construction market.
Municipal Construction
Cost of
revenues
for
sales of municipal construction projects increased by approximately $0.3 million, or 224%, from approximately $0.2 million
for the year ended December 31, 2021 to approximately $0.5 million for the year ended December 31, 2022.
78
Cost of
revenues
for
sales of municipal construction projects in our continuing operations amounted to approximately $150,000 and approximately
$11,000 for the years ended December 31, 2021 and 2020, respectively.
Technological Consulting and Other services
Cost of revenues for technological
consulting and other services amounted to approximately $0.3 million for the year ended December 31, 2022. There was no cost of technological
consulting and other services for the years ended December 31, 2021 and 2020.
Gross Profit
Our gross profit increased by approximately $0.4 million, or 109%, to approximately $0.8 million for the year ended December 31,
2022 from approximately $0.4 million for the year ended December 31, 2021. Gross profit margin for our continuing operations was 12% for
the year ended December 31, 2022, as compared with 11% for the year ended December 31, 2021.
Our gross profit
decreased by approximately $1.6 million, or 81%, to approximately $0.4 million for the year ended December 31, 2021 from
approximately $2.0 million for the year ended December 31, 2020. Gross profit margin for our continuing operations was 11% for
fiscal 2021, as compared with 24% for fiscal 2020. The decrease in gross profit margin from our continuing operations was primarily
attributable to significant decrease in gross profit in machinery and equipment segment due to the challenging market environment
resulting from the COVID-19 pandemic which resulted in financial tightness and slowdown of the construction industry and thereby
reduced demand for our products. We had to offer more competitive prices to maintain and win new customers/projects. In addition,
the COVID-19 pandemic caused disruption in our supply chain, impacted our ability to timely fulfill our customer orders and led to
higher fulfilment expenses.
Our gross profit and gross
margin by segments are as follows:
(All amounts, other than percentages, in thousands
of U.S. dollars)
2022
2021
Variance
Gross
Profit
Gross
Profit%
Gross
Profit
Gross
Profit%
Gross
Profit
Increase
(Decrease)
Gross
Profit%
Increase
(Decrease)
Machinery and equipment
$
368
9
%
$
298
17
%
$
70
23
%
Construction materials
(99
)
(12
)%
96
6
%
(194
)
(204
)%
Municipal construction
41
8
%
(8
)
(6
)%
49
(612
)%
Technological consulting and other services
497
59
%
-
-
497
-
%
Total
$
807
12
%
$
386
11
%
$
422
109
%
2021
2020
Variance
Gross
Profit
Gross
Profit%
Gross
Profit
Gross
Profit%
Gross
Profit
Increase
(Decrease)
Gross
Profit%
Increase
(Decrease)
Machinery and equipment
$
298
17
%
$
2,026
31
%
$
(1,728
)
(85
)%
Construction materials
96
6
%
(124
)
(7
)%
220
(177
)%
Municipal construction
(8
)
(6
)%
96
90
%
(104
)
(108
)%
Total
$
386
11
%
$
1,998
24
%
$
(1,612
)
(81
)%
79
Machinery and Equipment
Gross profit for sales of
machinery and equipment products increased by approximately $70,000 to approximately $0.4 million for the
year ended December 31, 2022 as compared to approximately $0.3 million for the year ended December 31, 2021. Gross profit margin for this
segment was 9% and 17%, respectively, for the years ended December 31, 2022 and 2021. The decrease in gross profit margin was mainly due
to the fact that we had to offer more competitive prices for our products in the challenging market environment resulting from the COVID-19
pandemic which resulted in financial tightness and slowdown of the construction industry and thereby reduced demand for our products.
In addition, the COVID-19 pandemic caused disruption in our supply chain, impacted our ability to timely fulfill our customer orders and
led to higher fulfilment expenses.
Gross profit for machinery
and equipment products decreased by approximately $1.7 million to approximately $0.3 million for the year
ended December 31, 2021 as compared to $2.0 million for the year ended December 31, 2020. Gross profit margin for this segment was 17%
and 31%, respectively, for the years ended December 31, 2021 and 2020. The decrease in gross profit margin was mainly due to the fact
that we had to offer more competitive prices for our products in the challenging market environment resulting from the COVID-19 pandemic
which resulted in financial tightness and slowdown of the construction industry and thereby reduced demand for our products. In addition,
the COVID-19 pandemic caused disruption in our supply chain, impacted our ability to timely fulfill our customer orders and led to higher
fulfilment expenses.
Construction Materials
Gross loss for construction
materials was approximately $0.1 million for the year ended December 31, 2022 compared to a gross profit
of approximately $0.1 million for the year ended December 31, 2021. The gross profit (loss) margin for this segment was approximately
(12)% for the year ended December 31, 2022 as compared to 6% for the year ended December 31, 2021.We had fixed costs which did not decrease
proportionately with the revenue decrease, and thus resulted in a gross loss.
Gross profit for construction
materials was approximately $0.1 million for the year ended December 31, 2021 compared to a gross loss of
approximately $0.1 million for the year ended December 31, 2020. The gross profit margin for this segment was approximately 6% for the
year ended December 31, 2021 as compared to (7%) for the year ended December 31, 2020. The increase in gross margin was mainly due to
the reverse of approximately $0.1 million in inventory valuation, which caused decrease in our cost of revenue.
Municipal Construction
Gross profit (loss) for the
municipal construction project segment was approximately $0.04 million, $(0.01) million and $0.1million
for the years ended December 31, 2022, 2021 and 2020, respectively.
Technological Consulting and Other Services
Gross profit for technological
consulting and other services was approximately $0.5 million for the year ended December 31, 2022. The gross profit margin for this segment
was approximately 59% for the year ended December 31, 2022. There was no technological consulting and other services offered during the
years ended December 31, 2021 and 2020.
Selling Expenses
For the year ended December
31, 2022, our selling expenses were approximately $3.8 million, representing a 357% increase from approximately
$0.8 million in the year ended December 31, 2021. As a percentage of sales, our selling expenses were 58% and 23% for the years ended
December 31, 2022 and 2021, respectively. The increase was mainly due to more marketing activities and shipping and handling fees associated
with increased sales in the year ended December 31, 2022.
80
For fiscal 2021, our selling
expenses were approximately $0.8 million, representing a 24% decrease from approximately $1.1 million in
the year ended December 31, 2020. As a percentage of sales, our selling expenses were 23% and 13% for the years ended December 31, 2021
and 2020, respectively. The decrease was mainly due to fewer marketing activities and shipping and handling fees associated with decreased
sales in the year ended December 31, 2021.
General and Administrative Expenses
For the year ended December
31, 2022, our general and administrative expenses were approximately $8.6 million, representing an increase of approximately $4.0 million
compared to approximately $4.6 million in the year ended December 31, 2021. The increase in general and administrative expenses was mainly
due to an increase of share-based compensation for services and consulting and professional fees of $4.0 million. As a percentage of revenues,
general and administrative expenses were 133% and 129% of our total revenues for the years ended December 31, 2022 and 2021, respectively.
For the year ended December
31, 2021, our general and administrative expenses were approximately $4.6 million, representing an increase of approximately $0.7 million
compared to approximately $4.0 million in the year ended December 31, 2020. The increase in general and administrative expenses was mainly
due to an increase of share-based compensation for services and consulting and professional fees of $1.9 million, offset by decreases
in other general administrative expenses. As a percentage of revenues, general and administrative expenses were 129% and 48% of our total
revenues for the years ended December 31, 2021 and 2020, respectively.
Bad Debt Expenses
For the year ended December
31, 2022, our bad debt expenses were approximately $1.7 million, representing a decrease of approximately
$0.5 million as compared to approximately $2.3 million in the year ended December 31, 2021. We incurred significant bad debt expenses
on uncollectible accounts receivable and advance payments for fiscal 2022 and 2021, however, in fiscal 2022, the impact of COVID-19 on
our customers alleviated. As a percentage of revenues, bad debt expenses were 26% and 63% of our total revenues for the years ended December
31, 2022 and 2021, respectively.
For the year ended December
31, 2021, our bad debt expenses were approximately $2.3 million, representing an increase of approximately
$1.4 million as compared to approximately $0.9 million in the year ended December 31, 2020. We incurred significant bad debt expenses
on uncollectible accounts receivable and advance payments due to slower or delayed payments from customers and delayed fulfillment of
suppliers who were adversely affected by the COVID-19 pandemic and faced shortage in working capital. As a percentage of revenues, bad
debt expenses were 63% and 11% of our total revenues for the years ended December 31, 2021 and 2020, respectively.
Research and Development Expenses
Our research and development
("R&D") expenses were approximately $1.0 million, $0.3 million and $0.3 million for the
years ended December 31, 2022, 2021 and 2020, respectively. The increase in R&D expenses in the year ended December 31, 2022 was due
to more R&D projects conducted by Beijing REIT.
Impairment of Long-lived Assets
During the years ended December
31, 2022, 2021 and 2020, due to the Company's reoccurring loss, the Company further assessed that the expected future cash flows
may not cover the carrying value of the Company's fixed asset equipment and machinery. As a result, the Company recorded an additional
impairment of approximately $nil, $4.3 million and $2.3 million on its fixed assets for the year ended
December 31, 2022, 2021 and 2020, respectively.
81
Impairment of Goodwill
For the year ended December
31, 2022, due to the slow development of REIT Mingde and its subsidiaries, the Company performed the two-step test for the REIT Mingde
and its subsidiaries. In accordance with ASC 350-20, the Company recorded an impairment loss of $1,018,870 for the year ended December
31, 2022.
Interest Expense
Our interest expenses were approximately $0.3 million, $0.1 million and $0.9 million for the years ended December 31, 2022, 2021 and
2020, respectively. The increase in interest expenses for fiscal 2022 as compared to fiscal 2021 was because of a higher loan balance
in 2022 as compared to that in 2021.
The decrease in interest expenses for
the year ended
December 31,
2021 as compared to
the year ended December 31,
2020
was because of a lower loan balance in 2021 as compared to that in 2020.
Other Income (Expense)
Other income amounted to approximately
$0.2 million in the year ended December 31, 2022, mainly representing government subsidy. We had other
expense
of approximately $26,991 in the year ended December 31, 2021, mainly representing acquired inventory loss
related to Hainan Yile IoT. We had other income of approximately $0.5 million from our continuing operations in fiscal 2020, mainly due
to approximately $0.3 million in government subsidy and recognition of certain balances over three years in customer advance as other
income.
Change in Fair Value in Convertible Debt
During the years ended December
31, 2022 and 2021, change in fair value in convertible debt amounted to approximately $0.5 million and $1.9 million, respectively.
There
was no change in fair value of convertible debt in year ended December 31, 2020.
Share of Losses in Equity Method Investments
For the years ended December
31, 2022 and 2021, share of losses in equity method investments for Shexian Ruibo amounted to approximately $0.05 million and $0.1 million,
respectively.
There was no
share of losses in equity method investments
in
the year ended December 31, 2020.
Gain (loss) from Disposal and Dissolution
of Subsidiaries
The
Company recognized a gain from dissolving subsidiaries of approximately $0.5 million in the year ended December 31, 2022. The Company
recognized a loss from disposal of REIT Changjiang of approximately $6.3 million in the year ended December 31, 2021. The Company recognized
a gain from disposal of
Gu'an REIT
of approximately $2.2 million in the year ended
December 31, 2020.
Loss before Income Taxes
Our loss before income taxes
was approximately $15.4 million for the year ended December 31, 2022, a decrease of approximately $5.1
million as compared to loss before income taxes of approximately $20.5 million for the year ended December 31, 2021. The decrease in our
loss before income taxes for the fiscal year 2022 was primarily attributable to the increase in revenues and decrease in other expenses,
partially offset by increased costs and operating expenses as discussed above.
Our loss before income taxes
was approximately $20.5 million for the year ended December 31, 2021, an increase of approximately $15.8
million as compared to loss before income taxes of approximately $4.7 million for the year ended December 31, 2020. The increase in our
loss before income taxes for the year ended December 31, 2021 was primarily attributable to the significant decrease in revenues and
increased costs and expenses as discussed above.
82
Provision for Income Taxes
The Company's PRC subsidiaries
are subject to PRC income tax, which is computed according to the relevant laws and regulations in the PRC. Under the EIT Law, the corporate
income tax rate applicable to all companies, including both domestic and foreign-invested companies, is 25%. However, each of Beijing
REIT and Hainan Yile IoT is recognized as a HNTE by PRC government and subject to a favorable income tax rate of 15%.
The following table reconciles
the income tax expense by statutory rate to the Company's actual income tax expense from our continuing operations:
For the Years Ended December 31,
2022
2021
2020
Income tax expense computed based on PRC statutory income tax rate
$
(3,849,305
)
$
(5,118,519
)
$
(1,179,508
)
Effect of favorable income tax rate in certain entity in PRC
181,088
889,716
(164,071
)
Non-PRC entities not subject to PRC tax
1,749,333
1,564,644
401,488
Research & Development ("R&D") tax credit
(240,150
)
(260,213
)
(251,178
)
Non-deductible expenses - permanent difference
171,393
588,191
826,034
Change in valuation allowance
1,970,079
2,339,650
937,209
Income tax expenses
$
(17,562
)
$
3,469
$
569,974
Net Loss
Our net loss from continuing
operations amounted to approximately $15.4 million, $20.5 million and $5.3 million for the years ended December 31, 2022, 2021 and 2020,
respectively. Our net loss from discontinued operations amounted to approximately $nil, $1.6 million and $7.6 million for the years ended
December 31, 2022, 2021 and 2020, respectively. Total net loss amounted to approximately $15.4 million, $22.1 million and $12.9 million
for the years ended December 31, 2022, 2021 and 2020, respectively.
B.
Liquidity and Going Concern
We are a holding company incorporated
in the British Virgin Islands. REIT Holdings, our wholly owned subsidiary established in Hong Kong, directly owns Beijing REIT, REIT Technology
and REIT Technology, which in turn own our assets through their respective subsidiaries in China, India and the United States. We may
need dividends and other distributions in equity from our subsidiaries, including our PRC subsidiaries to satisfy our liquidity requirements.
Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in
accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of
their 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 subsidiaries may also allocate a portion of their after-tax profits based on PRC accounting
standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. We have primarily
relied on direct payments of expenses by our subsidiaries (which generate revenues), to meet our obligations to date.
Substantially all of our operations
are conducted in China and are denominated in RMB, which is subject to the exchange control regulation in China, and, as a result, we
may have difficulty distributing any dividends outside of China due to PRC exchange control regulations that restrict the ability to convert
RMB into U.S. Dollars.
Under applicable PRC regulations,
foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC
accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its
after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reaches
50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise
has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity
owners except in the event of liquidation. Under PRC law, RMB is currently convertible into U.S. Dollars under a company's "current
account," which includes dividends, trade and service-related foreign exchange transactions, without prior approval of the SAFE,
not from a company's "capital account," which includes foreign direct investments and loans, without the prior approval
of the SAFE.
83
We have historically funded
our working capital needs from operations, advance payments from customers, bank borrowings, equity and debt offering, capital contributions
from shareholders and related-party loans. Presently, our principal sources of liquidity are generated from our operations, proceeds from
our shareholders' contributions, and loans and notes from commercial banks. Our working capital requirements are influenced by the
level of our operations, the numerical volume and dollar value of our sales contracts, the progress of execution on our customer contracts,
and the timing of accounts receivable collections.
As reflected in the Company's
consolidated financial statements for the year ended December 31, 2022, the Company reported a net
loss of approximately $15.4 million. As of December 31, 2022, the Company had a working capital deficit
of approximately of $10.1 million.
As of December 31, 2022, the
Company had outstanding bank loans of approximately $1.3 million from a PRC bank. If the Company cannot renew existing loans or borrow
additional loans from banks, the Company's working capital may be further negatively impacted.
As of December 31, 2022, the
Company had cash of approximately $0.1 million. In addition, the Company had outstanding accounts receivable of approximately $2.2 million
(including accounts receivable from third-party customers of $2.1 million and accounts receivable from related party customers of approximately
$0.1 million), of which approximately $0.3 million, or 7.7%, had been subsequently collected between January and April 2022, and became
available for use as working capital. As of December 31, 2022, the Company had outstanding bank loans of approximately $1.3 million from
a PRC bank.
Management expects that it
would be able to renew all of its existing bank loans upon their maturity based on past experience and the Company's good credit
history. Currently, the Company is working to improve its liquidity and capital source mainly through cash flow from its operations, renewal
of bank borrowings, and borrowing from related parties. In order to fully implement its business plan and sustain continued growth, the
Company may also seek equity financing from outside investors. At the present time, however, the Company does not have commitments of
funds from any potential investors. No assurance can be given that additional financing, if required, would be available on favorable
terms or at all.
Based on the reasons above,
there is a substantial doubt about the Company's ability to continue as a going concern for the next 12 months from the issuance
of the consolidated financial statements.
Cash Flows for Years Ended December 31, 2022, 2021 and 2020
The following table sets forth summary of our cash
flows for the periods indicated:
(All amounts in thousands
of U.S. dollars)
December 31,
2022
December 31,
2021
December 31,
2020
Net cash (used in) provided by operating
    activities
$
(9,962
)
$
(2,764
)
$
248
Net cash provided by (used in) investing activities
4,243
(1,743
)
944
Net cash provided by (used in) financing activities
4,756
4,048
(1,178
)
Effect of exchange rate changes on cash and cash equivalents
620
(204
)
121
Net (decrease) increase in cash and cash
    equivalents
(344
)
(663
)
135
Cash and restricted cash,
    beginning of the year
457
1,121
986
Cash and restricted cash, end of the year
114
$
458
$
1,121
Less: cash and cash equivalents, restricted cash of discounted operations at end of period
-
-
63
Cash and cash equivalents, restricted cash of continued operation, at end of period
$
114
$
458
$
1,058
84
Operating Activities
Net cash used in operating
activities was approximately $10.0 million in the year ended December 31, 2022. Net cash used in operating activities in the year ended
December 31, 2022 mainly consisted of net loss from continuing operation of approximately $15.4 million, adjustments of non-cash items
of approximately $8.3 million, an increase of approximately $2.7 million in accounts receivable, a decrease of approximately $0.1 million
in inventories, an increase of approximately $0.7 million in advance from customers, an increase of approximately $0.7 million in accounts
payable, a decrease of approximately $0.2 million in accrued expenses and other liabilities, and a decrease of approximately $0.6 million
in taxes payable.
Net cash used in operating
activities was approximately $2.8 million in the year ended December 31, 2021. Net cash provided by operating activities in the year ended
December 31, 2021 mainly consisted of net loss from continuing operation of approximately $20.5 million, adjustments of non-cash items
of approximately $18.2 million, a decrease of approximately $0.7 million in accounts receivable, a decrease of approximately $1.2 million
in advance to suppliers, a decrease of approximately $1.4 million in advance from customers, an increase of approximately $1.1 million
in accounts payable, an increase of approximately $1.0 million in accrued expenses and other liabilities, and a decrease of approximately
$0.2 million in deferred grants.  Net cash provided by discontinued operating activities was approximately $2.7 million.
Net cash provided by operating
activities was approximately $0.2 million in the year ended December 31, 2020. Net cash provided by operating activities in the year ended
December 31, 2020 mainly consisted of net loss of approximately $5.3 million, adjustments of non-cash items of approximately $3.0 million,
a decrease of approximately $3.9 million in accounts receivable, an increase of approximately $0.4 million in advance from customers,
an increase of approximately $1.1 million in accrued expenses and other liabilities, an increase of approximately $0.7 million in tax
payable, offset by an increase of approximately $1.2 million in advance to suppliers, a decrease of approximately $1.8 million in accounts
payable and, and an increase of approximately $0.7 million in prepayments and other assets. Net cash provided by discontinued operating
activities was $6,990.
Investing Activities
Net cash provided by investing
activities was approximately $4.2 million for the year ended December 31, 2022. During the year ended December 31, 2022, the Company paid
approximately $1.3 million on software and received proceeds from disposal of subsidiaries of approximately $5.7 million.
Net cash used in investing
activities was approximately $1.7 million for the year ended December 31, 2021. During the year ended December 31, 2021, the Company paid
approximately $2.6 million on the construction in progress ("CIP") and received proceeds from disposal of subsidiaries of
approximately $2.6 million. Net cash used in discontinued investing activities was approximately $1.8 million.
Net cash provided by investing
activities was approximately $0.9 million for the year ended December 31, 2020. During the year ended December 31, 2020, we paid approximately
$2.6 million for the acquisition of a 41.67% ownership interest in Shexian Ruibo and received approximately $3.8 million for disposition
of Gu'an REIT. Net cash used in discontinued investing activities was approximately $0.2 million.
Financing Activities
Net cash provided by financing
activities was approximately $4.8 million for the year ended December 31, 2022, including proceeds from bank loans of approximately $0.7
million, proceeds of approximately $3.0 million from issuance of a convertible note, proceeds from third-party loans of approximately
$1.8 million, proceeds received from share issuance of approximately $3.6 million, offset by repayment of bank loans of approximately
$1.5 million, net loan payment to related parties of approximately $1.3 million, payments to non-controlling shareholders of approximately
$1.9 million for purchasing non-controlling interest of a subsidiary, and repayment of third-party loans of approximately $1.0 million.
85
Net cash provided by financing
activities was approximately $4.0 million for the year ended December 31, 2021, including proceeds from bank loans of approximately $2.3
million and proceeds of approximately $3.7 million from issuing convertible loans, proceeds from third party loans of approximately $0.8
million, offset by repayment of bank loans of approximately $7.2 million and net loan payment to related parties of approximately $0.3
million.    Net cash provided by discontinued financing activities was approximately $4.7 million.
Net cash used in financing
activities was approximately $1.9 million for the year ended December 31, 2020, including proceeds from bank loans of approximately $11.0
million, offset by repayment of bank loans of approximately $13.2 million and net repayment to related parties of $38,835. Net cash provided
by discontinued financing activities was approximately $0.4 million.
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 restricted amounts as determined pursuant to PRC statutory laws totaled $1,066,554 and $1,230,387
as of December 31, 2022 and 2021, respectively.
Capital Expenditures
We had capital expenditures
of approximately $1.5 million, $2.6 million, and $0.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, for
purchases of equipment and intangible assets in connection with our business activities.
Recent Accounting Pronouncements
A list of recent relevant
accounting pronouncements is included in Note 2 "Summary of Principal Accounting Policies" of our consolidated financial statements
included elsewhere in this annual report.
C.
Research and Development, Patent and Licenses, etc.
Please
refer to "
Item 4. Information on the Company—B. Business Overview—Research and Development" and "—Intellectual
Property."
D.
Trend Information.
Other
than as disclosed 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 effect on our net revenues, income from continuing operations, profitability, liquidity or capital
resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial
condition.
E.
Critical Accounting Estimates.
We
prepare our financial statements in conformity with accounting principles generally accepted by the United States of America ("U.S.
GAAP"), which requires us to make judgments, estimates and assumptions that affect our reported amount of assets, liabilities, revenue,
costs and expenses, and any related disclosures. Although there were no material changes made to the accounting estimates and assumptions
in the past years, we continually evaluate these estimates and assumptions based on the most recently available information, our own historical
experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral
component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.
86
We
believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us
to make significant accounting estimates. Accordingly, these are the policies we believe are the most critical to understanding and evaluating
our consolidated financial condition and results of operations.
Accounts Receivable,
Net
Accounts
receivable is recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually
grants credit to customers with good credit standing with a maximum of 180 days and determines the adequacy of reserves for doubtful accounts
based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when
there is objective evidence that the Company may not be able to collect amounts due. 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. Based on the assessment
of customers' credit and ongoing relationships, the Company's payment terms typically range from 90 days to 1 year. The provision
is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive
income. Actual amounts received may differ from management's estimate of credit worthiness and the economic environment. Delinquent
account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection
is not probable. As affected by the ongoing COVID-19 pandemic and spread, the Company's accounts receivable collection was negatively
affected. Based on subsequent collection analysis, the Company accrued increased bad debt reserve for the outstanding accounts receivable
as of December 31, 2021. As a result, allowance for uncollectible balances amounted to $1,771,761 and $904,052 as of December 31,
2022 and 2021, respectively.
Impairment of Long-lived
Assets
The
Company reviews long-lived assets, including definitive-lived intangible assets, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual
disposition are below the asset's carrying value, then the asset is deemed to be impaired and written down to its fair value. During
the year ended December 31, 2019, the Company disposed of approximately $0.2 million of outdated and fully depreciated equipment and machinery.
Given the Company's net loss position in fiscal 2022, 2021 and 2020, the Company further assessed that the expected future cash
flow generated from its machinery, equipment, and other long-lived assets would not recover their carrying value and as a result, the
Company recorded an impairment of approximately $nil, $4.3 million and $2.3 million on these fixed assets for the year ended December
31, 2022, 2021 and 2020, respectively, based on the fair value assessment provided by the third party valuation firm using the significant
unobservable inputs.
Revenue Recognition
The
Company adopted ASC Topic 606 Revenue from Contracts with Customers ("ASC 606") on January 1, 2018 using the modified retrospective
approach. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company's customers
in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services.
To
determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract with
the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration
to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to
the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
The
Company's revenues are primarily derived from the following sources:
●
Revenue from machinery and equipment sales
The
Company recognizes revenue when the machinery and equipment is delivered and control is transferred. The Company generally provide a warranty
for a period of 12 months after the customers receive the equipment. The Company determines that such product warranty is not a separated
performance obligation because the nature of warranty is to provide assurance that a product will function as expected and in accordance
with customer's specification and the Company has not sold the warranty separately. From its past experience, the Company has not
experienced any material warranty costs and, therefore, the Company does not believe an accrual for warranty cost is necessary for the
years ended December 31, 2022, 2021 and 2020.
87
●
Revenue from construction materials sales
The
Company recognizes revenue, net of sales taxes and estimated sales returns, when the construction materials are shipped to, delivered
to or picked up by customers and control is transferred.
●
Revenue from municipal construction projects
The
Company provides municipal construction services, also known as sponge city projects. The Company recognizes revenue associated with these
contracts over time as service is performed and the transfer of control occurs, based on a percentage-of-completion method using cost-to-cost
input methods as a measure of progress. When the percentage-of-completion method is used, the Company estimates the costs to complete
individual contracts and records as revenue that portion of the total contract price that is considered complete based on the relationship
of costs incurred to date to total anticipated costs (the cost-to-cost approach).
Under
the cost-to-cost approach, the use of estimated costs to complete each contract is a significant variable in the process of determining
recognized revenue, requires judgment and can change throughout the duration of a contract due to contract modifications and other factors
impacting job completion. The costs of earned revenue include all direct material and labor costs and those indirect costs related to
contract performance, such as indirect labor, supplies, tools and repairs. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined.
●
Revenue from technological consulting and other services
The
Company recognizes revenue when technological consulting and other services are rendered and accepted by the customers.
Contract Assets
and Liabilities
Payment
terms are established on the Company's pre-established credit requirements based upon an evaluation of customers' credit quality.
Contact assets are recognized for in related accounts receivable. Contract liabilities are recognized for contracts where payment has
been received in advance of delivery. The contract liability balance can vary significantly depending on the timing of when an order is
placed and when shipment or delivery occurs.
As
of December 31, 2022 and 2021, other than accounts receivable and advances from customers, the Company had no other material contract
assets, contract liabilities or deferred contract costs recorded on its consolidated balance sheet. Costs of fulfilling customers'
purchase orders, such as shipping, handling and delivery, which occur prior to the transfer of control, are recognized in selling, general
and administrative expense when incurred.
Stock-based Compensation
The
Company accounts for share-based compensation in accordance with ASC 718, Compensation — Stock Compensation ("ASC 718").
In accordance with ASC 718, the Company determines whether an award should be classified and accounted for as a liability award or an
equity award. All the Company's share-based awards were classified as equity awards and are recognized in the consolidated financial
statements based on their grant date fair values.
88
The
Company has elected to recognize share-based compensation using the straight-line method for all share-based awards granted with graded
vesting based on service conditions. The Company uses the accelerated method for all awards granted with graded vesting. The Company accounts
for forfeitures as they occur in accordance with ASU No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvement to
Employee Share-based Payment Accounting. The Company, with the assistance of an independent third-party valuation firm, determined the
fair value of the stock options granted to employees. The binomial option pricing model and Black-Scholes Model were applied in determining
the estimated fair value of the options granted to employees and non-employees.
Income Taxes
The
Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax
bases.
Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized.
The
provisions of ASC 740-10-25, "Accounting for Uncertainty in Income Taxes," prescribe a more-likely-than-not threshold for
consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation
also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets
and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company records a liability
for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated.
To
the extent applicable, the Company records interest and penalties as a general and administrative expense. The Company's subsidiaries
in China and Hong Kong are subject to the income tax laws of the PRC and Hong Kong. No significant taxable income was generated outside
the PRC for the years ended December 31, 2022, 2021 and 2020. As of December 31, 2022, the tax years ended December 31, 2018 through December
31, 2022 for the Company's PRC subsidiaries remain open for statutory examination by PRC tax authorities.
Item 6. Directors, Senior Management and Employees
A.
Directors and senior management.
The following table sets forth information regarding
directors and our executive officers as of the date of this annual report.
Name
(1)
Age
Position
Hengfang Li
(2)
60
Chief Executive Officer and Chairman of the Board
Guangfeng Dai
(2)
62
President, Chief Operating Officer and Director
Zhizhong Hu
(2)
60
Chief Technology Officer and Director
Degang Hou
61
Chief Internal Control Officer
Yue Hu
33
Chief Financial Officer
Tonglong Liu
(3) (5) (6) (7)
59
Director
Baoqing Sun
(3) (5) (6) (7)
60
Director
Lidong Liu
(4)
(5)
51
Director
Austin Huang
(4) (6) (7)
65
Director
(1)
Each individual's business address is c/o Beijing REIT
Technology Development Co., Ltd., Building X-702, 60 Anli Road, Chaoyang District, Beijing China.
(2)
Class C director, whose term
will expire at the 2025 annual meeting of shareholders.
89
(3)
Class B director, whose term
will expire at the 2024 annual meeting of shareholders.
(4)
Class A director, whose term
will expire at the 2023 annual meeting of shareholders.
(5)
Member of audit committee.
(6)
Member of compensation committee.
(7)
Member of nominating committee.
Hengfang Li.
Mr. Li
has served as the Chief Executive Officer and Chairman of ReTo since April 2016. Mr. Li founded Beijing REIT in 1999 and has served
as Beijing REIT's Chief Executive Officer and Chairman since 1999. Mr. Li served as the chief representative in China of the German
Hess Group from 1995 until 1999. From 1988 through 1995, Mr. Li was an engineer, senior engineer and then branch director at China North
Vehicle Engine Research Center. Mr. Li holds a Master degree in Engine Studies from Beijing Institute of Technology.
Guangfeng Dai.
Mr.
Dai became the President of ReTo in 2020. Previously Mr. Dai served as the Chief Operating Officer and of ReTo and has served
as a Director since November 2016. Mr. Dai has served as Beijing REIT's Chief Operating Officer and Director since 2000.
Mr. Dai served as the deputy representative in China for Hess Mechanical Engineering Co., Ltd. of Germany from 1997 until 2000. From
1995 through 1997, Mr. Dai was a senior engineer at Yanxing Corporation of China. From 1992 through 1994, Mr. Dai was a senior
engineer at China North Industries Group Corporation. Mr. Dai received his Master degree in Automobile Engineering from Beijing
Institute of Technology.
Zhizhong Hu.
Mr.
Hu has served as the Chief Technology Officer and Director of ReTo since November 2016. Mr. Hu has served as Beijing REIT's Chief
Technology Officer and Director since 2000. Mr. Hu served as the general manager and executive director of Yichang Hayes Building Materials
Co., Ltd. from 1997 through 2000. From 1996 through 1997, Mr. Hu served as the business representative for Hayes Mechanical Engineering
Co., Ltd. of Germany. Mr. Hu received his Bachelor's Degree in Mechanical Engineering from Nanjing University of Science and
Technology.
Degang Hou.
Mr.
Hou has served as the Chief Internal Control Officer of ReTo since February 2020. From 1983 through 1999, he was an engineer and
senior engineer of North Vehicle Research Institute, State Weaponry Equipment Corporation. From 1999 through 2020 he was the deputy
general manager for Beijing REIT.  He graduated in Ship Internal Combustion Engine Direction from Dalian
University of Technology in 1983.
Yue Hu.
Ms.
Hu has served as Chief Financial Officer of ReTo since August 2022. She has worked in Beijing REIT Technology Development Co., Ltd.,
a wholly owned subsidiary of ReTo, as an assistant to the management since May 2019, and has assisted with preparation and filing
of periodic reports of the Company to the Securities and Exchange Commission. From March 2015 to December 2016, Ms. Hu worked
in Gu'an REIT Machinery Manufacturing Co., Ltd., a former wholly owned subsidiary of the Company, as a procurement specialist, in
charge of purchasing accessories needed for production and processing. Ms. Hu received her Bachelor's degree in Accounting from
Xi'an Siyuan University.
90
Tonglong Liu.
Mr. Liu
has served as an independent director of the Company since November 2022. Mr. Liu has also served as the Chief Executive Officer
and Chairman of Beike Huizhi Software Technology Co., Ltd., a private company, since June 2018. From December 2012 to June 2018,
he served as the Vice President of Great China of Dassault Systèmes S.A., a software solutions provider. Mr. Liu was with
PTC, Inc. (formerly Parametric Technology Corporation) (China), a computer software and services company, from March 1993 to November 2012,
where he served as the Application Engineer from March 1993 to March 1995, Sale Representative from March 1995 to September 1996,
District Manager of North China from September 1996 to September 1999, Reginal Director of North China from September 1999
to September 2002, Senior Regional Director of North China from September 2002 to September 2005, Area Vice President of
China from September 2005 to September 2008, and Senior Vice President of China from September 2008 to September 2012.
Prior to that, Mr. Liu worked at Computer Application Research Institute, NORICO Group from February 1988 to February 1993
where, he served as Engineer from February 1988 to February 1990 and as the Deputy Director of Computer Aided Design software
research division from February 1990 to February 1993. Mr. Liu received his master's degree and bachelor's
degree from the Department of Vehicle Engineering of Beijing Institute of Technology.
Baoqing Sun.
Mr. Sun
has served as an independent director of the Company since November 2022. Before retiring in 2014, Mr. Sun served as the Deputy
Director of Gu'an County Transportation Bureau from March 2003 to April 2014, where he was responsible for political and
administration affairs, matters regarding transportation technology, transportation combat readiness, and highway stations. He was also
responsible for construction and maintenance of national and provincial main lines and local highways. Prior to that, Mr. Sun served
as the Director of Economic Commission, Deputy Secretary of the Committee, Secretary of the Disciplinary Committee, and Deputy Mayor of
Gu'an Town, Gu'an County, from March 2001 to March 2003, from June 2000 to March 2001, from December 1999
to June 2000, and from December 1999 to April 1995, respectively, where he was mainly handling town affairs such as town
enterprises, taxation, or market development. From April 1995 to May 1996, he was the Deputy General Manager of Langfang Sanhe
Food Co., Ltd. Mr. Sun served as the Clerk of Gu'an County Labor and Personnel Bureau from June 1984 to April 1995
and worked in Gu'an County Transportation Bureau Second Automobile Team Overhaul Workshop from July 1983 to June 1984.
Mr. Sun obtained a bachelor's degree in mechanical engineering automotive from Hebei Institute of Technology.
Lidong Liu.
Ms. Liu
has served as the Chief Financial Officer since November 2015 for Jilin Yiyatong Deep Supply Chain Management Co., Ltd, a supply chain
management company. From January 2011 to September 2015, she served as the Chief Financial Officer for Sinopharm Holding (Jilin) Co.,
Ltd, a pharmaceuticals company. In addition, between January 2002 and December 2010, Ms. Liu was the Chief Financial Officer for Changchun
Yongxin Dirui Pharmaceutical Co., Ltd., a pharmaceuticals company. Ms. Liu is a member of China Certified Public Accountants and a seasoned
executive with professional experience in auditing and financial reporting. Ms. Liu holds a bachelor's degree in Accounting from
Ji Lin University of Finance and Economics, and an MBA from Changchun University of Science and Technology.
Austin Huang.
Dr.
Huang has served as an independent director of ReTo since November 2016. Dr. Huang has served as the President and Principal Engineer
for Merit Engineering, Inc., a geotechnical, environmental, and civil engineering services company, since 1993. Among other awards, Mr.
Huang has received the Diplomat of Geotechnical Engineering by the Academy of Geoprofessionals in 2011 and named a Fellow, ACCE (American
Society of Civil engineering) in 2007. Dr. Huang served  as an expert witness on geo-retaining wall design issues. In addition, he
has presented two papers in the area of slope stability and pile foundations with socket in bedrock in international conferences. He holds
19 research publications including six in leading research journals. Dr. Huang holds a Master's Degree and Ph.D. in Geotechnical
Engineering from University of Wisconsin.
91
Family Relationship
There are no family relations
among any of our officers or directors, except that Yue Hu is Zhizhong Hu's daughter. There are no other arrangements or understandings
pursuant to which our directors are selected or nominated.
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
7
Female
Male
Non-
Binary
Did Not
Disclose
Gender
Part I: Gender Identity
Directors
1
6
0
0
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction
0
LGBTQ+
0
Did Not Disclose Demographic Background
0
B.
Compensation.
Executive Compensation
Our board of directors has
not adopted or established a formal policy or procedure for determining the amount of compensation paid to our executive officers. Currently,
our board of directors determines the compensation to be paid to our executive officers based on our financial and operating performance
and prospects, and contributions made by the officers to our success. Each of our named executive officers is measured by a series of
performance criteria by the board of directors, or the compensation committee on a yearly basis. Such criteria are set forth based on
certain objective parameters such as job characteristics, required professionalism, management skills, interpersonal skills, related experience,
personal performance and overall corporate performance. The board of directors will make an independent evaluation of appropriate compensation
to key employees, with input from management. The board of directors has oversight of executive compensation plans, policies and programs.
In 2022, we expensed an
aggregate of approximately $479,235 as salaries to our senior officers named in this annual report. Other than
salaries, fees and share incentives, we do not otherwise provide pension, retirement or similar benefits to our officers and
directors.
Employment Agreements
Employment Agreement of Hengfang Li
The Company entered into an
employment agreement with Mr. Li on December 31, 2021 (the "Li Employment Agreement"), pursuant to which Mr. Li serves
as Chairman and Chief Executive Officer of the Company and Beijing REIT for a term from January 1, 2022 and shall terminate on December
31, 2023. Pursuant to the Li Employment Agreement, Mr. Li is entitled to an annual compensation of RMB 800,000 (approximately $117,000)
and social insurance and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance
with PRC law and the Company's policies.
Employment Agreement of Guangfeng Dai
The Company entered into an
employment agreement with Mr. Dai on December 31, 2021, (the "Dai Employment Agreement") pursuant to which Mr. Dai serves
as the President of the Company and Beijing REIT for a term from January 1, 2022 and shall terminate on December 31, 2023. Pursuant to
the Dai Employment Agreement, Mr. Dai is entitled to annual compensation of RMB 750,000 (approximately $109,000) and social insurance
and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance with PRC law and the
Company's policy.
92
Employment Agreement of Zhizhong Hu
The Company entered into an
employment agreement with Mr. Hu on December 31, 2021 (the "Hu Employment Agreement"), pursuant to which Mr. Hu serves as
the Chief Technology Officer of the Company and Beijing REIT for a term from January 1, 2022 and shall terminate on December 31, 2023.
Pursuant to the Hu Employment Agreement, Mr. Hu is entitled to annual compensation of RMB 700,000 (approximately $102,000) and social
insurance and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance with PRC law
and the Company's policy.
Employment Agreement of Degang Hou
The Company entered into an
employment agreement with Mr. Hou on December 31, 2021 (the "Hou Employment Agreement"), pursuant to which Mr. Hou serves
as the Chief Internal Control Officer of the Company and Beijing REIT for a term from January 1, 2022 and shall terminate on December
31, 2023. Pursuant to the Hou Employment Agreement, Mr. Hou is entitled to annual compensation of RMB 700,000 (approximately $102,000)
and social insurance and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance
with PRC law and the Company's policy.
Employment Agreement with Yue Hu
The Company entered into an
employment agreement with Ms. Hu on August 15, 2022 providing for Ms. Hu to serve as the Company's Chief Financial Officer
(the "Hu Employment Agreement") for a term from August 15, 2022 to August 14, 2025. Pursuant to the terms of the
Hu Employment Agreement, Ms. Hu will be entitled to an annual compensation of RMB180,000 (approximately $26,500) and social insurance
and other employee benefits (including health insurance, vacation and expense reimbursement), each in accordance with laws in the People's
Republic of China and the Company's policy. The Hu Employment Agreement may be terminated in accordance with the PRC Labor Contract
Law and relevant local regulations in Beijing.
Director Compensation
Officers are elected by and
serve at the discretion of the Board of Directors. Employee directors do not receive any compensation for their services on the Board
of Directors. Non-employee directors are entitled to receive $10,000 per year for serving as directors and may receive stock grants pursuant
to our share incentive plans.  In addition, non-employee directors are entitled to receive compensation for their actual travel expenses
for each Board of Directors meeting attended, up to a maximum of $2,000 per meeting and $4,000 per year.
During the fiscal year ended
December 31, 2022,
1,025,000
Common Shares were issued pursuant to the 2018 Share Incentive
Plan, and
3,000,000
Common Shares were issued pursuant to the 2021 Share Incentive Plan.
See Item 6.E for a description
of our 2018 Share Incentive Plan, 2021 Share Incentive Plan and the 2022 Share Incentive Plan.
C.
Board Practices.
See information provided in response to Item 6.A.
above as to the current directors.
Composition of Board
Our board of directors currently
consists of seven directors. The directors are divided into three classes, as nearly equal in number as the then total number of directors
permits. All directors hold office until the next annual meeting of shareholders at which their respective class of directors is re-elected
and until their successors have been duly elected and qualified. Officers are elected by and serve at the discretion of the board of directors.
Class A directors shall face re-election at our 2023 annual general meeting of shareholders and shall face reelection every three years
thereafter. Class B directors faced re-election at our 2024 annual general meeting of shareholders and every three years thereafter. Class
C directors shall face re-election at our 2025 annual general meeting of shareholders and every three years thereafter.
93
If the number of directors
changes, any increase or decrease will be apportioned among the classes so as to maintain the number of directors in each class as nearly
as possible. Any additional director of a class elected to fill a vacancy resulting from an increase in such class will hold office for
a term that coincides with the remaining term of that class. Decreases in the number of directors will not shorten the term of any incumbent
director. These board provisions could make it more difficult for third parties to gain control of our Company by making it difficult
to replace members of the board of directors.
There are no membership qualifications
for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting.
The board of directors maintains
a majority of independent directors who are deemed to be independent under the definition of independence under Rule 5605(c)(2) of the
Nasdaq Stock Market Rules and meet the independence standards under Rule 10A-3 under the Exchange Act, as amended. Baoqing Sun, Tonglong
Liu, Lidong Liu and Austin Huang are our independent directors.
There are no other arrangements
or understandings pursuant to which our directors are selected or nominated. We do not have any service contacts with our directors that
provide benefits upon termination of employment.
Our board of directors plays
a significant role in our risk oversight. The board of directors makes all relevant company decisions. As such, it is important for us
to have both our Chief Executive Officer and President to serve on the Board as they play key roles in the risk oversight or the Company.
As a smaller reporting company with a small board of directors, we believe it is appropriate to have the involvement and input of all
of our directors in risk oversight matters.
Committees of the Board of Directors
Currently, three committees
have been established under the board: the audit committee, the compensation committee and the nominating committee. The audit committee
is responsible for overseeing the accounting and financial reporting processes of the Company and audits of the financial statements of
the Company, including the appointment, compensation and oversight of the work of our independent auditors. The compensation committee
of the board of directors reviews and makes recommendations to the board regarding our compensation policies for our officers and all
forms of compensation, and also administers our incentive compensation plans and equity-based plans (but our board retains the authority
to interpret those plans). The nominating committee of the board of directors is responsible for the assessment of the performance of
the board, considering and making recommendations to the board with respect to the nominations or elections of directors and other governance
issues. The nominating committee considers diversity of opinion and experience when nominating directors.
Baoqing Sun and Tonglong Liu
serve on all three Committees, Austin Huang serves on the Nominating Committee and Compensation Committee, Lidong Liu serves on the Audit
Committee. Austin Huang chairs the Nominating Committee and the Compensation Committee and Lidong Liu chairs the Audit Committee. Lidong
Liu qualifies as an "audit committee financial expert" as that term is defined by the applicable SEC regulations and Nasdaq
Capital Market corporate governance requirements.
Duties of Directors
Under BVI law, our directors
have a duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the care,
diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to
us, our directors must ensure compliance with our M&A. Shareholders shall have the right to seek damages if a duty owed by our directors
is breached.
The functions and powers of
our board of directors include, among others:
●
having all the powers necessary for managing and for directing and supervising, the business and affairs for the Company
●
appointing officers and determining the term of office of the officers;
94
●
fixing the emoluments of officers;
●
exercising all powers of the Company to incur indebtedness, liabilities or obligations and to secure indebtedness, liabilities or obligations whether of the Company or of any third party;
●
designating committees of directors;
●
executing checks, promissory notes, drafts, bills of exchange and other negotiable instruments on behalf of the Company; and
●
determining that any sale, transfer, lease, exchange, or other disposition is in the usual or regular course of the business carried on by the Company and such determination is, in the absence of fraud, conclusive.
Interested Transactions
A director may vote, attend
a board meeting or sign a document on our behalf with respect to any contract or transaction in which he or she is interested. A director
must promptly disclose the interest to all other directors after becoming aware of the fact that he or she is interested in a transaction
we have entered into or are to enter into. A general notice or disclosure to the board or otherwise contained in the minutes of a meeting
or a written resolution of the board or any committee of the board that a director is a shareholder, director, officer or trustee of any
specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure,
and, after such general notice, it will not be necessary to give special notice relating to any particular transaction. A director may
be counted for a quorum upon a motion in respect of any contract or arrangement which he shall make with our Company, or in which he is
so interested and may vote on such motion.
Remuneration and Borrowing
The directors may receive
such remuneration as our board of directors may determine from time to time. Each director is entitled to be repaid or prepaid for all
traveling, hotel and incidental expenses reasonably incurred or expected to be incurred in attending meetings of our board of directors
or committees of our board of directors or shareholder meetings or otherwise in connection with the discharge of his or her duties as
a director. The compensation committee will assist the directors in reviewing and approving the compensation structure for the directors.
Our board of directors may
exercise all the powers of the Company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to
issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation
of the Company or of any third party.
Qualification
A director is not required to hold shares as a
qualification to office.
Limitation on Liability and Other Indemnification Matters
Under British Virgin Islands
law, each of our directors and officers, in performing his or her functions, is required to act honestly and in good faith with a view
to our best interests. Our M&A provide that, to the fullest extent permitted by British Virgin Islands law or any other applicable
laws, our directors will not be personally liable to us or our shareholders for any acts or omissions in the performance of their duties.
Such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission. These provisions
will not limit the liability of directors under United States federal securities laws.
95
We may indemnify any of our
directors or anyone serving at our request as a director of another entity against all expenses, including legal fees, and against all
judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings.
We may only indemnify a director if he or she acted honestly and in good faith with the view to our best interests and, in the case of
criminal proceedings, the director had no reasonable cause to believe that his or her conduct was unlawful. The decision of our board
of directors as to whether the director acted honestly and in good faith with a view to our best interests and as to whether the director
had no reasonable cause to believe that his or her conduct was unlawful, is in the absence of fraud sufficient for the purposes of indemnification,
unless a question of law is involved. The termination of any proceedings by any judgment, order, settlement, conviction or the entry of
no plea does not, by itself, create a presumption that a director did not act honestly and in good faith and with a view to our best interests
or that the director had reasonable cause to believe that his or her conduct was unlawful. If a director to be indemnified has been successful
in defense of any proceedings referred to above, the director is entitled to be indemnified against all expenses, including legal fees,
and against all judgments, fines and amounts paid in settlement and reasonably incurred by the director or officer in connection with
the proceedings.
We may purchase and maintain
insurance in relation to any of our directors or officers against any liability asserted against the directors or officers and incurred
by the directors or officers in that capacity, whether or not we have or would have had the power to indemnify the directors or officers
against the liability as provided in our M&A.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted for our directors or officers under the foregoing provisions, we have
been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is
therefore unenforceable as a matter of United States law.
D.
Employees.
As of December 31, 2022, we
had a total of 116 full-time employees. Among these employees, we had 35 employees in management, 22 employees in sales and marketing,
41 employees in research and development, 14 employees in manufacturing and installation and four employees in administration. All of
these employees were located at our facilities in Beijing, Hainan and Xinyi, China. We had a total of 115 and 139 full-time employees
as of December 31, 2021 and 2020, respectively. We did not hire any part-time employees during the fiscal years ended December 31, 2022,
2021 and 2020. Our employees are not represented by a labor organization or covered by a collective bargaining agreement.
We participate in various
employee social security plans that are organized by municipal and provincial governments, including housing, pension, medical insurance
and unemployment insurance, as required by laws and regulations in China. We are required under PRC law to make contributions to employee
benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified
by the local government from time to time.
We typically enter into standard
labor contracts with our employees. We also enter into standard confidentiality and non-compete agreements with our senior management
and research and development personnel. These contracts involve a covenant that prohibits them from engaging in any activities that compete
with our business within certain agreed period after the termination of their employment with us, and during such non-competition period.
We believe we maintain a good working relationship with our employees, and we have not experienced any material labor disputes or any
difficulty in recruiting staff for our operations.
E.
Share ownership.
The following tables set forth certain information
with respect to the beneficial ownership of our Common Shares as of April 28, 2023, for:
●
each of our directors and named executive officers; and
●
all of our directors and executive officers as a group.
We have determined beneficial
ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished
to us, that the persons and entities named in the table below have sole voting and investment power or the power to receive the economic
benefit with respect to all Common Shares that they beneficially own, subject to applicable community property laws.
96
Applicable percentage ownership
prior is based on 53,787,689 Common Shares outstanding as of the date of this annual report. Unless otherwise indicated, the address of
each beneficial owner listed in the table below is c/o ReTo Eco-Solutions, Inc., Building X-702, 60 Anli Road, Beijing, People's
Republic of China 100101.
Beneficial Ownership
Name of Beneficial Owner
Common Shares
Percentage
Directors and Executive Officers
Hengfang Li
(1)
2,646,264
4.9
%
Guangfeng Dai
(2)
1,620,632
3.0
%
Zhizhong Hu
(3)
1,355,632
2.5
%
Degang Hou
(4)
1,155,632
2.1
%
Yue Hu
(5)
25,000
*
Tonglong Liu
-
-
Baoqing Sun
-
-
Lidong Liu
(5)
10,000
*
Austin Huang
(6)
40,000
*
All directors and executive officers as a group (nine persons)
6,853,161
12.7
%
Other 5% or greater beneficial owners
REIT International Development (Group) Co., Limited
3,903,161
7.3
%
*
Less than 1%.
(1)
Represents (i) approximately 1,561,264 Common Shares held through REIT International Development (Group) Co, a Hong Kong limited liability company ("REIT International"). Mr. Li holds a 40% ownership of REIT International and has the voting and investment power with respect to 40% of the 3,903,161 Common Shares held by REIT International; (ii) 10,000 Common Shares held through Soothie Holdings Limited, a British Virgin Islands company, controlled by Mr. Li; (iii) 225,000 Common Shares held by Mr. Li directly; (iv) 600,000 Common Shares granted to Mr. Li under the 2021 Share Incentive Plan; and (v) 250,000 shares granted to Mr. Li under the 2022 Share Incentive Plan.
(2)
Represents (i) approximately 780,632 Common Shares held through REIT International. Mr. Dai holds a 20% ownership of REIT International and has the voting and investment power with respect to 20% of the 3,903,161 Common Shares held by REIT International; (ii) 150,000 Common Shares held by Mr. Dai directly; (iii) 440,000 Common Shares granted to Mr. Dai under the 2021 Share Incentive Plan; and (iv) 250,000 shares granted to Mr. Dai under the 2022 Share Incentive Plan.
(3)
Represents (i) approximately 780,632 Common Shares held through REIT International. Mr. Hu holds a 20% ownership of REIT International and has the voting and investment power with respect to 20% of the 3,903,161 Common Shares held by REIT International; (ii) 125,000 Common Shares held by Mr. Hu directly; (iii) 300,000 Common Shares granted to Mr. Hu under the 2021 Share Incentive Plan; and (iv) 150,000 Common Shares granted to Mr. Hu under the 2022 Share Incentive Plan.
(4)
Represents (i) approximately 780,632 Common Shares held through REIT International. Mr. Hou holds a 20% ownership of REIT International and has the voting and investment power with respect to 20% of the 3,903,161 Common Shares held by REIT International; (ii) 125,000 Common Shares held by Mr. Hou directly; and (iii) 200,000 Common Shares granted to Mr. Hou under the 2021 Share Incentive Plan; and (iv) 50,000 Common Shares granted to Mr. Hou under the 2022 Share Incentive Plan.
(5)
Represents Common Shares granted under the 2022 Share Incentive Plan.
(6)
Represents (i) 30,000 Common Shares held by Mr. Huang directly; and (ii) 10,000 Common Shares granted to Mr. Huang under the 2022 Share Incentive Plan.
97
2018 Share Incentive Plan
On November 6, 2018, the Company's
shareholders approved the 2018 Share Incentive Plan, which allows for issuance of up to 2,000,000 Common Shares to employees, non-employee
directors, officers and consultants for services rendered to the Company.
On April 22, 2022, the Company's
board of directors approved the issuance of an aggregate of 1,025,000 Common Shares to its employees for their services.
The Company issued an aggregate of 975,000 Common Shares under the
2018 Share Incentive Plan as of December 31, 2021. The Company issued an aggregate of 2,000,000 Common Shares under the 2018 Share Incentive
Plan as of December 31, 2022. As of April 28, 2023, there were no shares available for issuance under the 2018 Incentive Plan.
The following is a summary
of the principal terms of the 2018 Share Incentive Plan.
Administration
The 2018 Share Incentive Plan
is administered by the Compensation Committee of the Board of Directors. The 2018 Share Incentive Plan provides the Compensation Committee
with flexibility to design compensatory awards that are responsive to the company's needs. Subject to the terms of the 2018 Share
Incentive Plan, the Compensation Committee has the discretion to determine the terms of each award.
Amount of Awards
The maximum number of Common
Shares as to which awards may be granted under the 2018 Share Incentive Plan is 2,000,000 shares.
Types of Awards
Awards under the 2018 Share
Incentive Plan may be in the form of incentive stock options, non-statutory stock options or restricted stock awards. An option is the
right to purchase shares of Common Shares at a price and on a schedule set by the Compensation Committee. The option price will be no
less than the fair market value of the shares on the option grant date.
Participants
Employees of the Company,
executive officers, employee and non-employee directors, consultants, independent contractors and advisors may all be selected by the
Compensation Committee to receive awards under the 2018 Share Incentive Plan. The benefits or amounts that may be received by or allocated
to participants under the 2018 Share Incentive Plan will be determined at the discretion of the Compensation Committee and are not presently
determinable.
Termination and Amendment
The Compensation Committee
may terminate the 2018 Share Incentive Plan at any time. If not sooner terminated by the Board of Directors, the 2018 Share Incentive
Plan will terminate on the tenth anniversary of its effective date.
The 2018 Share Incentive Plan
may be amended by the Board of Directors, but without further approval by the shareholders of the Company, the Board shall not amend the
2018 Share Incentive Plan in any manner that requires shareholder approval. The Board may condition any amendment on the approval of the
shareholders if such approval is necessary or deemed advisable with respect to the applicable listing or other requirements of a national
securities exchange or other applicable laws, policies or regulations.
98
2021 Share Incentive Plan
On November 24, 2021, the
Company's shareholders approved the 2021 Share Incentive Plan, which allows for issuance of up to 3,000,000 Common Shares to employees,
non-employee directors, officers and consultants for services rendered to the Company.
The Company did not issue any Common Shares under the 2021 Share Incentive
Plan as of December 31, 2021. On April 22, 2022, the Company's board of directors approved the issuance of an aggregate of 3,000,000
Common Shares to its employees, officers and directors for their services. The Company issued an aggregate of 3,000,000 Common Shares
under the 2021 Share Incentive Plan as of December 31, 2022. As of April 28, 2023, there were no shares available for issuance under the
2021 Incentive Plan.
The following is a summary of the principal terms
of the 2021 Share Incentive Plan.
Administration
The 2021 Share Incentive Plan
is administered by the Compensation Committee of the Board of Directors. The 2021 Share Incentive Plan provides the Compensation Committee
with flexibility to design compensatory awards that are responsive to the company's needs. Subject to the terms of the 2021 Share
Incentive Plan, the Compensation Committee has the discretion to determine the terms of each award.
Amount of Awards
The maximum number of Common
Shares as to which awards may be granted under the 2021 Share Incentive Plan was 3,000,000 shares.
Types of Awards
Awards under the 2021 Share
Incentive Plan may be in the form of incentive stock options, non-statutory stock options or restricted stock awards. An option is the
right to purchase shares of Common Shares at a price and on a schedule set by the Compensation Committee. The option price will be no
less than the fair market value of the shares on the option grant date.
Participants
Employees of the Company,
executive officers, employee and non-employee directors, consultants, independent contractors and advisors may all be selected by the
Compensation Committee to receive awards under the 2021 Share Incentive Plan. The benefits or amounts that may be received by or allocated
to participants under the 2021 Share Incentive Plan will be determined at the discretion of the Compensation Committee and are not presently
determinable.
Termination and Amendment
The Compensation Committee
may terminate the 2021 Share Incentive Plan at any time. If not sooner terminated by the Board of Directors, the 2021 Share Incentive
Plan will terminate on the tenth anniversary of its effective date.
The 2021 Share Incentive Plan
may be amended by the Board of Directors, but without further approval by the shareholders of the Company, the Board shall not amend the
2021 Share Incentive Plan in any manner that requires shareholder approval. The Board may condition any amendment on the approval of the
shareholders if such approval is necessary or deemed advisable with respect to the applicable listing or other requirements of a national
securities exchange or other applicable laws, policies or regulations.
2022 Share Incentive Plan
On December 6, 2022, the Company's
shareholders approved the 2022 Share Incentive Plan, which initially allowed for issuance of up to 5,000,000 Common Shares to employees,
non-employee directors, officers and consultants for services rendered to the Company, with an automatic share reserve increase by a number
equal to the lesser of (i) 5% of the total number of Common Shares issued and outstanding on December 31 of the calendar year immediately
preceding the date of such increase and (ii) a number of = Common Shares determined by the Compensation Committee.
99
The Company did not issue
any Common Shares under the 2022 Share Incentive Plan as of December 31, 2022. On March 8, 2023, the Company's board of directors
approved the issuance of an aggregate of 5,000,000 Common Shares to its employees, officers and directors for their services. As of April
28, 2023, there were 2,169,944 shares available for issuance under the 2022 Incentive Plan.
The following is a summary of the principal terms
of the 2022 Share Incentive Plan.
Administration
The 2022 Share Incentive Plan
is administered by the Compensation Committee of the Board of Directors. The 2022 Share Incentive Plan provides the Compensation Committee
with flexibility to design compensatory awards that are responsive to the company's needs. Subject to the terms of the 2022 Share
Incentive Plan, the Compensation Committee has the discretion to determine the terms of each award.
Amount of Awards
The maximum number of Common
Shares as to which awards may be granted under the 2022 Share Incentive Plan is 5,000,000 shares. The 2022 Share Incentive Plan provides
for an automatic share reserve increase feature, whereby the share reserve will be increased automatically on the first day of each
fiscal year beginning with the 2023 fiscal year, in an amount equal to the lesser of (i) a number equal to 5% of the aggregate number
of Common Shares outstanding on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares
as is determined by the compensation committee. The automatic share reserve feature and any provisions that are or would create a "formula"
plan for purposes of Nasdaq listing requirements will operate only until the ten-year anniversary of the earlier of the initial adoption
of the 2022 Share Incentive Plan by the Board or the approval of the 2022 Share Incentive Plan by our shareholders, and therefore no automatic
share reserve increase will be added after the increase on the first day of our 2032 fiscal year.
Types of Awards
Awards under the 2022 Share
Incentive Plan may be in the form of incentive stock options, non-statutory stock options or restricted stock awards. An option is the
right to purchase shares of the Company's Common Shares at a price and on a schedule set by the Compensation Committee. The option
price will be no less than the fair market value of the shares on the option grant date.
Participants
Employees of the Company,
executive officers, non-employee directors and consultants may all be selected by the Compensation Committee to receive awards under the
2022 Share Incentive Plan. The benefits or amounts that may be received by or allocated to participants under the 2022 Share Incentive
Plan will be determined at the discretion of the Compensation Committee and are not presently determinable.
Termination and Amendment
The Compensation Committee
may terminate the 2022 Share Incentive Plan at any time. If not sooner terminated by the Board of Directors, the 2022 Share Incentive
Plan will terminate on the tenth anniversary of its effective date.
The 2022 Share Incentive Plan
may be amended by the Board of Directors, but without further approval by the shareholders of the Company, the Board shall not amend the
2022 Share Incentive Plan in any manner that requires shareholder approval. The Board may condition any amendment on the approval of the
shareholders if such approval is necessary or deemed advisable with respect to the applicable listing or other requirements of a national
securities exchange or other applicable laws, policies or regulations.
100
Item 7. Major Shareholders and Related Party Transactions
A.
Major shareholders.
Please refer to "
Item 6. Directors, Senior
Management and Employees—E. Share Ownership
."
B.
Related party transactions.
The related party transactions for the years ended
December 31, 2022, 2021 and 2020 are identified as follows:
(1)
Related parties relationships
Name of Related Party
Relationship to the Company
Mr. Hengfang Li
Chief Executive Officer and Chairman of the Board of Directors
Q Green Techcon Private Limited
Owned by the minority shareholder of REIT India
Shexian Ruibo
The Company owns 41.67% ownership interest in Shexian Ruibo
Zhongrong Honghe Eco Construction Materials Co., Ltd
An entity controlled by Ms. Hong Ma
Hunyuan Baiyang Food Co., Ltd.
An entity controlled by Mr. Hengfang Li
Bei Qi Yin Jian Yi Le (Haikou) Smart Move Science Technology Co., Ltd.
Hainan Yile IoT owns 45% ownership interest in this company
Zhongtou REIT Information Service (Beijing) Co., Ltd
An entity controlled by Mr. Xinyang Li and Ms. Xinran Li, children of Mr. Hengfang Li
Handan Ruisheng Construction Material Technology Co., Ltd.
An entity controlled by Shexian Ruibo
(2)
Due to related parties
The balance of due to related parties were as follows:
December 31,
2022
December 31,
2021
December 31,
2020
Mr. Hengfang Li
$
208,225
$
472,439
$
1,019,469
(3)
Accounts receivable from related parties
Accounts receivable from related parties consisted
of the following:
December 31,
2022
December 31,
2021
December 31,
2020
Accounts receivable – related party
REIT International Trading Co. Ltd
$
-
$
-
$
199,999
Q Green Techcon Private Limited
-
2,981
-
Hunyuan Baiyang Food Co., Ltd.
37,048
40,088
-
Bei Qi Yin Jian Yi Le (Haikou) Smart Move Science Technology Co., Ltd.
46,688
50,520
-
Total accounts receivable from related party
$
83,736
$
93,589
$
199,999
The Company fully collected
the accounts receivable as of December 31, 2022 from related parties as of the date of this annual report.
101
(4)
Advance to suppliers, related party
Advance to suppliers, related party, consisted
of the following:
December 31,
2022
December 31,
2021
December 31,
2020
Q Green Techcon Private Limited
$
15,310
$
174,099
$
162,014
Shexian Ruibo Environmental Science and Technology Co., Ltd.*
3,769,138
3,656,118
3,872,110
Handan Ruisheng Construction Material Technology Co., Ltd.
2,588
12,403
-
Total
$
3,787,036
$
3,832,421
$
4,034,124
*
The balance represents the Company's purchase advances for eco-friendly materials and equipment supplied by Shexian Ruibo.
(5)
Accounts payable to related parties
Accounts payables to related parties consisted
of the following:
December 31,
2022
December 31,
2021
December 31,
2020
Shexian Ruibo Environmental Science and Technology Co., Ltd.
$
-
$
-
$
153,344
Zhongtou REIT Information Service (Beijing) Co., Ltd
-
10,199
-
Total
$
-
$
10,199
$
153,344
(6)
Sales to related parties
Sales to related parties consisted of the following:
For the Years Ended December 31,
2022
2021
2020
Changjiang Zhongrong Hengde Environmental Protection Co., Ltd.
$
215,693
$
-
$
-
Shexian Ruibo
82,453
61,177
228,814
Q Green Techcon Private Limited
6,729
220,607
-
Total
$
304,875
$
281,784
$
228,814
Cost of revenue associated with the sales to these
related parties amounted to $471,849, $175,053 and $148,034 for the years ended December 31, 2022, 2021 and 2020, respectively.
102
(7)
Purchases from related parties
Purchases from related parties consisted of the
following:
For the Years Ended December 31,
2022
2021
2020
Q Green Techcon Private Limited
$
266,544
$
228,838
$
1,039,152
Shexian Ruibo
1,141,377
235,946
1,837,841
Total
$
1,407,921
$
464,784
$
2,876,993
(8)
Other related party transactions
On September 7, 2020, Beijing
REIT entered into a share transfer agreement with the original shareholder of Shexian Ruibo for the acquisition of a 41.67% ownership
interest in Shexian Ruibo for a total consideration of $3.6 million (RMB 25 million), including a cash payment of $2.8 million (RMB 18.5
million) and a non-cash contribution of six patents valued at $0.9 million (RMB 6.5 million). The cash consideration was fully paid for
the year ended December 31, 2020.
C.
Interests of Experts and Counsel
Not applicable.
Item 8. Financial Information
A.
Consolidated Statements and Other Financial Information.
The financial statements required by this item
may be found at the end of this report on 20-F, beginning on page F-1.
Legal and Administrative Proceedings
In the ordinary course of
business, the Company is from time to time involved in legal proceedings and litigation that are generally contractual in nature.
In 2018, a financial intermediary
and Xinyi REIT began negotiations towards a potential cooperation where the financial intermediary would introduce potential investors
to facilitate investment in Xinyi REIT's business. In December 2018, an investor invested RMB 1,000,000 (approximately $0.15 million)
in Xinyi REIT through this financial intermediary. Xinyi REIT rejected this investment and returned the total investment funds it received
to the investor and informed the financial intermediary to cease facilitating investments from other investors. In addition, despite there
not being a final mutual agreement between the parties, it appears the financial intermediary may have acquired investment funds in the
aggregate amount of RMB 15,450,000 (approximately $2.15 million) from certain investors, and Xinyi REIT did not receive any funds from
these investments.
Mr.
Hengfang Li, the Company's Chief Executive Officer and Chairman, has agreed to assume full responsibility for liabilities, if any,
and assume the creditor's rights for these claims on behalf of the Company for any legal claims or lawsuits against the Company
due to these investments. In May 2020, Mr. Li paid RMB 300,000 (approximately $44,000) to an investor in a lawsuit against Xinyi REIT
to return the investment funds. In 2022 and 2023, a few other investors brought legal actions against Xinyi REIT for the same claim and
judgments were rendered in their favor. Subsequently, Xinyi REIT appealed these judgments, and the appeals are still pending in higher
courts as of the date of this annual report. The Company does not believes that any liability resulting from the outcome of such proceedings,
if any, will have a material adverse effect on the Company's consolidated financial position or results of operations or liquidity.
On April 8, 2022,
Beijing REIT reached a settlement with the minority shareholder of Xinyi REIT for the lawsuit filed by the minority shareholder of
Xinyi REIT in respect of the buy-back of the 30% equity interest of Xinyi REIT held by the minority shareholder. Pursuant to the
settlement, Beijing REIT agreed to pay an aggregate amount of RMB18 million to purchase the 30% equity interest. The purchase price
is payable in four installments of RMB 4 million, RMB 4 million, RMB 5 million, and RMB 5 million, due by April 19, 2022, June 30,
2022, September 30, 2022, and December 31, 2022, respectively.
The Company had paid
RMB 13 million (approximately $1.9 million) as of December 31, 2022. As of December 31, 2022, the balance amounted to
RMB 5 million (approximately $0.7 million)
.
The Company further paid
RMB 3 million (approximately $0.4 million) in 2023.
However, as of the date of this annual report, the
remaining balance of RMB 2 million (
approximately $0.3 million
) is due by Beijing
REIT.
103
On
April 11, 2023, a local court order was issued to Beijing REIT and its legal representative to restrict them from frivolous
spending. We are actively negotiating the settlement with the party who initiated the court order and we do not believe
this matter will have a material adverse effect on the Company's consolidated financial position or results of operations.
Except as disclosed above,
we are currently not a party to any material legal or administrative proceedings and we are not aware of any material legal or administrative
proceedings threatened against us. We may from time to time be subject to various legal or administrative proceedings arising in the ordinary
course of business.
Dividend Policy
We have never declared or
paid any cash dividends on our Common Shares. We anticipate that we will retain any earnings to support operations and to finance the
growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination
relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including
future earnings, capital requirements, financial conditions and future prospects and other factors the board of directors may deem relevant.
Under British Virgin Islands
law, we may only pay dividends from surplus (the excess, if any, at the time of the determination of the total assets of our company over
the sum of our liabilities, as shown in our books of account, plus our capital), and we must be solvent before and after the dividend
payment in the sense that we will be able to satisfy our liabilities as they become due in the ordinary course of business; and the realizable
value of assets of our company will not be less than the sum of our total liabilities, other than deferred taxes as shown on our books
of account, and our capital.
If we determine to pay dividends
on any of our Common Shares in the future, as a holding company, we will be dependent on receipt of funds from our PRC subsidiaries. Current
PRC regulations permit our PRC subsidiaries to pay dividends to REIT Holdings only out of their accumulated profits, if any, determined
in accordance with PRC accounting standards and regulations. Further, loan governing part of the current debts incurred by Beijing REIT
has restrictions on its ability to pay dividends, and any future financing arrangements may impose such restrictions as well. In addition,
each of our subsidiaries 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. Our PRC subsidiaries are also required to further set aside a portion
of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion
of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate
future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except
in the event of liquidation. Our subsidiaries in China are required to set aside statutory reserves and have done so.
In addition, pursuant to the
EIT Law and its implementation rules, dividends generated after January 1, 2008 and distributed to us by Beijing REIT, REIT Technology
and REIT Ordos are subject to withholding tax at a rate of 10% unless otherwise exempted or reduced according to treaties or arrangements
between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.
Under existing PRC foreign
exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related
foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange,
or SAFE, by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval
of SAFE, cash generated from the operations in China may be used to pay dividends to our company. See
"Item 4. Information on
the Company – B. Business Overview – Regulation – Regulation of Foreign Currency Exchange and Dividend Distribution."
104
B.
Significant Changes.
Except as otherwise disclosed
in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements
included herein.
Item 9. The Offer and Listing
A.
Offer and listing details
.
Our Common Shares have been
listed on the Nasdaq Capital Market since November 29, 2017 under the symbol "RETO."
B.
Plan of distribution.
Not applicable.
C.
Markets.
Our Common Shares are listed
on the Nasdaq Capital Market under the symbol "RETO."
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
the description of our M&A, as currently in effect in the British Virgin Islands, set forth in our registration statement on Form
F-1, as amended, declared effective on November 28, 2017 (File No. 333-219709).
C.
Material contracts.
Securities Purchase Agreement dated March
1, 2021
On March 1, 2021, the Company
entered into a securities purchase agreement with an accredited investor (the "Debenture Holder") for the issuance of a Convertible
Debenture (the "March Debenture") in the aggregate principal amount of up to $2,300,000 with a maturity date of twelve months
after the issuance thereof, provided that in case of an event of default, the March Debenture may become at the Debenture Holder's
election immediately due and payable. In addition, the Company paid to an affiliate of the March Debenture Holder a fee equal to 3.5%
of the amount of the Debenture and a one-time due diligence and structuring fee of $10,000 at the closing.
105
The Debenture Holder may convert
the March Debenture in its sole discretion to Company's Common Shares at any time at the lower of $2.50 or 95% of the average of
the two lowest daily VWAPs during the ten consecutive trading days immediately preceding the conversion date, provided that the conversion
price may not be less than $0.50 (the "March Debenture Floor Price"). The Debenture Holder may not convert any portion of
a Debenture if such conversion would result in the Debenture Holder beneficially owning more than 4.99% of Company's then issued
and Common Shares, provided that such limitation may be waived by the Debenture Holder with a 65 days' notice. Any time after the
issuance of the March Debenture that the daily VWAP is less than the March Debenture Floor Price for a period of 10 consecutive trading
days (each such occurrence, a "March Debenture Triggering Event") and only for so long as such conditions exist after a March
Debenture Triggering Event, the Company shall make monthly payments beginning on the 30
th
day after the date of the March
Debenture Triggering Event. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of
the date of the March Debenture Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium
of 20% of such principal amount and (iii) accrued and unpaid interest hereunder as of each payment date.
The Company has elected to
recognize the March Debenture at fair value and therefore there was no further evaluation of embedded features for bifurcation. The March
Debenture was fully converted into 2,369,501 Common Shares of the Company for the year ended December 31, 2022.
Securities Purchase Agreement dated July
6, 2021
On July 6, 2021, the Company
entered into another securities purchase with the Debenture Holder for the issuance of a Convertible Debenture (the "July Debenture")
in the aggregate principal amount of up to $2,500,000 with a maturity date of twelve months after the issuance thereof, provided that
in case of an event of default, the July Debenture may become at the Debenture Holder's election immediately due and payable. In
addition, the Company paid to an affiliate of the Debenture Holder a fee equal to 3.5% of the amount of the July Debenture and a one-time
due diligence and structuring fee of $5,000 at the closing.
The Debenture Holder may convert
the July Debenture in its sole discretion to Company's Common Shares at any time at the lower of $1.50 or 95% of the average of
the two lowest daily VWAPs during the ten consecutive trading days immediately preceding the conversion date, provided that the conversion
price may not be less than $0.50 (the "July Debenture Floor Price"). The Debenture Holder may not convert any portion of the
July Debenture if such conversion would result in the Debenture Holder beneficially owning more than 4.99% of Company's then issued
and Common Shares, provided that such limitation may be waived by the Debenture Holder with a 65 days' notice. Any time after the
issuance of the July Debenture that the daily VWAP is less than the July Debenture Floor Price for a period of 10 consecutive trading
days (each such occurrence, a "July Debenture Triggering Event") and only for so long as such conditions exist after a July
Debenture Triggering Event, the Company shall make monthly payments beginning on the 30th day after the date of the July Debenture Triggering
Event. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the July
Debenture Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of 20% of such principal
amount and (iii) accrued and unpaid interest hereunder as of each payment date. The principal balance of $1,130,000 of the July Debenture
was converted into 1,385,533 Common Shares of the Company for the year ended December 31, 2021. The remaining balance of $1,370,000 of
the July Debenture was converted into 1,068,078 Common Shares of the Company during the year ended December 31, 2022.
Securities Purchase Agreement dated March 10, 2022
On March 10, 2022, ReTo entered
into a Securities Purchase Agreement pursuant to which ReTo issued Note to the Investor. The Note will mature 12 months after the purchase
price of the Note is delivered from the Investor to ReTo (the "Purchase Price Date"). The Note has an original principal amount
of $3,105,000 and Investor gave consideration of $3,000,000, reflecting an original issue discount of $90,000 and $15,000 for Investor's
fees, costs and other transaction expenses incurred in connection with the purchase and sale of the Note. The transaction contemplated
under the Securities Purchase Agreement was closed on March 11, 2022 and the Company anticipates using the proceeds for general working
capital purposes.
On March 28, 2022, ReTo and
Investor entered into an amendment to the Note, pursuant to which ReTo has agreed to satisfy any conversion request from Investor by making
a cash payment equal to 110% of any converted amount if, at the time of the conversion, the Floor Price (as defined in the Note) is higher
than the then current conversion price.
106
On October 13, 2022, the Company
entered into a standstill agreement with the Investor. Pursuant to the standstill agreement, the Investor agreed not to seek to convert
any portion of the Note During the Standstill Period. Balance of the Note was increased by $310,500 as of the date of the standstill agreement.
The principal balance of $10,000
of the Note was converted into 290,773 Common Shares of the Company on December 20, 2022. Subsequently from February to April 2023, the
principal balance of $350,000 of the Note was converted into 1,388,804 Common Shares of the Company. The parties have agreed to extend the Note and are in the process of negotiating the terms of the extension as of the date of this annual
report.
Equity Transfer Agreement dated December 27, 2021
For a description of the terms
of this agreement, see
"Item 4. Information on the Company—B. Business Overview—Recent Development —Acquisition
of REIT Mingde."
Consulting Agreement
On April 21, 2021, the Company entered into that certain three-year
consulting agreement (the "Consulting Agreement") with Geniusland International Capital Ltd. (the "Geniusland")
in connection with Company's corporate strategy on the Nasdaq Stock Market. Pursuant to the agreement, the Company issued an aggregate
of 1,000,000 Common Shares to Geniusland and its designees for services rendered. The Consulting Agreement was superseded by the Supplemental
Consulting Agreement described below.
Supplemental Consulting Agreement
On December 29, 2021, the
Company entered into a Supplemental Consulting Agreement with Geniusland (the "Supplemental Agreement") which superseded the
Consulting Agreement. Pursuant to the Supplemental Agreement, Geniusland provided corporate strategies in connection with the Company's
listing on the Nasdaq Stock Market for a term from December 29, 2021 to March 28, 2022. In consideration of the services rendered by Geniusland,
upon execution of the Supplemental Agreement, the Company issued 500,000 restricted Common Shares to Geniusland, in lieu of cash, valued
at 70% of the closing price on the day before the signing date of the Supplemental Agreement. Such shares are subject to a 6-month lock-up.
Lease Agreement
On November 25, 2021, REIT
Technology entered into a lease agreement ("Lease") with Hainan Nuclear Power Co., Ltd. ("Hainan Nuclear Power")
to lease an office space of 1,279.66 square meters, located at the 22nd Floor, Xinheng Building, No. 123-8, Binhai Avenue, Longhua District,
Haikou City, Hainan Province, China. The Lease has a term of three years from February 1, 2022 to January 31, 2025. If REIT Technology
intends to renew the Lease, REIT shall notify Hainan Nuclear Power two months earlier in writing. Hainan Nuclear Power shall notify REIT
Technology of its intention to sell the leased property at least 90 business days in advance, under which circumstances, REIT Technology
shall have the priority right to purchase the leased property, If Hainan Nuclear terminates the Lease earlier without cause, it shall
notify REIT Technology 60 days in advance and refund REIT Technology with the balance of the paid rent and security deposit and pay a
liquidated damage equal to 100% of the security deposit to REIT Technology. If REIT Technology terminates the Lease earlier, it shall
notify Hainan Nuclear Power at least 60 days in advance and forfeit the paid rent and the security deposit.
Settlement Agreement
For a description of the terms of this agreement,
see "
Item 8. Financial Information – A. Consolidated Statements and Other Financial Information – Legal and Administrative
Proceedings.
"
107
Hainan Tashanshi Agreement
On May 25, 2022, the
Company entered into a securities purchase agreement with Hainan Tashanshi, pursuant to which the Company agreed to sell to Hainan Tashanshi
an aggregate of 5,970,000 Common Shares at $0.60 per share, for aggregate gross proceeds of $3,582,000. The transaction was closed on
May 25, 2022 and the Company issued 5,970,000 Common Shares to the designees of Hainan Tashanshi.
2023 Consulting Agreements
On February 27, 2023, the
Company entered into a consulting service agreement with Express Transportation Ltd. ("ETL"). Pursuant to the agreement, ETL
has agreed to provide feasibility, analysis and risk management services on investment project in mainland China in exchange for 2,000,000
Common Shares, which were issued on March 8, 2023.
On February 27, 2023, the
Company entered into a consulting service agreement with Maxleed Investment Holding Ltd. ("MIHL"). Pursuant to the agreement,
MIHL has agreed to provide strategy, due diligence, business expansion and optimization services in exchange for 2,000,000 Common Shares,
which were issued on March 8, 2023.
Other than those set forth
above and those described elsewhere in this annual report, we did not have any other material contracts.
D.
Exchange controls.
Foreign Currency Exchange
The principal regulations
governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended on August 5,
2008, the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) and the Interim Measures on Administration
on Foreign Debts (2003), as amended on July 26, 2022. Under these regulations, 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 most
capital account items, such as direct investment, loans, repatriation of investment and investment in securities outside China, unless
the prior approval of SAFE or its local counterparts is obtained. In addition, any loans to an operating subsidiary in China that is a
foreign invested enterprise, cannot, in the aggregate, exceed the difference between its respective approved total investment amount and
its respective approved registered capital amount. Furthermore, any foreign loan must be registered with SAFE or its local counterparts
for the loan to be effective. Any increase in the amount of the total investment and registered capital must be approved by the MOFCOM
or its local counterpart. We may not be able to obtain these government approvals or registrations on a timely basis, if at all, which
could result in a delay in the process of making these loans.
The dividends paid by the
subsidiary to its shareholder are deemed shareholder income and are taxable in mainland China. Pursuant to the Administration Rules of
the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in China may purchase or remit foreign exchange,
subject to a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE. Foreign exchange transactions
under the capital account are still subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC
governmental authorities.
On August 29, 2008, SAFE issued
the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign
Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of
foreign currency-registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB
capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business
scope approved by the applicable government authority and may not be used for equity investments within China. SAFE also strengthened
its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-invested enterprises.
The use of such RMB capital may not be changed without SAFE's approval, and such RMB capital may not in any case be used to repay
RMB loans if the proceeds of such loans have not been used. On March 30, 2015, SAFE issued SAFE Circular 19, which took effective and
replaced SAFE Circular 142 on June 1, 2015. Although SAFE Circular 19 allows for the use of RMB converted from the foreign currency-denominated
capital for equity investments in China, the restrictions continue to apply as to foreign-invested enterprises' use of the converted
RMB for purposes beyond the business scope, for entrusted loans or for inter-company RMB loans. 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 of the rules set forth in SAFE Circular 19, but changes the prohibition
against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted
loans to a prohibition against using such capital to issue loans to non-associated enterprises. Violations of SAFE Circular 19 or SAFE
Circular 16 could result in administrative penalties.
108
On November 19, 2012, SAFE
promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment which
substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special
purpose foreign exchange accounts (e.g., pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts),
the reinvestment of lawful incomes derived by foreign investors in China (e.g. profit, proceeds of equity transfer, capital reduction,
liquidation and early repatriation of investment), and purchase and remittance of foreign exchange as a result of capital reduction, liquidation,
early repatriation or share transfer in a foreign-invested enterprise no longer require SAFE approval, and multiple capital accounts for
the same entity may be opened in different provinces, which was not possible before. In addition, SAFE promulgated the Circular on Printing
and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting
Documents in May 2013, which specifies that the administration by SAFE or its local departments over direct investment by foreign investors
in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment
in China based on the registration information provided by SAFE and its local departments.
On February 13, 2015, SAFE
promulgated the Circular on Further Simplifying and Improving the Policies Concerning Foreign Exchange Control on Direct Investment, or
SAFE Circular 13, which took effect on June 1, 2015. SAFE Circular 13 delegates the authority to enforce the foreign exchange registration
in connection with the inbound and outbound direct investment under relevant SAFE rules to certain banks and therefore further simplifies
the foreign exchange registration procedures for inbound and outbound direct investment.
Circular 37
On July 4, 2014, SAFE
issued Circular 37, which became effective as of July 4, 2014. According to Circular 37, PRC residents shall apply to SAFE and its
branches for going through the procedures for foreign exchange registration of overseas investments before contributing the domestic assets
or interests to a SPV. An amendment to registration or filing with the local SAFE branch by such PRC resident is also required if the
registered overseas SPV's basic information such as domestic individual resident shareholder, name, operating period, or major events
such as domestic individual resident capital increase, capital reduction, share transfer or exchange, merger or division has changed.
Although the change of overseas funds raised by overseas SPV, overseas investment exercised by overseas SPV and non-cross-border capital
flow are not included in Circular 37, we may be required to make foreign exchange registration if required by SAFE and its branches.
Moreover, Circular 37 applies
retroactively. As a result, PRC residents who have contributed domestic assets or interests to a SPV, but failed to complete foreign exchange
registration of overseas investments as required prior to implementation of Circular 37, are required to send a letter to SAFE and its
branches for explanation. Under the relevant rules, failure to comply with the registration procedures set forth in Circular 37 may
result in receiving a warning from SAFE and its branches, and may result in a fine of up to RMB 300,000 for an organization or up to RMB
50,000 for an individual. In the event of failing to register, if capital outflow occurred, a fine up to 30% of the illegal amount may
be assessed.
PRC residents who control
our Company are required to register with SAFE in connection with their investments in us. If we use our equity interest to purchase the
assets or equity interest of a PRC company owned by PRC residents in the future, such PRC residents will be subject to the registration
procedures described in Circular 37.
Regulations on Offshore Parent Holding Companies' Direct Investment
in and Loans to Their PRC Subsidiaries
According to the Interim Regulations
on Statistics and Supervision of Foreign Debt promulgated by the State Council and latest amended on November 29, 2020, and the Interim
Provisions on the Management of Foreign Debts promulgated by SAFE, the NDRC and the MOFCOM and effective from March 1, 2003 and latest
amended on July 26, 2022, loans by foreign companies to their subsidiaries in China, which accordingly are FIEs, are considered foreign
debt, and such loans must be registered with the local branches of the SAFE. Under the provisions, the total amount of accumulated medium-term
and long-term foreign debt and the balance of short-term debt borrowed by a FIE is limited to the difference between the total investment
and the registered capital of the foreign-invested enterprise.
109
On January 12, 2017, the People's
Bank of China promulgated the Circular of the People's Bank of China on Matters relating to the Macro-prudential Management of Comprehensive
Cross-border Financing, or PBOC Circular 9, which took effect on the same date. The PBOC Circular 9 established a capital or net assets-based
constraint mechanism for cross-border financing. Under such mechanism, a company may carry out cross-border financing in Renminbi or foreign
currencies at their own discretion. The total cross-border financing of a company shall be calculated using a risk-weighted approach and
shall not exceed an upper limit. The upper limit is calculated as capital or assets multiplied by a cross-border financing leverage ratio
and multiplied by a macro-prudential regulation parameter.
In addition, according to
PBOC Circular 9, as of the date of the promulgation of PBOC Circular 9, a transition period of one year is set for foreign-invested enterprises
and during such transition period, FIEs may apply either the current cross-border financing management mode, namely the mode provided
by Implementation Rules for the Provisional Regulations on Statistics and Supervision of Foreign Debt and the Interim Provisions on the
Management of Foreign Debts, or the mode in this PBOC Circular 9 at its sole discretion. After the end of the transition period, the cross-border
financing management mode for FIEs will be determined by the People's Bank of China and SAFE after assessment based on the overall
implementation of this PBOC Circular 9.
According to applicable PRC
regulations on FIEs, capital contributions from a foreign holding company to its PRC subsidiaries, which are considered FIEs, may only
be made when approval by or registration with the MOFCOM or its local counterpart is obtained.
Regulation of Dividend Distribution
The principal regulations
governing the distribution of dividends by foreign holding companies include the Company Law of China (1993), as amended in 2018.
Under these regulations, enterprises
in China may pay dividends only out of their retained profits, if any, determined in accordance with PRC accounting standards and regulations.
In addition, enterprises in China are required to allocate at least 10% of their respective retained 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, and an enterprise is not permitted to distribute any profits until losses from prior fiscal years have been offset.
E.
Taxation.
The following sets forth the
material British Virgin Islands, PRC and U.S. federal income tax matters related to an investment in our Common Shares. It is directed
to U.S. Holders (as defined below) of our Common Shares and is based on 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 an investment in our Common Shares, such as the tax consequences under state, local and other tax laws.
The following brief description
applies only to U.S. Holders (defined below) that hold Common Shares as capital assets and that have the U.S. dollar as their functional
currency. This brief description is based on the 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 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.
110
WE URGE POTENTIAL PURCHASERS
OF OUR SHARES TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING,
OWNING AND DISPOSING OF OUR SHARES.
PRC Enterprise Income Tax
According to the EIT Law,
which was promulgated by the SCNPC on March 16, 2007 (effective as of January 1, 2008 and was last amended on February 24, 2017 (effective
on the same day) and on December 29, 2018 (effective on the same day), respectively. The income tax for both domestic and foreign-invested
enterprises on their global income is at a uniform rate of 25%, unless they qualify for certain exceptions. The Regulation on the Implementation
of Enterprise Income Tax Law of China (the "EIT Rules") was promulgated by the State Council on December 6, 2007 and became
effective on January 1, 2008 and partly amended on April 23, 2019 further clarifies the calculation of the income tax on different types
of incomes and permit certain HNTEs strongly supported by the state" that independently own core intellectual property and meet
statutory criteria, to enjoy a reduced 15% enterprise income tax rate.
On January 29, 2016, the PRC
Ministry of Science and Technology, Ministry of Finance and State Administration of Taxation enacted the Administrative Measures for Certifying
High and New Technology Enterprises (2016 Version) (the "Certifying Measures"), which retroactively became effective on January
1, 2016. Under the EIT Law and the Certifying Measures, certain qualified high-tech companies may benefit from a preferential tax rate
of 15% if they own their core intellectual properties and are classified into certain industries strongly supported by the PRC government
and set forth by certain departments of the PRC State Council. Beijing REIT, Hainan Yile IoT and IoV Technology Research were granted
the HNTE qualifications valid until December 2025, October 2023 and October 2025, respectively. There can be no assurance, however, that
Beijing REIT and Hainan Yile IoT will continue to meet the qualifications for such a reduced tax rate. In addition, there can be no guaranty
that relevant governmental authorities will not revoke the "HNTE" status of Beijing REIT, Hainan Yile IoT or IoV Technology
Research in the future.
Pursuant to Circular of the
State Administration of Taxation on Printing and Distributing the Implementing Measures for Special Tax Adjustments (for Trial Implementation),
effective on January 1, 2008, enterprises shall adopt a reasonable transfer pricing method when conducting transactions with their affiliates.
Tax authorities have the power to assess whether related transactions conform to the principle of equity and make adjustments accordingly.
Therefore, the invested enterprise should faithfully report relevant information of its related transactions. Pursuant to the Announcement
of the State Administration of Taxation on Issuing the Administrative Measures for Special Tax Adjustment and Investigation and Mutual
Consultation Procedures, effective on May 1, 2017, an enterprise may adjust and pay taxes at its own discretion when it receives a special
tax adjustment risk warning or identifies its own special tax adjustment risks, and the tax authorities may also carry out special tax
investigation and adjustment in accordance with the relevant provisions in regard to enterprises that adjust and pay taxes at their own
discretion.
In January 2009, the SAT promulgated
the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, or the Non-resident
Enterprises Measures, which was repealed by Announcement of the State Administration of Taxation on Issues Relating to Withholding at
Source of Income Tax of Non-resident Enterprises in December 2017. According to the new announcement, it shall apply to handling of matters
relating to withholding at source of income tax of non-resident enterprises pursuant to the provisions of Article 37, Article 39 and Article
40 of the EIT Law. According to Article 37, Article 39 of the EIT Law, income tax over non-resident enterprise income pursuant to the
provisions of the third paragraph of Article 3 shall be subject to withholding at the source, where the payer shall act as the withholding
agent. The tax amount for each payment made or due shall be withheld by the withholding agent from the amount paid or payable. Where a
withholding agent fails to withhold tax or perform tax withholding obligations pursuant to the provisions of Article 37, the taxpayer
shall pay tax at the place where the income is derived. Where the taxpayer fails to pay tax pursuant to law, the tax authorities may demand
payment of the tax amount payable, from a payer of the taxpayer with payable tax amounts from other taxable income items in China.
111
On April 30, 2009, the MOFCOM
and the SAT jointly issued the Circular on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business,
or Circular 59, which became effective retroactively as of January 1, 2008 and was partially revised on January 1, 2014. By promulgating
and implementing this circular, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests
in a PRC resident enterprise by a Non-resident Enterprise.
On February 3, 2015, the SAT
issued the Announcement of the State Administration of Taxation on Several Issues Relating to Enterprise Income Tax of Transfers of Assets
between Non-resident Enterprises, or SAT Bulletin 7, which was partially abolished on December 29, 2017. SAT Bulletin 7 extends its tax
jurisdiction to transactions involving transfer of immovable property in China and assets held under the establishment, and placement
in China, of a foreign company through the offshore transfer of a foreign intermediate holding company. SAT Bulletin 7 also addresses
transfer of the equity interest in a foreign intermediate holding company broadly. In addition, SAT Bulletin 7 introduces safe harbor
scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee
of the Indirect Transfer as they have to assess whether the transaction should be subject to PRC tax and to file or withhold the PRC tax
accordingly.
On October 17, 2017, the SAT
issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income
Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017 and was revised on June 15, 2018. The SAT Bulletin 37 further
clarifies the practice and procedure of withholding of non-resident enterprise income tax.
If non-resident investors
were involved in our private equity financing, if such transactions were determined by the tax authorities to lack reasonable commercial
purpose, we and our non-resident investors may be at risk of being required to file a return and be taxed under SAT Bulletin 7 and we
may be required to expend valuable resources to comply with SAT Bulletin 7 or to establish that we should not be held liable for any obligations
under SAT Bulletin 7.
Uncertainties exist with respect
to how the EIT Law applies to the tax residence status of ReTo and our offshore subsidiaries. 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 PRC enterprise for enterprise income tax purposes. Although the EIT Rules define "de
facto management body" as a managing body that exercises substantive and overall management and control over the production and
business, personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available
is set forth in Circular 82 issued by the State Administration of Taxation, on April 22, 2009 which provides that a foreign enterprise
controlled by a PRC company or a PRC company group will be classified as a "resident enterprise" with its "de facto
management bodies" located within China if all of the following criteria are satisfied:
●
the place where the senior management and core management departments that are in charge of its daily operations perform their duties is mainly located in China;
●
its financial and human resources decisions are made by or are subject to approval by persons or bodies in China;
●
its major assets, accounting books, company seals, and minutes and files of its board and shareholders' meetings are located or kept in China; and
●
half or more than half of the enterprise's directors or senior management with voting rights frequently reside in China.
We do not believe that we
meet the conditions outlined in the preceding paragraph since ReTo does not have a PRC enterprise or enterprise group as our primary controlling
shareholder. In addition, we are not aware of any offshore holding companies with a corporate structure similar to the Company that has
been deemed a China "resident enterprise" by the PRC tax authorities.
If we are deemed a China resident
enterprise, we may be subject to the EIT at the rate of 25% on our global income, except that the dividends we receive from our PRC subsidiaries
may be exempt from the EIT to the extent such dividends are deemed dividends among qualified resident enterprises. If we are considered
a resident enterprise and earn income other than dividends from our PRC subsidiaries, a 25% EIT on our global income could significantly
increase our tax burden and materially and adversely affect our cash flow and profitability.
112
PRC Value-Added Tax
The Provisional Regulations
of the PRC on Value-added Tax were promulgated by the State Council on December 13, 1993 and came into effect on January 1, 1994, which
were subsequently amended on November 10, 2008 and came into effect on January 1, 2009 and most recently amended on November 19, 2017.
The Detailed Rules for the Implementation of the Provisional Regulations of the PRC on Value-added Tax was promulgated by the Ministry
of Finance on December 25, 1993 and subsequently amended on December 15, 2008 and October 28, 2011, or collectively, VAT Law. On November
19, 2017, the State Council promulgated the Decisions on Abolishing the Provisional Regulations of the PRC on Business Tax and Amending
the Provisional Regulations of the PRC on Value-added Tax, or Order 691. According to the VAT Law and Order 691, all enterprises and individuals
in China engaging in the sale of goods, the provision of processing, repair and assembly services, sales of services, intangible assets,
real property and the importation of goods within the territory of the PRC are the taxpayers of VAT. On April 4, 2018, Ministry of Finance
and State Administration of Taxation collectively promulgated the Circular of the Ministry of Finance and the State Administration of
Taxation on Adjusting Value-added Tax Rates, the implementation of which began on May 1, 2018, pursuant to which a taxpayer engaging in
a taxable sales activity for the value-added tax purpose or imports of goods, the previous applicable 17% and 11% tax rates are adjusted
to 16% and 10% respectively, and exported goods originally subject to 17% and 11% tax rates and export rebate rate, will be subject to
16% and 10% tax rate and export rebate rate. From April 1, 2019, the 16% and 10% tax rates were reduced to 13% and 9%, respectively. The
VAT tax rates generally applicable are simplified as 17%, 11%, 6% and 0%, and the VAT tax rate applicable to the small-scale taxpayers
is 3%. The amount of VAT payable is calculated as "output VAT" minus "input VAT" and the rate of VAT for the China
PRC subsidiaries ranges from 3% to 13%.
China Dividend Withholding Tax
Under the PRC tax laws effective
prior to January 1, 2008, dividends paid to foreign investors by foreign-invested enterprises were exempt from PRC withholding tax. Pursuant
to the EIT Law and the Implementation Rules, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in
China to its foreign enterprise investors are subject to a 10% withholding tax, unless any such foreign investor's jurisdiction
of incorporation has a tax treaty with China that provides for a different withholding arrangement.
Pursuant to an Arrangement
Between the Mainland of 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 came into effect on December 8, 2006, and other applicable PRC laws and regulations, if
a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such
Double Tax Avoidance Arrangement and other applicable laws and regulations, the 10% withholding tax on the dividends the Hong Kong resident
enterprise receives from a PRC resident enterprise may be reduced to 5%. According to the Announcement of the SAT on Issuing the Measures
for the Administration of Non-resident Taxpayers' Enjoyment of Treaty Benefits effective on January 1, 2020, non-resident taxpayers
can enjoy tax treaty benefits via the "self-assessment of eligibility, claiming treaty benefits, retaining documents for inspection"
mechanism. Non-resident taxpayers who have self-assessed that they are eligible for the treaty benefits can claim such tax treaty benefits
accordingly provided that they have collected and retained relevant supporting documents for inspection by the tax authorities in their
post-filing administration process. Pursuant to the Announcement on Certain Issues with Respect to the "Beneficial Owner"
in Tax Treaties, issued by the SAT on February 3, 2018, and effective on April 1, 2018, when determining an applicant's "beneficial
owner" status regarding tax treatments in connection with dividends, interests or royalties in tax treaties, several factors set
forth below will be taken into account, although the actual analysis will be fact-specific: (i) whether the applicant is obligated to
pay more than 50% of his or her income in 12 months to residents in a third country or region; (ii) whether the business operated by the
applicant constitutes a substantial business operation; and (iii) whether the counterparty country or region to the tax treaties does
not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate. The applicant must submit relevant documents
to the competent tax authorities to prove his or her "beneficial owner" status.
113
British Virgin Islands Taxation
All dividends paid by ReTo
to holders of Common Shares who are not persons resident in the BVI are exempt from the provisions of the British Virgin Islands Income
Tax Act, and any capital gains realized with respect to any Common Shares by persons who are not persons resident in the BVI are exempt
from all forms of taxation in the BVI.
No estate, inheritance, succession,
or gift tax, rate, duty, levy, or other charge is payable by persons who are not persons resident in the BVI with respect to Common Shares.
All instruments relating to
transfers of property (except in the case of real estate situated in the BVI) to or by ReTo and all instruments relating to transactions
in respect of Common Shares are exempt from the payment of stamp duty in the BVI.
There is no income tax treaty
or convention currently in effect between the United States and the British Virgin Islands or between China and the British Virgin Islands.
Material United States Federal Income Tax Considerations
The following does not address
the tax consequences to any particular investor or to persons in special tax situations such as:
●
a dealer in securities or currencies;
●
a person whose "functional currency" is not the United States dollar;
●
banks;
●
financial institutions;
●
insurance companies;
●
regulated investment companies;
●
real estate investment trusts;
●
broker-dealers;
●
traders that elect to mark-to-market;
●
U.S. expatriates;
●
tax-exempt entities;
●
persons liable for alternative minimum tax;
●
persons holding our Common Shares as part of a straddle, hedging, conversion or integrated transaction;
●
persons that actually or constructively own 10% or more of our voting shares;
●
personsthat are subject to the applicable financial statement accounting rules under Section 451(b) of the Code;
●
persons who acquired our Common Shares pursuant to the exercise of any employee share option or otherwise as consideration; or
●
persons holding our Common Shares through partnerships or other pass-through entities.
Prospective purchasers are
urged to consult their tax advisors about the application of the U.S. Federal 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 Common Shares.
114
Taxation of Dividends and Other Distributions
on our Common Shares
Subject to the passive foreign
investment company rules discussed below, the gross amount of distributions made by us to you with respect to the Common 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). The dividends will not be eligible for the dividends-received deduction allowed to corporations in
respect of dividends received from other U.S. corporations.
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 Common Shares are readily tradable on an established securities market in the United States, or in the event
we are deemed to be a PRC "resident enterprise" under the China tax law, 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 passive foreign investment
company (as discussed 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. Under U.S. Internal Revenue Service authority, Common 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 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 Common
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 Common 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 Common Shares, and to the extent the amount of the distribution
exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal
income tax principles. Therefore, a U.S. Holder should expect that a distribution 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.
Taxation of Dispositions of Common 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
Common Shares. The gain or loss will generally be capital gain or loss. Capital gains are generally subject to United States federal income
tax at the same rate as ordinary income, except that non-corporate U.S. Holders who have held Common Shares for more than one year may
be eligible for reduced rates of taxation. 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.
115
Passive Foreign Investment Company
Based on our current and anticipated
operations and the composition of our income and assets, we do not expect to be a passive foreign investment company, or PFIC, for U.S.
federal income tax purposes for our current taxable year ending December 31, 2023. Our actual PFIC status for the current taxable years
ending December 31, 2023 will not be determinable until after the close of such taxable years and, accordingly, there is no guarantee
that we will not be a PFIC for the current taxable year.  PFIC status is a factual determination for each taxable year which cannot
be made until the close of the taxable year. A non-U.S. corporation is considered a PFIC for any taxable year if either:
●
at least 75% of its gross income 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").
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.
We must make a separate determination
each year as to whether we are a PFIC. As a result, our PFIC status may change. In particular, because the value of our assets for purposes
of the asset test will generally be determined based on the market price of our Common Shares, our PFIC status will depend in large part
on the market price of our Common Shares. Accordingly, fluctuations in the market price of the Common 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 raised in our IPO. If we are a PFIC for any year during which you
hold Common Shares, we will continue to be treated as a PFIC for all succeeding years during which you hold Common Shares. However, if
we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a "deemed sale" election with
respect to the Common Shares.
If we are a PFIC for any taxable
year during which you hold Common 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 Common 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 Common
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 Common Shares;
●
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and
●
the amount allocated to each other year 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 or other disposition of the Common Shares cannot be treated as capital,
even if you hold the Common Shares as capital assets.
A U.S. Holder of "marketable
stock" (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the tax treatment discussed
above. If you make a mark-to-market election for the Common Shares, you will include in ordinary income each year an amount equal to the
excess, if any, of the fair market value of the Common Shares as of the close of your taxable year over your adjusted tax basis in such
Common Shares. You are allowed a deduction for the excess, if any, of the adjusted tax basis of the Common Shares over their fair market
value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the
Common 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 Common Shares, are treated as ordinary income. Ordinary loss treatment also applies
to the deductible portion of any mark-to-market loss on the Common Shares, as well as to any loss realized on the actual sale or disposition
of the Common Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for
such Common Shares. Your tax basis in the Common 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 Common Shares
" generally would not apply.
116
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 Common Shares are regularly traded on the Nasdaq
Capital Market and if you are a holder of Common Shares, the mark-to-market election would be available to you were we to be or become
a PFIC.
Alternatively, a U.S. Holder
of stock in a PFIC may make a "qualified electing fund" election 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. However,
the qualified electing fund election 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 Common Shares in any year in which we are a PFIC, you will generally
be required to file U.S. Internal Revenue Service Form 8621 to report your ownership of our Common Shares as well as distributions received
on the Common Shares, any gain realized on the disposition of the Common Shares, any PFIC elections you would like to make in regard to
the Common Shares, and any information required to be reported pursuant to such an election.
You are urged to consult your
tax advisors regarding the application of the PFIC rules to your investment in our Common Shares and the elections discussed above.
Information Reporting and Backup Withholding
Dividend payments with respect
to our Common Shares and proceeds from the sale, exchange or redemption of our Common Shares may be subject to information reporting to
the U.S. Internal Revenue Service and possible U.S. backup withholding at a current 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.
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.
Under the Hiring Incentives
to Restore Employment Act of 2010, certain United States Holders are required to report information relating to Common Shares, subject
to certain exceptions (including an exception for 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 shares. U.S. Holders are urged to consult their own tax advisors regarding the application of the U.S. information reporting
and backup withholding rules.
A Non-U.S. Holder generally
may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status to the
payor, under penalties of perjury, on the applicable IRS Form W-8BEN.
117
F.
Dividends and paying agents.
Not applicable.
G.
Statement by experts.
Not applicable.
H.
Documents on display.
We are subject to periodic
reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers, and are required
to file reports and other information with the SEC. Specifically, we are required to file annually an annual report on Form 20-F within
four months after the end of each fiscal year, which is December 31. All information filed with the SEC can be obtained over the internet
at the SEC's website at www.sec.gov. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing
the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
In accordance with Nasdaq
Stock Market Rule 5250(d), we will post this annual report on Form 20-F on our website at www.retoeco.com. In addition, we will
provide hard copies of our annual report free of charge to shareholders upon request.
I.
Subsidiary information.
Not applicable.
J.
Annual Report to Security Holders.
Not applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our main interest rate exposure
relates to bank borrowings. We manage our interest rate exposure with a focus on reducing our overall cost of debt and exposure to changes
in interest rates.
As of December 31, 2022, we
had $1.3 million in outstanding debt borrowings, with effective interest rates between 5.50% and 7.3590%. As of December 31, 2021, we
had $2.4 million in outstanding debt borrowings, with effective interest rates between 4.55% and 8.5%. As of December 31, 2020, we had
$15.9 million in outstanding debt borrowings, with effective interest rates ranging from 5.0025% to 19.2%.
As of December 31, 2022,
if interest rates change by 1%, with all other variables having remained constant, and assuming the amount of bank borrowings outstanding
at the end of the year was outstanding for the entire year, profit attributable to equity owners of our Company would have been RMB51,603
($7,668) lower/higher, respectively, mainly as a result of higher/lower interest expenses incurred on the outstanding debt borrowings.
As of December 31, 2021, if
interest rates increased/decreased by 1%, with all other variables having remained constant, and assuming the amount of bank borrowings
outstanding at the end of the year was outstanding for the entire year, profit attributable to equity owners of our Company would have
been RMB151,820 ($23,535) lower/higher, respectively, mainly as a result of higher/lower interest expenses incurred on the outstanding
debt borrowings.
As of December 31, 2020, if
interest rates increased/decreased by 1%, with all other variables having remained constant, and assuming the amount of bank borrowings
outstanding at the end of the year was outstanding for the entire year, profit attributable to equity owners of our Company would have
been RMB 1,095,297 ($158,599) lower/higher, respectively, mainly as a result of higher/lower interest expenses incurred on the outstanding
debt borrowings.
118
Foreign Exchange Risk
Our functional currency is
the RMB, and our financial statements are presented in U.S. dollars. China's currency has gradually depreciated against most foreign
currencies over the last few years. The average exchange rate for US$ against Chinese RMB has changed from US$1.00 for RMB6.4508 in fiscal
2021 to US $1.00 for RMB6.7290 in fiscal 2022. The exchange rate was US$1.00 for RMB6.8972 as of December 31, 2022. The change in the
value of RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any
underlying change in our business or results of operation. If using the average exchange rate of fiscal 2021, our revenue, cost of revenue
and total expenses, including selling expenses, general administrative expenses, bad debt expense and research and development expenses,
for the year ended December 31, 2022 would decrease by approximately $280,000, $245,000 and $694,000, respectively.
Currently, our assets, liabilities,
revenues and costs are denominated in RMB and in U.S. dollars, our exposure to foreign exchange risk will primarily relate to those financial
assets denominated in U.S. dollars. Any significant revaluation of RMB against U.S. dollar may materially affect our earnings and financial
position, and the value of, and any dividends payable on, our Common Shares in U.S. dollars in the future. See "
Item 3. Key Information-
D. Risk Factors — Risks Related to Doing Business in China — Fluctuations in exchange rates could result
in foreign currency exchange losses to us and may reduce the value of, and amount in U.S. Dollars of dividends payable on, our shares
in foreign currency terms."
Credit Risk
As of December 31, 2022, we
had cash and cash equivalents of $0.1 million. Our cash and cash equivalents are invested primarily in savings and deposit accounts with
original maturities of three months or less. Savings and deposit accounts generate a small amount of interest income.
Inflation Risk
Inflationary factors such
as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that
inflation has had a material effect on our financial position or results of operations to date, a high rate of inflation in the future
may have an adverse effect on our ability to maintain current levels of gross profit and selling, general and administrative expenses
as a percentage of net sales if the selling prices of our products do not increase with these increased costs.
Commodity Risk
As a developer and manufacturer of construction
materials and equipment, our Company is exposed to the risk of an increase in the price of raw materials. We historically have been able
to pass on price increases to customers by virtue of pricing terms that vary with changes in raw material prices such as steel and cement,
but we have not entered into any contract to hedge any specific commodity risk. Moreover, our Company does not purchase or trade on commodity
instruments or positions; instead, it purchases commodities for use.
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.
119
PART II
Item 13. Defaults, Dividends Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders
and Use of Proceeds
Material Modifications to the Rights of Security Holders
See "
Item 10.
Additional Information – B. Memorandum and Articles of Association
" for a description of the rights of securities holders,
which remain unchanged.
Use of Proceeds
Not applicable.
Item 15. Controls and Procedures
(a)
Disclosure Controls and Procedures.
As of December 31, 2022 (the
"Evaluation Date"), the Company carried out an evaluation, under the supervision of and with the participation of management,
including the Company's chief executive officer and chief financial officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on
the foregoing, the chief executive officer and chief financial officer concluded that as of the Evaluation Date the Company's disclosure
controls and procedures were not effective due to the material weaknesses identified below.
(b)
Management's Annual Report on Internal Control over Financial Reporting.
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is
a process designed under the supervision of our chief executive officer and chief financial officer to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purpose in
accordance with U.S. generally accepted accounting principles.
Management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2022. In making this assessment, management used the framework set
forth in the report Internal Control – Integrated framework issued in 2013 by the Committee of Sponsoring Organization of the
Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company's internal control system, including
(1) the control environment, (2) risk assessment, (3) control activities, (4) information and communication and (5) monitoring.
Based on that evaluation,
management concluded that these controls were ineffective at December 31, 2022 due to material weaknesses relating to (i) a lack
of full-time accounting and financial reporting personnel with appropriate knowledge of U.S. GAAP and SEC reporting and compliance requirements;
and (ii) a lack of an effective review by management for the year ended accounting close and reporting.
Remediation Activities
and Plans
The Company is in the process
of designing and implementing measures to improve our internal control over financial reporting to remediate the material weaknesses that
have we identified, including (i) hiring external financial consultants with experience in U.S. GAAP and SEC reporting obligations; (ii)
implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting
personnel; iii) implementing new policies and procedures to standardize relevant processes, and (iv) enhancing our internal recordkeeping.
Since initially identifying
the material weaknesses, we have improved our internal control environment in the following ways:
(i)
Management engaged certain qualified consultants with relevant U.S. GAAP and SEC reporting experience
and qualification to strengthen the Company's financial reporting and U.S. GAAP and SEC reporting training; and
(ii)
Management strengthened the application of critical accounting policies and implemented new critical accounting
policies to support the financial reporting and disclosure.
(c)
Attestation report of the registered public accounting firm.
Not applicable.
120
(d)
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
The Company's Board
of Directors has determined that Ms. Lidong Liu qualifies as an "audit committee financial expert" in accordance with applicable
Nasdaq standards. The Company's Board of Directors has also determined that Ms. Liu and the other members of the Audit Committee
are all "independent" in accordance with the applicable Nasdaq standards.
Item 16B. Code of Ethics
Our board of directors has
adopted a code of business conduct and ethics that applies to all of our directors, executive officers and employees. We have filed our
code of business conduct and ethics as an exhibit to our registration statement on Form F-1, declared effective on July 27, 2017 (File
No. 333-217355). The code is also available on our official website under the investor relations section at www.retoeco.com.
Item 16C. Principal Accountant Fees
The following table sets forth
the aggregate fees by categories specified below in connection with certain professional services rendered and billed by YCM CPA Inc.,
our independent registered public accounting firm, for the periods indicated.
December 31,
2022
December 31,
2021
Audit fees
(1)
$
190,000
$
190,000
Audit-Related fees
-
-
Tax fees
-
-
All other fees
(2)
-
-
Total
$
190,000
$
190,000
(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 and review of the interim financial statements.
(2)
All other fees include the aggregate fees billed in each of the fiscal years for products and services provided by our independent registered public accounting firm other than the services reported under audit fees, audit-related fees, and tax fees.
The policy of our audit committee
is to pre-approve all audit and non-audit services provided by YCM CPA Inc., our independent registered public accounting firm, including
audit services, audit-related services, tax services, and other services as described above.
121
Item 16D. Exemptions form 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
(1) Previous Independent Registered Public Accounting
Firm
(i) On March 15, 2021, the Company
dismissed its independent registered public accounting firm, Friedman LLP ("Friedman").
(ii) The report of Friedman
on the financial statements of the Company for the fiscal years ended December 31, 2019, and the related statements of operations and
comprehensive income (loss), changes in shareholders' equity (deficit), and cash flows for the fiscal years ended December 31, 2019
did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting
principles, except that the audit report on the financial statements of the Company for the year ended December 31, 2019 contained an
uncertainty about the Company's ability to continue as a going concern.
(iii) The decision to change
the independent registered public accounting firm was recommended and approved by the Audit Committee of the Company.
(iv) During the fiscal years
ended December 31, 2019 and 2020 and the subsequent interim period from January 1, 2021 through March 15, 2021, the date of dismissal,
(a) there were no disagreements with Friedman on any matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Friedman, would have caused it to make reference
thereto in its reports on the financial statements for such years and (b) there were no "reportable events" as described in
Item 304(a)(1)(v) of Regulation S-K.
(v) On March 15, 2021, the Company
provided Friedman with a copy of the Current Report 6-K which was filed on March 15, 2020 and had requested that it furnished the Company
with a letter addressed to the U.S. Securities and Exchange Commission stating whether it agreed with the above statements. A copy of
such letter was filed as an Exhibit 16.1 to the Company's Current Report on Form 6-K filed on March 15, 2021 and was incorporated
herein for reference in this report.
(2) New Independent Registered Public Accounting
Firm
On March 15, 2021, the Audit
Committee approved the appointment of YCM CPA Inc. ("YCM") as its new independent registered public accounting firm to undertake
the Company's audit for the financial year ending December 31, 2020. YCM also conducted the audit for the financial year ending
December 31, 2021.
During the two fiscal years
ended December 31, 2020 and December 31, 2019 and the subsequent interim period from January 1, 2021 through March 15, 2021, prior to
the engagement of YCM, neither the Company, nor someone on its behalf, has consulted YCM regarding:
(i) either: the application
of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered
on the Company's consolidated financial statements, and either a written report was provided to the Company or oral advice was provided
that the new independent registered public accounting firm concluded was an important factor considered by the Company in reaching a decision
as to the accounting, auditing or financial reporting issue; or
(ii) any matter that was either
the subject of a disagreement as defined in paragraph 304(a)(1)(iv) of Regulation S-K or a reportable event as described in paragraph
304(a)(1)(v) of Regulation S-K.
122
Item 16G. Corporate Governance
Our Common Shares are listed
on the Nasdaq Capital Market. As such, we are subject to corporate governance requirements imposed by Nasdaq. Under Nasdaq rules, listed
non-US companies such as ourselves may, in general, follow their home country corporate governance practices in lieu of some of the Nasdaq
corporate governance requirements.
Certain corporate governance
practices in the BVI, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. The
following summarizes some significant ways in which our corporate governance practices differ from those followed by domestic companies
under the listing standards of the Nasdaq:
Pursuant to the home country
rule exemption set forth under Nasdaq Listing Rule 5615(a)(3)(A), which provides (with certain exceptions not relevant to the conclusions
expressed herein) that a foreign private issuer may follow its home country practice in lieu of the requirements of the Nasdaq Marketplace
Rule 5600 Series, we elected to be exempt from the requirements as follows:
(a)
Nasdaq Marketplace Rule 5620 which provides that (with certain exceptions not relevant to the conclusions expressed herein) each company listing common stock or voting preferred stock, and their equivalents, shall hold an annual meeting of shareholders no later than one year after the end of the company's fiscal year-end; and
(b)
Nasdaq Marketplace Rule 5635 which sets forth the circumstances under which shareholder approval is required prior to an issuance of securities in connection with: (i) the acquisition of the stock or assets of another company; (ii) equity-based compensation of officers, directors, employees or consultants; (iii) a change of control; and (iv) transactions other than public offerings.
We currently intend to comply
with the Nasdaq corporate governance practices and do not rely on the home country rule exemption and except for the foregoing, there
is no significant difference between our corporate governance practices and what the Nasdaq requires of domestic U.S. companies.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections
Not applicable.
123
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 ReTo Eco-Solutions, Inc. are included at the end of this annual report, beginning with page F-1.
Item 19. Exhibits
Exhibit
1.1
Memorandum and Articles of Association (Incorporated herein by reference to Exhibit 3.1 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)
2.1
Specimen Common Share Certificate (Incorporated herein by reference to Exhibit 4.1 to our Form F-1/A (File No. 333-219709) filed on November 13, 2017)
2.2
Description of Securities Registered under Section 12 of the Exchange Act. (Incorporated herein by reference to Exhibit 2.2 to our Form 20-F filed on October 30, 2020)
3.1
Form of Shareholder's Voting Proxy Agreement (Incorporated herein by reference to Exhibit 9.1 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)
4.1
Joint Venture Agreement to Establish Xinyi REIT, dated November 17, 2014 by and between Xinyi Transport Investment Co., Ltd. and Beijing REIT Technology Development Co., Ltd. (Incorporated herein by reference to Exhibit 4.1 to our Form 20-F filed on May 2, 2022)
4.2
Translation of Supplementary Agreement Establishing Xinyi REIT (Incorporated herein by reference to Exhibit 2.8 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)
4.3
REIT India Joint Venture Agreement (Incorporated herein by reference to Exhibit 2.9 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)
4.4
Employment Agreement, dated December 31, 2021 by and among ReTo Eco-Solutions, Inc., Beijing REIT and Hengfang Li (Incorporated herein by reference to Exhibit 4.4 to our Form 20-F filed on May 2, 2022)
4.5
Employment Agreement, dated December 31, 2021 by and among ReTo Eco-Solutions, Inc., Beijing REIT and Guangfeng Dai (Incorporated herein by reference to Exhibit 4.5 to our Form 20-F filed on May 2, 2022)
4.6
Employment Agreement, dated December 31, 2021 by and among ReTo Eco-Solutions, Inc., Beijing REIT and Zhizhong Hu (Incorporated herein by reference to Exhibit 4.6 to our Form 20-F filed on May 2, 2022)
4.7
Employment Agreement, dated December 31, 2021 by and among ReTo Eco-Solutions, Inc., Beijing REIT and Degang Hou (Incorporated herein by reference to Exhibit 4.7 to our Form 20-F filed on May 2, 2022)
4.8
Employment Agreement, dated August 15, 2022, by and between the Company and Yue Hu (Incorporated herein by reference to Exhibit 10.1 to our Form 6-K filed on August 22, 2022)
4.9
Employment Agreement, dated June 3, 2021 by and between ReTo Eco-Solutions, Inc. and Lidong Liu (Incorporated herein by reference to Exhibit 10.1 to our Form 6-K filed on June 7, 2021)
124
4.10
Joint Patent Agreement with Luoyang Water-Conservancy Surveying & Design Co., Ltd. (Incorporated herein by reference to Exhibit 10.13 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)
4.11
Translation of Indemnification Agreement for Housing Provident Fund (Incorporated herein by reference to Exhibit 10.15 to our Form F-1/A (File No. 333-219709) filed on October 16, 2017)
4.14
2022 Share Incentive Plan (Incorporated herein by reference to Exhibit 4.1 to our registration statement on Form S-8 filed on March 8, 2023)
4.15
Convertible Promissory Note dated March 10, 2022 issued to Streeterville Capital, LLC (Incorporated herein by reference to Exhibit 4.1 to our Current Report 6-K, filed on March 14, 2022)
4.16
Securities Purchase Agreement dated March 10, 2022 by and between ReTo Eco-Solutions, Inc. and Streeterville Capital, LLC (Incorporated herein by reference to Exhibit 10.1 to our Current Report 6-K, filed on March 14, 2022)
4.17
Amendment to Convertible Promissory Note dated March 28, 2022 issued to Streeterville Capital, LLC. (Incorporated herein by reference to Exhibit 4.19 to our Form 20-F filed on May 2, 2022)
4.18
Translation of Equity Transfer Agreement, dated December 27, 2021 by and among REIT Technology Development Co., Ltd., Xiaoping Li, Jing Peng, REIT Mingde, Hainan Yile IoT and Yangpu Fangyuyuan (Incorporated herein by reference to Exhibit 10.1 to our Form 6-K, filed on January 4, 2022)
4.19
Subscription Agreement dated February 17, 2022, by and between ReTo Eco-Solutions, Inc and Xiaoping Li (Incorporated by reference to Exhibit 99.2 to our Form SCHEDULE 13D, filed on March 4, 2022)
4.20
Securities Purchase Agreement, dated May 25, 2022, by and between ReTo Eco-Solutions, Inc. and Hainan Tashanshi Digital Information Co., Ltd (Incorporated by reference to Exhibit 10.1 to our Form 6-K, filed on June 1, 2022)
4.21
Translation of Lease Agreement, dated November 25, 2021, by and between REIT Technology Development Co., Ltd and Hainan Nuclear Power Co., Ltd (Incorporated herein by reference to Exhibit 4.23 to our Form 20-F filed on May 2, 2022)
4.22*
Translation of Lease Agreement, dated March 25, 2023, by and between Beijing REIT Technology Development Co., Ltd and Cheng Zhang
4.23
Settlement Agreement, dated April 8, 2022, by and among Beijing REIT Technology Development Co., Ltd., Xinyi Traffic Investment Co., Ltd. and REIT New Materials Xinyi Co., Ltd. (Incorporated herein by reference to Exhibit 4.24 to our Form 20-F filed on May 2, 2022)
8.1*
List of Subsidiaries
11.1
Code of Business Conduct and Ethics (Incorporated herein by reference to Exhibit 99.1 to our Form F-1/A (File No. 333-219709) filed on August 4, 2017)
12.1*
Certification of the Chief Executive Officer of ReTo Eco-Solutions, Inc. pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*
Certification of the Chief Financial Officer of ReTo Eco-Solutions, Inc. pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
125
13.1**
Certification of the Chief Executive Officer of ReTo Eco-Solutions, Inc. 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 the Chief Financial Officer of ReTo Eco-Solutions, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*
Consent of YCM CPA Inc.
101. INS*
Inline XBRL Instance Document.
101. SCH*
Inline XBRL Taxonomy Extension Schema Document.
101. CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101. DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101. LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document.
101. PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
Filed herewith.
**
Furnished herewith.
126
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.
RETO ECO-SOLUTIONS, INC.
By:
/s/ Hengfang Li
Hengfang Li
Chief Executive Officer
(Principal Executive Officer)
Date: May 1, 2023
127
RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES
Report of independent registered public accounting firm PCAOB ID 6781
F-2
Consolidated balance sheets as of December 31, 2022 and 2021
F-4
Consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020
F-5
Consolidated statements of shareholders' equity for the years ended December 31, 2022, 2021 and 2020
F-6
Consolidated statements of cash flows for the years ended December 31, 2022, 2021 and 2020
F-7
Notes to consolidated financial statements
F-8 - F-37
F-
1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
ReTo Eco-solutions, Inc.
Opinion
on the Financial
Statements
We have
audited the accompanying consolidated balance sheets of
ReTo Eco-solutions, Inc.
and subsidiaries
(collectively, the "Company") as of December 31, 2022 and 2021, and the related consolidated statements of operations and
comprehensive income (loss), changes in stockholders' equity, and cash flows for the years ended December 31, 2022, 2021 and 2020,
and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results
of its operations and its cash flows for the years ended December 31, 2022, 2021 and 2020, in conformity with accounting principles generally
accepted in the United States of America.
Going Concern
The accompanying consolidated
financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated
financial statements, the Company records an accumulated deficit as of December 31, 2022, and the Company currently has net working capital
deficit, continued net losses and negative cash flows from operations. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 3. These consolidated
financial statements do not include any adjustments that might result from the outcome of these uncertainties.
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. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our 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 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 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.
F-
2
Critical
Audit Matters
The critical
audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Impairment
of goodwill - Mingde Reporting Unit — Refer to Notes 2, and 5 to the financial statements
Critical
Audit Matter Description
Goodwill represents the excess of the cost of
an acquisition over the fair value of the identifiable assets acquired less liabilities assumed of an acquired business. The Group's
goodwill at December 31, 2021 arose from its business acquisition of REIT Mingde and its subsidiaries. Goodwill acquired in a business
combination is not amortized, but instead tested for impairment at least annually, or more frequently if certain circumstances indicate
a possible impairment may exist. In accordance with ASC 350-20, Intangibles-Goodwill and Other, Goodwill, ("ASC 350-20") the
Group has assigned and assessed goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level
below the operating segment. The Group has determined that it has one reporting unit, which is also its only reportable segment. For the
year ended December 31, 2022, due to the slow development of REIT Mingde and its subsidiaries, the Company performed the two-step test
for the REIT Mingde and its subsidiaries. In accordance with ASC 350-20, the Company recorded an impairment loss of $1,018,870 for the
year ended December 31, 2022.
We identified
goodwill impairment as a critical audit matter because the determination of the estimated future cash flows requires significant management
judgment, specifically forecasting future sales, gross profits and general expenses. Changes in these estimates could have a significant
impact on whether goodwill should be further evaluated for impairment and could have a significant impact on the measurement of the resulting
impairment charge. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures
to evaluate the reasonableness of the Company's judgments used in these estimates.
How the
Critical Audit Matter Was Addressed in the Audit
Our audit
procedures related to management's judgments regarding the estimated future cash flows, specifically projection of future sales,
gross margin and general expense growth assumptions included the following, among others:
(1)
We evaluated management's
ability to accurately estimate future cash flows by comparing actual results to management's historical forecasts and internal
communications regarding the Company's business plan and strategy.
(2)
We evaluated the reasonableness
of management's estimated future cash flows by comparing the projections to historical operating results, performed independent
analysis, and exercised professional judgment during our evaluation process.
/s/
YCM CPA, Inc
.
We have served as the Company's
auditor since 2021.
PCAOB ID
6781
Irvine, California
May 01, 2023
F-
3
RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
December 31,
2022
2021
ASSETS
Current Assets:
Cash and cash equivalents
$
113,895
$
457,495
Accounts receivable, net
2,150,450
441,703
Accounts receivable, net - related party
83,736
93,589
Advances to suppliers, net
453,894
281,600
Advances to suppliers, net - related party
3,787,036
3,842,620
Inventories, net
337,798
463,731
Prepayments and other current assets
402,151
389,864
Due from related parties
208,225
-
Receivable from disposition - current
-
7,059,559
Total Current Assets
7,537,185
13,030,161
Property, plant and equipment, net
8,722,435
9,707,602
Intangible assets, net
4,869,654
4,111,029
Long-term investment in equity investee
2,503,944
2,758,228
Right-of-use assets
424,999
278,269
Goodwill
-
1,075,778
Total Assets
$
24,058,217
$
30,961,067
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term loans
$
1,319,490
2,353,500
Convertible debt
3,922,686
1,645,000
Advances from customers
2,551,216
2,061,203
Due to a minority shareholder
725,000
-
Deferred grants - current
18,563
269,061
Accounts payable
2,624,701
2,121,313
Accounts payable - related party
-
10,199
Accrued and other liabilities
2,717,432
3,103,056
Loans from third parties
1,106,233
1,593,977
Taxes payable
2,077,088
2,599,770
Due to related parties
-
472,439
Operating lease liabilities, current
277,036
155,857
Deferred tax liability
325,593
370,856
Total Current Liabilities
17,665,038
16,756,231
Loans from third parties-noncurrent
1,160,000
-
Operating lease liabilities - noncurrent
158,650
120,558
Total Liabilities
18,983,688
16,876,789
Commitments and Contingencies
Shareholders' Equity:
Common Share, $
0.001
par value,
200,000,000
shares authorized,
43,398,885
shares and
28,965,034
shares issued and outstanding as of December 31, 2022 and 2021, respectively
43,400
28,966
Additional paid-in capital
53,331,093
46,776,170
Statutory reserve
1,066,554
1,230,387
Accumulated deficit
(
47,813,206
)
(
33,347,984
)
Accumulated other comprehensive loss
(
2,388,890
)
(
1,135,386
)
Total
    Shareholders' Equity Attributable to ReTo Eco-Solutions Inc.
4,238,951
13,552,153
Noncontrolling interest
835,578
532,125
Total
    Shareholders' Equity
5,074,529
14,084,278
Total Liabilities and
    Shareholders' Equity
$
24,058,217
30,961,067
The accompanying notes are an integral part of
these consolidated financial statements.
F-
4
RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS)
For the Years Ended
December 31,
2022
2021
2020
Revenues
$
6,168,798
$
3,318,294
$
8,110,401
Revenues – related parties
304,875
281,784
228,814
Total Revenues
6,473,673
3,600,078
8,339,215
Cost of revenues
5,195,159
3,039,296
6,193,505
Cost of revenues – related parties
471,849
175,053
148,034
Total cost of revenues
5,667,008
3,214,349
6,341,539
Gross Profit
806,665
385,729
1,997,676
Operating Expenses:
Selling expenses
3,774,666
826,242
1,085,602
General and administrative expenses
8,592,966
4,619,058
3,971,496
Bad debt expenses
1,710,839
2,250,334
909,931
Impairment of long-lived assets
-
4,344,133
2,267,485
Impairment of goodwill
1,018,870
-
-
Research and development expenses
960,598
346,951
334,904
Total Operating Expenses
16,057,939
12,386,718
8,569,418
Loss from Operations
(
15,251,274
)
(
12,000,989
)
(
6,571,742
)
Other Income (Expenses):
Interest expense
(
321,686
)
(
103,340
)
(
857,551
)
Interest income
3,234
1,898
(
64
)
Other income (expenses), net
177,753
(
26,991
)
480,054
Loss from disposal of REIT Changjiang
-
(
6,293,149
)
-
Gain from dissolution of subsidiaries
508,345
-
-
Gain from disposal of Gu'an REIT
-
-
2,231,270
Share of losses in equity method investments
(
46,209
)
(
142,673
)
-
Change in fair value convertible debt
(
467,383
)
(
1,908,830
)
-
Total Other Income (Expenses), net
(
145,946
)
(
8,473,085
)
1,853,709
Loss before provision for income taxes
(
15,397,220
)
(
20,474,074
)
(
4,718,033
)
Income taxes provision (benefit)
(
17,562
)
3,469
569,974
Net loss from continuing operations
(
15,379,658
)
(
20,477,543
)
(
5,288,007
)
Net loss from discontinued operations, net of taxes
-
(
1,596,390
)
(
7,612,601
)
Net Loss
(
15,379,658
)
(
22,073,933
)
(
12,900,608
)
Less: net loss attributable to noncontrolling interest
(
750,603
)
(
969,107
)
(
1,126,845
)
Net loss attributable to ReTo Eco-Solutions, Inc.
$
(
14,629,055
)
$
(
21,104,826
)
$
(
11,773,763
)
Comprehensive Loss:
Net Loss
$
(
15,379,658
)
(
22,073,933
)
(
12,900,608
)
Other Comprehensive income (loss):
Foreign currency translation adjustments
(
1,183,819
)
493,769
1,923,316
Comprehensive Loss
(
16,563,477
)
(
21,580,164
)
(
10,977,292
)
Less: comprehensive loss attributable to noncontrolling interest
(
680,918
)
(
938,771
)
(
1,132,148
)
Comprehensive loss attributable to ReTo Eco-Solutions, Inc.
$
(
15,882,559
)
$
(
20,641,393
)
$
(
9,845,144
)
Net loss attributable to ReTo Eco-Solutions, Inc.
Continuing operations
(
14,629,055
)
(
19,508,436
)
(
4,161,162
)
Discontinued operations
-
(
1,596,390
)
(
7,612,601
)
Total
$
(
14,629,055
)
$
(
21,104,826
)
$
(
11,773,763
)
Basic and Diluted Loss Per Share Attributable to ReTo Eco-Solutions, Inc.
Continuing operations
(
0.38
)
(
0.75
)
(
0.17
)
Discontinued operations
-
(
0.06
)
(
0.32
)
Total
$
(
0.38
)
$
(
0.81
)
$
(
0.49
)
Weighted average number of shares
Basic and diluted
38,800,974
26,160,750
24,124,884
The accompanying notes are an integral part of
these consolidated financial statements
F-
5
RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021
AND 2020
Additional
Retained
Earnings
Accumulated
Other
Common Shares
Paid-in
Statutory
(Accumulated
Comprehensive
Noncontrolling
Total
Shares
Amount
Capital
Reserve
Deficit)
Income (Loss)
Interest
Equity
Balance at December 31, 2019
$
23,160,000
$
23,160
$
42,725,852
$
2,632,797
$
(
5,718,368
)
$
(
3,527,438
)
$
1,818,860
$
37,954,863
Net loss
-
-
-
-
(
11,773,763
)
-
(
1,126,845
)
(
12,900,608
)
Issuance of common shares for services
685,000
685
650,065
-
-
-
-
650,750
Issuance of common shares for services
290,000
290
333,210
-
-
-
-
333,500
Change in statutory reserve related to disposal of Gu'an REIT
-
-
-
(
575,695
)
575,695
-
-
-
Appropriation to statutory reserve
-
-
-
329,017
(
329,017
)
-
-
-
Foreign currency translation adjustments
-
--
-
-
-
1,928,619
(
5,303
)
1,923,316
Balance at December 31, 2020
$
24,135,000
$
24,135
$
43,709,127
$
2,386,119
$
(
17,245,453
)
$
(
1,598,819
)
$
686,712
$
27,961,821
Net loss
(
21,104,826
)
(
969,107
)
(
22,073,933
)
Common shares issued for conversion of debt
3,755,034
3,756
3,926,244
-
-
-
-
3,930,000
Issuance of common shares for services
1,075,000
1,075
1,413,562
-
-
-
-
1,414,637
Appropriation to statutory reserve
-
-
-
32,671
(
32,671
)
-
-
-
Change in capital related to disposal of REIT Changjiang
-
-
(
3,846,563
)
-
3,846,563
-
-
-
Change statutory related to disposal of REIT Changjiang
-
-
-
(
1,188,403
)
1,188,403
-
-
-
Change in non-controlling interest related to acquisition subsidiaries of REIT Mingde
-
-
-
-
-
-
784,184
784,184
Share to be issued
-
-
1,573,800
-
-
-
-
1,573,800
Foreign currency translation adjustments
-
-
-
-
-
463,433
30,336
493,769
Balance at December 31, 2021
$
28,965,034
$
28,966
$
46,776,170
$
1,230,387
$
(
33,347,984
)
$
(
1,135,386
)
$
532,125
$
14,084,278
Net loss
-
-
-
-
(
14,629,055
)
-
(
750,603
)
(
15,379,658
)
Conversion of convertible debt
1,358,851
1,359
1,797,955
-
-
-
-
1,799,314
Issuance of common shares for acquisition of REIT Mingde
2,580,000
2,580
(
2,580
)
-
-
-
-
-
Issuance of common shares in private placements
5,970,000
5,970
3,576,030
-
-
-
-
3,582,000
Issuance of common shares for services
500,000
500
734,500
-
-
-
-
735,000
Share-based compensation
4,025,000
4,025
3,292,450
-
-
-
-
3,296,475
Appropriation to statutory reserve
-
-
-
22,782
(
22,782
)
-
-
-
Shareholders' contribution
-
-
-
-
-
-
815,814
815,814
Purchase of
30
% noncontrolling interest in Xinyi REIT
-
-
(
2,843,432
)
-
-
-
168,632
(
2,674,800
)
Change in equity related to dissolution of Dingxuan and REIT Xong'an
-
-
-
(
186,615
)
186,615
-
(
75
)
(
75
)
Foreign currency translation adjustment
-
-
-
-
-
(
1,253,504
)
69,685
(
1,183,819
)
Balance at December 31, 2022
$
43,398,885
$
43,400
$
53,331,093
$
1,066,554
$
(
47,813,206
)
$
(
2,388,890
)
$
835,578
$
5,074,529
The accompanying notes are an integral part of
these consolidated financial statements.
F-
6
RETO ECO-SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
2022
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
(
15,379,658
)
$
(
22,073,933
)
$
(
12,900,608
)
Less: net loss from discontinued operations
-
1,596,390
7,612,601
Net loss from continuing operations
(
15,379,658
)
(
20,477,543
)
(
5,288,007
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss from disposal of property and equipment
-
4,466
88,312
Deferred tax provision (benefit)
(
17,562
)
366,365
-
Depreciation and amortization
621,805
875,695
869,725
Change in fair value in convertible debt
467,383
1,908,830
-
Convertible debt issuance cost
415,500
-
-
Accrued interest for convertible debt
194,117
132,516
-
Impairment of long-lived assets
-
4,344,133
2,267,485
Stock-based compensation
4,031,475
1,906,762
772,125
Change in bad debt allowances
1,690,004
2,250,334
909,931
Change in inventory reserve
20,835
(
119,995
)
123,280
Impairment of good will
1,018,870
-
-
(Gain) loss from disposal of subsidiary
-
6,293,149
(
2,231,270
)
Gain from dissolution of a subsidiary
(
508,345
)
Shares of losses in equity method investments
46,209
142,673
-
Amortization of operating lease right-of-use assets
271,185
121,778
159,181
Changes in operating assets:
Accounts receivable
(
2,745,026
)
614,765
3,591,628
Accounts receivable - related party
2,824
109,761
284,487
Advances to suppliers
255,613
905,758
2,621,196
Advances to suppliers - related party
(
241,714
)
282,773
(
3,810,445
)
Inventories
108,188
167,336
(
58,308
)
Prepayments and other current assets
(
134,711
)
(
128,130
)
(
742,853
)
Changes in operating liabilities:
Advances from customers
662,391
(
1,436,799
)
423,517
Advances from customers - related party
-
(
2,201
)
2,056
Deferred revenue
(
254,828
)
(
31,000
)
25,051
Deferred grants
19,024
(
230,197
)
463,360
Accounts payable
680,770
1,163,509
(
477,341
)
Accounts payable - related party
(
9,659
)
(
144,969
)
(
1,352,618
)
Accrued and other liabilities
(
240,979
)
997,686
1,088,452
)
Taxes payable
(
641,431
)
76,419
698,905
Operating lease liability
(
294,115
)
(
131,769
)
(
186,891
)
Net cash (used in) provided by operating
    activities from continuing operations
(
9,961,835
)
(
37,895
)
240,958
Net cash provided by (used in) operating activities from discontinued operations
-
(
2,726,347
)
6,990
Net cash provided by (used in) operating activities
(
9,961,835
)
(
2,764,242
)
247,948
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of subsidiaries
5,696,215
2,649,463
3,843,734
Addition of property and equipment
(
149,547
)
(
17,686
)
(
64,758
)
Addition of intangible assets
(
1,303,965
)
-
-
Investment in equity method investment
-
-
(
2,649,840
)
Prepayment on CIP
-
(
2,552,958
)
-
Net cash from acquisition of REIT Mingde
-
21,339
-
Net cash provided by investing activities from continuing operations
4,242,703
100,158
1,129,136
Net cash used in investing activities from discontinued operations
-
(
1,843,757
)
(
184,735
)
Net cash provided by (used in) investing activities
4,242,703
(
1,743,599
)
944,401
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term bank loans
668,700
2,325,000
11,012,040
Repayment of short-term bank loans
(
1,545,450
)
(
5,774,926
)
(
13,097,915
)
Repayment of long-term bank loans
-
(
1,394,854
)
(
144,937
)
Proceeds received from share issuance
3,582,000
-
-
Proceeds from third-party loans
1,768,340
799,674
724,000
Repayment of third-party loans
(
955,498
)
-
-
Shareholder contribution
815,814
-
-
Proceeds from issuance of convertible debt
3,000,000
3,666,171
-
Payments to non-controlling shareholders
(
1,931,800
)
-
-
Proceeds from related party loans
667,487
483,510
669,089
Repayment of related party loans
(
1,313,778
)
(
788,937
)
(
707,924
)
Net cash provided by (used in) financing activities from continuing operations
4,755,815
(
684,362
)
(
1,545,647
)
Net cash provided by financing activities from discontinued operations
-
4,732,509
367,808
Net cash provided by (used in) financing activities
4,755,815
4,048,147
(
1,177,839
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
619,717
(
203,651
)
120,615
NET INCREASE (DECREASE) IN CASH
(
343,600
)
(
663,345
)
135,125
CASH, BEGINNING OF YEAR
457,495
1,120,840
985,715
CASH, END OF YEAR
$
113,895
$
457,495
$
1,120,840
Less: cash and cash equivalents, restricted cash of discontinued operations at end of period
-
-
62,702
Cash and cash equivalents, restricted cash of continued operation, at end of period
$
113,895
$
457,495
$
1,058,138
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid
$
321,686
$
990,580
$
1,505,452
Income tax paid
$
-
$
3,268
$
-
Non-Cash Investing Activities
Right-of-use assets obtained in exchange for
    operating lease obligations
$
493,731
$
132,336
$
402,778
Right-of-use assets offset with operating lease obligations due to lease cancellation
$
50,545
$
64,230
$
410,614
Purchase of
30
% noncontrolling interest in Xinyi REIT through payable to non-controlling shareholders
$
743,000
$
-
$
-
Addition to account receivable from disposal of REIT Changjiang
$
-
$
4,666,938
$
-
Common shares issued for conversion of debt
$
1,799,314
$
3,930,000
$
-
Withdrawal of capital by original minority shareholder in Xinyi REIT
$
2,843,432
$
-
$
-
Share to be issued for acquisition of REIT Mingde
$
-
$
1,573,800
$
-
The accompanying notes are an integral part of
these consolidated financial statements.
F-
7
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
ReTo Eco-Solutions, Inc. ("ReTo")
is a business company established under the laws of the British Virgin Islands on August 7, 2015 as a holding company to develop business
opportunities in the People's Republic of China (the "PRC" or "China"). ReTo and its subsidiaries are collectively
referred to as the Company. ReTo, through its subsidiaries, is engaged in (i) manufacture and distribution of eco-friendly construction
materials and equipment used for the production of these eco-friendly construction materials and related consultation and technological
services; (ii) consultation, design, project implementation and construction of urban ecological protection projects; (iii) roadside assistance
services; and (iv) software development services.
As of December 31, 2022, the accompanying consolidated
financial statements of the Company reflected the principal activities of the entities listed below. All inter-company balances and transactions
have been eliminated upon consolidation.
Name of the Entity
Place of
Incorporation
Ownership
Percentage
ReTo Eco-Solutions, Inc.
British Virgin Islands
Parent
REIT Holdings (China) Limited ("REIT Holdings")
Hong Kong, China
100
%
Beijing REIT Technology Development Co., Ltd. ("Beijing REIT")
Beijing, China
100
%
Beijing REIT Ecological Engineering Technology Co., Ltd. ("Beijing REIT Ecological")
Beijing, China
100
%
Hainan REIT Construction Engineering Co., Ltd. ("REIT Construction")**
Haikou, China
100
%
REIT New Materials Xinyi Co., Ltd. ("Xinyi REIT")
Xinyi, China
70
%
Nanjing Dingxuan Environmental Protection Technology Development Co., Ltd. ("Dingxuan")**
Nanjing, China
-
%
REIT Q GREEN Machines Private Ltd ("REIT India")
India
51
%
REIT Ecological Technology Co., Ltd. ("REIT Ordos")*
Yancheng, China
100
%
Datong Ruisheng Environmental Engineering Co., Ltd. ("Datong Ruisheng")
Datong, China
100
%
Guangling REIT Ecological Cultural Tourism Co., Ltd.
Datong, China
100
%
REIT (Xiong'an, Hebei) Eco Technology Co., Ltd. ("REIT Xiong'an")**
Xiong'an, China
-
%
REIT Technology Development Co., Ltd ("REIT Technology")
Haikou, China
100
%
Hainan REIT Mingde Investment Holding Co., Ltd ("REIT Mingde")
Haikou, China
100
%
Yangpu Fangyuyuan United Logistics Co., Ltd. ("Fangyuyuan")
Haikou, China
90
%
Hainan Kunneng Direct Supply Chain Management Co., Ltd.
Haikou, China
51
%
Hainan Yile IoT Technology Co., Ltd ("Hainan Yile IoT")
Haikou, China
61.6
%
Hainan Yile IoV Technology Research Institute Co., Ltd, ("IoV Technology Research")
Haikou, China
90
%
Ruishi Tongda Ecological Management Co., Ltd.**
Gansu,China
70
%
Honghe Ruitu Ecological Technology Co., Ltd.
Yunnan,China
100
%
Hainan Coconut Network Freight Co., Ltd.
Haikou, China
100
%
*
Previously known as "REIT Yangcheng"
**
Dingxuan was dissolved on August 30, 2022; REIT Xiong'an was dissolved on September 9, 2022. REIT Construction was dissolved subsequently on February 9, 2023. Ruishi Tongda Ecological Management Co., Ltd. was dissolved on March 7, 2023.
F-
8
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity
with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. These estimates are based on information as of the date of the consolidated financial statements.
Significant estimates required to be made by management
include, but are not limited to, the valuation of accounts receivable, inventories, advances to suppliers, useful lives of property, plant
and equipment, intangible assets, the recoverability of long-lived assets, provision necessary for contingent liabilities, revenue recognition
under the input method, and realization of deferred tax assets. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents represent cash on hand
and cash deposited in major third-party payment processing platform such as Alipay. In addition, highly liquid investments which have
original maturities of three months or less when purchased are classified as cash equivalents. The Company maintains most of the bank
accounts in the PRC. On May 1, 2015, the PRC's new Deposit Insurance Regulation came into effect, pursuant to which banking financial
institutions, such as commercial banks, established in the PRC are required to purchase deposit insurance for deposits in RMB and in foreign
currency placed with them. Such Deposit Insurance Regulation would not be effective in providing complete protection for the Company's
accounts, as its aggregate deposits are much higher than the compensation limit, which is RMB
500,000
for one bank.
Accounts Receivable, net
Accounts receivable are recognized and carried
at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers with
good credit standing with a maximum of 180 days and determines the adequacy of reserves for doubtful accounts based on individual account
analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence
that the Company may not be able to collect amounts due. 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. Based on the assessment of customers' credit
and ongoing relationships, the Company's payment terms typically range from 90 days to 1 year. The provision is recorded against
accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income.
Actual amounts received may differ from management's estimate of credit worthiness and the economic environment. Delinquent account
balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection
is not probable. As affected by the ongoing COVID-19 pandemic, the Company's accounts receivable collection was negatively affected.
Based on subsequent collection analysis, the Company accrued increased bad debt reserve for the outstanding accounts receivable as of
December 31, 2022. As a result, allowance for uncollectible balances amounted to $
1,771,761
and $
904,052
as of December 31, 2022
and 2021, respectively.
Inventories
Inventories are stated at the lower of cost or
net realizable value. Costs include the cost of raw materials, freight, direct labor and related production overhead. The cost of inventories
is calculated using the weighted average method. Any excess of the cost over the net realizable value of each item of inventories is recognized
as a provision for diminution in the value of inventories.
Net realizable value is the estimated selling
price in the normal course of business less any costs to complete and sell products. The Company evaluates inventories on a quarterly
basis for its net realizable value adjustments, and reduces the carrying value of those inventories that are obsolete or in excess of
the forecasted usage to their estimated net realizable value based on various factors including aging and future demand of each type of
inventories. The Company recorded an inventory reserve of $
31,527
and $
12,116
from its continuing operations as of December 31, 2022 and
2021, respectively.
Advances to Suppliers, net
Advances to suppliers consist of balances paid
to suppliers for services and materials that have not been provided or received. Advances to suppliers for service and material are short-term
in nature. Advances to Suppliers 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. In addition, at each reporting date, the Company generally determines the adequacy of allowance
for doubtful accounts by evaluating all available information, and then records specific allowances for those advances based on the specific
facts and circumstances. Allowance for uncollectible balances from the continuing operations amounted to $
449,517
and $
965,843
as of December
31, 2022 and 2021, respectively.
F-
9
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, Plant and Equipment
Property and equipment are stated at cost. The
straight-line depreciation method is used to compute depreciation over the estimated useful lives of the assets, as follows:
Useful life
Property and buildings
30
–
50
years
Machinery equipment
5
–
15
years
Transportation vehicles
5
–
10
years
Office and electronic equipment
3
–
5
years
Expenditures for maintenance and repairs, which
do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments
which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired
or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other
comprehensive income in other income or expenses.
Construction-in-Progress ("CIP")
Construction-in-progress represents property and
buildings under construction and consists of construction expenditures, equipment procurement, and other direct costs attributable to
the construction. Construction-in-progress is not depreciated. Upon completion and ready for intended use, construction-in-progress is
reclassified to the appropriate category within property, plant and equipment.
Intangible Assets
Intangible assets consist primarily of land use
rights and software. Under the PRC law, all land in the PRC is owned by the government and cannot be sold to an individual or company.
The government grants individuals and companies the right to use parcels of land for specified periods of time. These land use rights
are sometimes referred to informally as "ownership". Land use rights are stated at cost less accumulated amortization. Intangible
assets are amortized using the straight-line method with the following estimated useful lives:
Items
Useful life
Land use rights
45
-
49
years
Software
10
years
Goodwill
Goodwill represents the excess of the cost of
an acquisition over the fair value of the identifiable assets acquired less liabilities assumed of an acquired business. The Group's
goodwill at December 31, 2021 arose from its business acquisition of REIT Mingde and its subsidiaries. Goodwill acquired in a business
combination is not amortized, but instead tested for impairment at least annually, or more frequently if certain circumstances indicate
a possible impairment may exist.
In accordance with ASC 350-20, Intangibles-Goodwill
and Other, Goodwill, ("ASC 350-20") the Group has assigned and assessed goodwill for impairment at the reporting unit level.
A reporting unit is an operating segment or one level below the operating segment. The Group has determined that it has one reporting
unit, which is also its only reportable segment. The Group has the option to first assess qualitative factors to determine whether it
is necessary to perform the two-step test in accordance with ASC 350-20. If the Group believes, as a result of the qualitative assessment,
that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative
impairment test described below is required. Otherwise, no further testing is required. In the qualitative assessment, the Group considers
primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information
related to the operations. In performing the two-step quantitative impairment test, the first step compares the carrying amount of the
reporting unit to the fair value of the reporting unit based on either quoted market prices of the ordinary shares or estimated fair value
using a combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value
of the reporting unit, goodwill is not impaired, and the Group is not required to perform further testing. If the carrying value of the
reporting unit exceeds the fair value of the reporting unit, then the Group must perform the second step of the impairment test in order
to determine the implied fair value of the reporting unit's goodwill. The fair value of the reporting unit is allocated to its assets
and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit
goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss.
For the year ended December 31, 2022, due to the
slow development of REIT Mingde and its subsidiaries, the Group performed the two-step test for the reporting unit. In accordance with
ASC 350-20, the Group recorded an impairment loss of $
1,018,870
(RMB
6,856,458
) for the year ended December 31, 2022.
F-
10
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
Impairment of Long-lived Assets
The Company reviews long-lived assets, including
definitive-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset's
carrying value, then the asset is deemed to be impaired and written down to its fair value. Given the Company's net loss position
in fiscal 2022, 2021 and 2020, the Company further assessed that the expected future cash flow generated from its machinery, equipment,
and other long-lived assets would not recover their carrying value and as a result, the Company recorded an impairment of approximately
$
nil
, $
4.3
million and $
2.3
million on these fixed assets for the year ended December 31, 2022, 2021 and 2020, respectively, based on
the fair value assessment provided by the third party valuation firm using the significant unobservable inputs.
Long-term investment in Equity Investee
The Company's long-term investments include
equity method investments and equity investments without readily determinable fair values.
Investments in entities in which the Company can
exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting
in accordance with ASC 323, Investments-Equity Method and Joint Ventures ("ASC 323"). Under the equity method, the Company
initially records its investment at cost and the difference between the cost of the equity investee and the amount of the underlying equity
in the net assets of the equity investee is accounted for as if the investee were a consolidated subsidiary. The share of earnings or
losses of the investee are recognized in the consolidated statements of comprehensive loss. Equity method adjustments include the Company's
proportionate share of investee income or loss, adjustments to recognize certain differences between the Company's carrying value
and its equity in net assets of the investee at the date of investment, impairments, and other adjustments required by the equity method.
The Company assesses its equity investment for other-than-temporary impairment by considering factors as well as all relevant and available
information including, but not limited to, current economic and market conditions, the operating performance of the investees including
current earnings trends, the general market conditions in the investee's industry or geographic area, factors related to the investee's
ability to remain in business, such as the investee's liquidity, debt ratios, and cash burn rate and other company-specific information.
Investments in equity securities without readily
determinable fair values are measured at cost minus impairment adjusted by observable price changes in orderly transactions for the identical
or a similar investment of the same issuer. These investments are measured at fair value on a nonrecurring basis when there are events
or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements
of comprehensive loss equal to the amount by which the carrying value exceeds the fair value of the investment. Prior to the adoption
of ASU 2016-01 on January 1, 2019, these investments were accounted for using the cost method of accounting, measured at cost less
other-than-temporary impairment.
As of December 31, 2022 and December 31, 2021,
the Company's long-term investment in equity investee balance represents its $
2,503,944
and $
2,758,228
, or
41.67
%
equity investment
in Shexian Ruibo Environmental Science and Technology Co., Ltd. (Shexian Ruibo). On September 7, 2020, the Company acquired such equity
interest from an original shareholder of Shexian Ruibo and the original shareholder of Shexian Ruibo. Shexian Ruibo manufactures and sells
eco-friendly construction materials in the PRC. The Company accounted for the investments using equity method, because the Company has
significant influence but does not own a majority equity interest or otherwise control over the equity investee. Under 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. When the Company's share of losses in the equity investee equals or exceeds its interest
in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or
guarantees on behalf of the equity investee. For the years ended December 31, 2022 and 2021, the investment loss from Shexian Ruibo was
$
46,209
and $
142,673
, respectively.
The Company continually reviews its investments
in equity investees to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors
the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee;
other company specific information such as recent financing rounds; the geographic region, market and industry in which the equity investee
operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed
to be other-than-temporary, the carrying value of the equity investee is written down to fair value. As of December 31, 2022 and December
31, 2021, the Company did not recognize any impairment on its equity investment.
F-
11
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases
The Company adopted ASU No. 2016-02—Leases
(Topic 842) on January 1, 2019 using the modified retrospective transition method permitted under ASU No. 2018-11. This transition approach
provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted.
In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among
other things, allowed us to carry forward the historical lease classification. The standard did not materially impact our consolidated
net earnings and cash flows.
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 - Quoted prices in active markets for identical assets and liabilities.
●
Level 2 - Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
●
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company considers the recorded value of its
financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, advance to suppliers, accounts
payable, accrued and other liabilities, advances from customers, deferred revenue, taxes payable and due to related parties to approximate
the fair value of the respective assets and liabilities at December31, 2022 and 2021, based upon the short-term nature of the assets and
liabilities.
The Company believes that the carrying amount
of the short-term and long-term borrowings approximates fair value at December31, 2022 and 2021 based on the terms of the borrowings and
current market rates as the rates of the borrowings are reflective of the current market rates.
The Company elected the fair value option to account
for its convertible loans. The Company engaged an independent valuation firm to perform the valuation. The fair value of the convertible
loans included in short term debts as of December 31, 2022 was $
3,922,686
calculated using the binomial tree model. The convertible loans
are classified as level 3 instruments as the valuation was determined based on unobservable inputs which are supported by little or no
market activity and reflect the Company's own assumptions in measuring fair value. Significant estimates used in developing the
fair value of the convertible loans include time to maturity, risk-free interest rate, straight debt discount rate, probability to convert
and expected timing of conversion. Refer to Note 13 for additional information.
As the inputs used in developing the fair value
for level 3 instruments are unobservable, and require significant management estimate, a change in these inputs could result in a significant
change in the fair value measurement.
The following is a reconciliation of the beginning
and ending balances for convertible loans measured at fair value on a recurring basis using significant unobservable inputs (Level 3)
as of December 31, 2022:
December 31,
2022
Opening balance
$
1,645,000
New convertible loans issued
3,415,500
Accrued interest
194,117
Loss on change in fair value of convertible loan
467,383
Conversion of convertible loans
(
1,799,314
)
Total
$
3,922,686
F-
12
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition
The Company adopted ASC Topic 606 Revenue from
Contracts with Customers ("ASC 606") on January 1, 2018 using the modified retrospective approach. Under ASC 606, revenue
is recognized when control of promised goods or services is transferred to the Company's customers in an amount of consideration
to which an entity expects to be entitled to in exchange for those goods or services.
To determine revenue recognition for contracts
with customers, the Company performs the following five steps: (i) identify the contract with the customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable
that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations
in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
The Company's revenues are primarily derived
from the following sources:
●
Revenue from machinery and equipment sales
The Company recognizes revenue when the machinery
and equipment is delivered and control is transferred. The Company generally provide a warranty for a period of 12 months after the customers
receive the equipment. The Company determines that such product warranty is not a separated performance obligation because the nature
of warranty is to provide assurance that a product will function as expected and in accordance with customer's specification and
the Company has not sold the warranty separately. From its past experience, the Company has not experienced any material warranty costs
and, therefore, the Company does not believe an accrual for warranty cost is necessary for the years ended December 31, 2022, 2021 and
2020.
●
Revenue from construction materials sales
The Company recognizes revenue, net of sales taxes
and estimated sales returns, when the construction materials are shipped to, delivered to or picked up by customers and control is transferred.
●
Revenue from municipal construction projects
The Company provides municipal construction services,
also known as sponge city projects. The Company recognizes revenue associated with these contracts over time as service is performed and
the transfer of control occurs, based on a percentage-of-completion method using cost-to-cost input methods as a measure of progress.
When the percentage-of-completion method is used, the Company estimates the costs to complete individual contracts and records as revenue
that portion of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated
costs (the cost-to-cost approach).
F-
13
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
Under the cost-to-cost approach, the use of estimated
costs to complete each contract is a significant variable in the process of determining recognized revenue, requires judgment and can
change throughout the duration of a contract due to contract modifications and other factors impacting job completion. The costs of earned
revenue include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor,
supplies, tools and repairs. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are
determined.
●
Revenue from technological consulting and other services
The Company recognizes revenue when technological
consulting and other services are rendered and accepted by the customers.
Contract assets and liabilities
Payment terms are established on the Company's
pre-established credit requirements based upon an evaluation of customers' credit quality. Contact assets are recognized for in
related accounts receivable. Contract liabilities are recognized for contracts where payment has been received in advance of delivery.
The contract liability balance can vary significantly depending on the timing of when an order is placed and when shipment or delivery
occurs.
As of December 31, 2022 and 2021, other than accounts
receivable and advances from customers, the Company had no other material contract assets, contract liabilities or deferred contract costs
recorded on its consolidated balance sheet. Costs of fulfilling customers' purchase orders, such as shipping, handling and delivery,
which occur prior to the transfer of control, are recognized in selling, general and administrative expense when incurred.
Disaggregation of Revenues
The Company disaggregates its revenue from contracts
by products and services, as we believe it best depicts how the nature, amount, timing and uncertainty of the revenue and cash flows are
affected by economic factors. The Company's disaggregation of revenues for the years ended December 31, 2022, 2021 and 2020 is disclosed
in Note 21.
Shipping and Handling
Shipping and handling costs are expensed as incurred
and are included in operating expenses, as a part of selling, and general and administrative expenses, in the Company's consolidated
statements of income and comprehensive income. Shipping and handling costs associated with the Company's continuing operations were
$
151,500
, $
367,873
and $
216,301
for the years ended December 31, 2022, 2021 and 2020, respectively.
Government grants
Government grants represent cash subsidies received
from PRC government or related institutions. Cash subsidies which have no defined rules and regulations to govern the criteria necessary
for companies to enjoy the benefits are recognized as other income, net when received. Specific subsidies that local government has provided
for a specific purpose, such as research and development are recorded as other non-current liabilities when received and recognized as
other income or reduction of related expense when the specific performance is meet. As of December 31, 2020, the Company received related
grants of $
490,560
for a specific research and development project to be conducted during the period from 2021 to 2022. The Company recorded
such grants as deferred grants on its consolidated balance sheet. As of December 31, 2022 and December 31, 2021, the remaining balance
was $
18,563
and $
269,061
, respectively.
F-
14
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-based compensation
The Company accounts for share-based compensation
in accordance with ASC 718, Compensation — Stock Compensation ("ASC 718"). In accordance with ASC 718, the Group determines
whether an award should be classified and accounted for as a liability award or an equity award. All the Company's share-based awards
were classified as equity awards and are recognized in the consolidated financial statements based on their grant date fair values.
The Company has elected to recognize share-based
compensation using the straight-line method for all share-based awards granted with graded vesting based on service conditions. The Company
uses the accelerated method for all awards granted with graded vesting. The Company accounts for forfeitures as they occur in accordance
with ASU No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting. The
Company, with the assistance of an independent third-party valuation firm, determined the fair value of the stock options granted to employees.
The binomial option pricing model and Black-Scholes Model were applied in determining the estimated fair value of the options granted
to employees and non-employees.
Income Taxes
The Company accounts for income taxes under ASC
740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated
financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including
the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The provisions of ASC 740-10-25, "Accounting
for Uncertainty in Income Taxes," prescribe a more-likely-than-not threshold for consolidated financial statement recognition and
measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition
of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest
and penalties associated with tax positions, and related disclosures. The Company records a liability for uncertain tax positions when
it is probable that a loss has been incurred and the amount can be reasonably estimated.
To the extent applicable, the Company records
interest and penalties as a general and administrative expense. The Company's subsidiaries in China and Hong Kong are subject to
the income tax laws of the PRC and Hong Kong. No significant taxable income was generated outside the PRC for the years ended December
31, 2022, 2021 and 2020. As of December 31, 2022, the tax years ended December 31, 2018 through December 31, 2022 for the Company's
PRC subsidiaries remain open for statutory examination by PRC tax authorities.
Value Added Tax ("VAT")
Sales revenue represents the invoiced value of
goods, net of VAT. The VAT is based on gross sales price and VAT rates range up to
13
%, starting from April 1, 2019, depending on the
type of products sold. The VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing
or acquiring its finished products. The Company recorded a VAT payable net of payments in the accompanying consolidated financial statements.
All of the VAT returns of the Company have been and remain subject to examination by the tax authorities for five years from the date
of filing.
Earnings (Loss) per Share
The Company computes earnings (loss) per share
("EPS") in accordance with ASC 260, "Earnings per Share" ("ASC 260"). ASC 260 requires companies with
complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average
common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of
potential common 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 common 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. For the years ended December 31, 2022, 2021 and 2020,
the Company had no dilutive security outstanding that could potentially dilute EPS in the future.
F-
15
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Translation
The Company's principal country of operations
is the PRC. The financial position and results of its operations located in PRC are determined using RMB, the local currency, as the functional
currency. ReTo, REIT US and REIT Holdings use U.S. Dollars as their functional currency, while REIT India uses Indian rupee as the functional
currency. The Company's financial statements are reported using U.S. Dollars. The results of operations and the consolidated statements
of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities
denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date.
The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution.
Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the consolidated
statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation
adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated
other comprehensive income (loss). Gains and losses from foreign currency transactions are included in the results of operations.
The value of RMB against US$ and other currencies
may fluctuate and is affected by, among other things, changes in the PRC's political and economic conditions. Any significant revaluation
of RMB may materially affect the Company's financial condition in terms of US$ reporting. The following table outlines the currency
exchange rates that were used in creating the consolidated financial statements in this report:
December 31,
2022
December 31,
2021
December 31,
2020
Year-end spot rate
US$
1
=RMB
6.8972
US$
1
=RMB
6.3726
US$
1
=RMB
6.5250
Average rate
US$
1
=RMB
6.7290
US$
1
=RMB
6.4508
US$
1
=RMB
6.9042
Risks and Uncertainties
The main
operation of the Company is located in the PRC. Accordingly, the Company's business, financial condition, and results of operations
may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company's
results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not
experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization
and structure disclosed in Note 1, this may not be indicative of future results.
The coronavirus
disease 2019 ("COVID-19") pandemic has, and continues to have, a severe and negative impact on the PRC and the global economy.
The Company's business has been negatively impacted by the COVID-19 pandemic.
From late January 2020 through March 2020, the Company had to temporarily
suspend the manufacturing activities due to government restrictions. During the temporary business closure period, employees had very
limited access to its manufacturing facilities and the shipping companies were not available and as a result, the Company experienced
difficulty delivering the products to customers on a timely basis. In addition, due to the COVID-19 outbreak, some of the Company's
customers or suppliers experienced financial distress, delayed or defaulted on their payments, reduced the scale of their business, or
suffered disruptions in their business due to the outbreak. Any increased difficulty in collecting accounts receivable, delayed raw materials
supply, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could
negatively impact its results of operations. The Company's production and sales activities from its continuing operations returned
to normal after the spread of COVID-19 had been substantially controlled in China in late 2020. However, since 2021, there has been a
resurgence of COVID-19 cases caused by new variants such as Delta and Omicron in multiple cities in China, as well as across the world.
Restrictions have been re-imposed in certain cities to combat such outbreaks and emerging variants of the virus. The COVID-19 pandemic
has had a significant impact on the construction sector, which is sensitive to economic cycles. The nature of the impacts and extent of
the ramifications are in large part dependent upon the location of the underlying projects. Direct impacts have ranged from a slowdown
of available materials and labor through to suspensions and, in some instances, deferral and suspension of entire projects. COVID-19 had
a significant impact on the Company's financial results for the years ended December 31, 2022 and 2021. On December 7, 2022,
China announced 10 new rules that constitute a relaxation of almost all of its stringent COVID-19 pandemic control measures. Shortly
after their announcement, additional mobility restrictions issued by local governments were also scrapped. While such measures effectively
reopened business within China, COVID-19's continued existence may have significant and still not well-understood impacts on our
industry. 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.
F-
16
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Reclassifications
In connection with the discontinued operations
of a business, certain prior-year amounts have been reclassified for consistency with the current-year presentation. These reclassifications
had no effect on the reported results of operations. The assets and liabilities related to the discontinued operations are classified
as assets/liabilities held for sale as of December 31, 2022 and 2021, while results of operations related to the discontinued operations,
including comparatives, were reported as losses from discontinued operations. Certain prior-year balance sheet accounts have been reclassified
to conform to the current-year presentation.
Concentrations and Credit Risk
A majority of the Company's 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 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 affect the remittance.
As of December 31, 2022 and 2021, $
97,554
and
$
357,462
of the Company's cash and cash equivalents was on deposit at financial institutions in the PRC. These deposits were insured
per PRC's new Deposit Insurance Regulation for up to RMB
500,000
for one bank. In addition, as of December 31, 2022 and 2021, $
11,631
and $
52,727
of the Company's cash and cash equivalents was on deposit at financial institutions in the Republic of India ("India")
which is insured under the Deposit Insurance and Credit Guarantee Corporation for up to
100,000
Indian Rupee (approximately $
1,403
).
For the year ended December 31, 2022, one customer
accounted for
21
% of the Company's total revenue. For the year ended December 31, 2021, one customer accounted for
11
% of the Company's
total revenue. For the year ended December31, 2020, no single customer accounted for more than
10
% of the Company's total revenue.
As of December 31, 2022, three customers
accounted for
24
% ,
18
% and
11
% of the Company's consolidated accounts receivable, respectively. As of December 31, 2021, one
customer accounted for
15
% of the Company's consolidated accounts receivable.
For the years ended December 31, 2022, 2021 and
2020, the Company purchased approximately
19
%,
53
% and
43
% of its raw materials from one major suppliers, respectively.
As of December 31, 2022, two suppliers accounted
for
35
% and
26
% of the total accounts payable balance, respectively. As of December 31, 2021, one supplier accounted for
47
% of the total
accounts payable balance.
F-
17
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
In June 2016, the Financial Accounting Standards
Board (the "FASB") issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) ("ASU 2016-13"), which
requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience,
current conditions, and reasonable and supportable forecasts. This ASU replaces the existing incurred loss model and is applicable to
the measurement of credit losses on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by Accounting Standards
Update 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Accounting Standards Update 2019-04 Codification
Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,
and Accounting Standards Update 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this guidance
and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2018. As an emerging growth company, the Company adopted this guidance effective January 1, 2023. The adoption did
not have significant impact on the Company's consolidated financial statements.
In January
2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic
323), and Derivatives and Hedging (Topic 815) ("ASU 2020-01"), which is intended to clarify the interaction of the accounting
for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting
for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for the Company beginning
January 1, 2021. The adoption did not impact the Company's financial position.
In August
2020, the FASB issued ASU 2020-06, "Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
— Contracts in Entity's Own Equity (Subtopic 815-40)". This ASU reduces the number of accounting models for convertible
debt instruments and convertible preferred stock. As well as amend the guidance for the derivatives scope exception for contracts in an
entity's own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related
EPS guidance. This standard became effective for the Company on January 1, 2022. The ASU did not have a significant impact on the
Company's 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 adoption
of this guidance did not have a material impact on the Company's consolidated financial statements.
Except for the above-mentioned pronouncements,
there are no recently issued accounting standards that will have a material impact on the audited consolidated financial position, statements
of operations, and cash flows of the Company.
F-
18
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – GOING CONCERN
As reflected in the Company's consolidated financial statements
for the year ended December 31, 2022, the Company's revenue increased by approximately $
2.9
million, or
80
%, from approximately
$
3.6
million in the year ended December 31, 2021 to approximately $
6.5
million in the year ended December 31, 2022, its gross profit from
continued operation increased by approximately $
0.4
million, or
109
%, from approximately $
0.4
million in the year ended December 31, 2021
to approximately $
0.8
million for the year ended December 31, 2022, and its gross margin for the year ended December 31, 2022 increased
to
13
% from
11
% for the last year. For the years ended December 31, 2022 and 2021, the Company incurred significant impairment losses
on bad debt expenses on uncollectible accounts receivable and advance payments due to changes in market conditions of its customers and
suppliers. As a result, for the years ended December 31, 2022 and 2021, the Company reported a net loss of approximately $
15.4
million
and $
22.1
million, respectively. As of December 31, 2022, the Company had a working capital deficit of approximately $
10.1
million.
In addition, the Company had large bank borrowings
as of December 31, 2022 and some of the bank loans will mature and need to be repaid within the next 12 months. If the Company cannot
renew existing loans or borrow additional loans from banks, the Company's working capital may be further negatively impacted.
As of December 31, 2022, the Company had cash
of approximately $
0.1
million. In addition, the Company had outstanding accounts receivable of approximately $
2.2
million (including accounts
receivable from third-party customers of $
2.1
million and accounts receivable from related party customers of approximately $
0.1
million),
of which approximately $
0.3
million, or
7.7
%, had been subsequently collected between January and April 2022, and became available for
use as working capital. As of December 31, 2022, the Company had outstanding bank loans of approximately $
1.3
million from a PRC bank.
Management expects that it would be able to renew
all of its existing bank loans upon their maturity based on past experience and the Company's good credit history. Currently, the
Company is working to improve its liquidity and capital source mainly through cash flow from its operations, renewal of bank borrowings,
and borrowing from related parties. In order to fully implement its business plan and sustain continued growth, the Company may also seek
equity financing from outside investors. At the present time, however, the Company does not have commitments of funds from any potential
investors. No assurance can be given that additional financing, if required, would be available on favorable terms or at all.
Based on above reasons, there is a substantial
doubt about the Company's ability to continue as a going concern for the next 12 months from the issuance of the consolidated financial
statements.
F-
19
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – DISCONTINUED OPERATION
The Company's
subsidiary Gu'an REIT was primarily engaged in manufacturing and distribution of machinery and equipment used for environmental-friendly
construction materials production. On January 2, 2020, Beijing REIT signed a share transfer agreement with a third party - Hebei
Huishitong Techonology Inc. ("Huishitong") to sell
100
% ownership interest in Gu'an REIT to Huishitong for a cash consideration
of RMB
39.9
million (approximately $
5.7
million). As of December 31, 2019, the Company received RMB
9.7
million (approximately $
1.5
million)
from Huishitong as an acquisition deposit. In 2020, the Company received an additional RMB
26.6
million (approximately $
4.1
million). In
2021, the Company received the remaining RMB
3.6
million (approximately $
0.6
million). The Company recorded a gain from the disposition
of $
2,231,270
for the year ended December 31, 2020.
The Company's subsidiary, REIT Changjiang
was primarily engaged in solid waste processing business. On November 12, 2021, the Company signed a share transfer agreement with Zhixin
Group (Hong Kong) Co., Ltd. and Xiamen Zhixin Building Materials Co., Ltd. (collectively, "Zhixin") to sell
100
% ownership
interest in REIT Changjiang to Zhixin for a cash consideration of RMB
60.0
million (approximately $
9.4
million). As of December 31, 2021,
the Company received RMB
15
million (approximately $
2.1
million) from Zhixin. The Company recorded a loss from the disposition of $
6,335,508
for the year ended December 31, 2021. During the year ended December 31, 2022, the Company further received RMB
38.5
million (approximately
$
5.7
million) from Zhixin. The remaining balance amounted to $
1,067,945
. Allowance for uncollectible balances from the operations amounted
to $
1,067,945
as of December 31, 2022, respectively.
The discontinued operation represents a strategic
shift that has a major effect on the Company's operations and financial results, which trigger discontinued operations accounting
in accordance with ASC 205-20-45. The results of operations related to the discontinued operations for the years ended December 31, 2021
and 2020 were reported as loss from discontinued operations.
The results of discontinued operations of REIT
Changjiang for years ended December 31, 2022, 2021 and 2020 are as follows:
For the Years Ended December 31,
2022
2021
2020
Revenue
$
-
$
886,571
1,395,285
Cost of revenues
-
1,657,799
2,235,598
Gross loss
-
(
771,228
)
(
840,313
)
Operating expenses
-
829,049
6,036,039
Loss from discontinued operations
-
(
1,600,277
)
(
6,876,352
)
Other income (expense), net
-
4,375
(
736,249
)
Loss before tax
-
(
1,595,902
)
(
7,612,601
)
Income tax provision
-
488
-
Net loss from discontinued operations
$
-
$
(
1,596,390
)
(
7,612,601
)
F-
20
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – ACQUISITION
On December 27, 2021, the Company entered into
an acquisition agreement to acquire
100
% equity interest in REIT Mingde and its subsidiaries from two unrelated parties for a consideration
of $
1,569,000
(or RMB
10
million). REIT Mingde, through its subsidiaries, is primarily engaged in providing roadside assistance services
and software development services. The acquisition was completed on December 28, 2021 (the "acquisition date"). The Company
believes the acquisition will expand the Company's technology application in the transportation market. The operating results of
REIT Mingde and its subsidiaries, which have been included in the Company's consolidated financial statements since December 31,
2021, was insignificant. In lieu of cash consideration of RMB
10
million, the Company issued an aggregate of
2,580,000
common shares to
the sellers, based on a price of $
0.61
per share and the exchange rate of USD to RMB of
6.39
on February 22, 2022.
The acquisition was accounted for as business
combinations in accordance with ASC 805. The purchase price was RMB
10
million in cash. Acquisition-related costs incurred for the acquisitions
are not material. The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed for the acquired
entities at the acquisition date, which represents the net purchase price allocation at the date of the acquisition based on a valuation
performed by an independent valuation firm engaged by the Company:
Amount
Cash acquired
$
21,601
Other current assets
271,258
Total current assets
292,859
Property and equipment
7,731
Intangible assets, net
2,581,119
Goodwill
1,075,778
Total assets
3,957,487
Current liabilities
1,233,447
Deferred tax liability
370,856
Total liabilities
1,604,303
Non-controlling interest
784,184
Total consideration
$
1,569,000
Goodwill is mainly attributable to the excess
of the consideration paid over the fair value of the net assets acquired that cannot be recognized separately as identifiable assets,
and comprise (a) the assembled work force and (b) the expected but unidentifiable business growth as a result of the synergy resulting
from the acquisition. None of the goodwill is expected to be deductible for income tax purposes. For the year ended December 31, 2022,
the Company fully impaired the goodwill related to the acquisition of REIT Mingde and its subsidiaries.
F-
21
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – ACCOUNTS RECEIVABLE, NET
Accounts receivable consisted of the following:
December 31,
2022
December 31,
2021
Trade accounts receivable from third-part customers
$
3,922,211
$
1,345,755
Less: allowances for doubtful accounts
(
1,771,761
)
(
904,052
)
Total accounts receivable from third-party customers, net
2,150,450
441,703
Add: accounts receivable, net, related parties
83,736
93,589
Accounts receivable, net
$
2,234,186
$
535,292
Due to a change in market conditions as affected by the COVID-19 outbreak
and spread, the Company's collection efforts did not result in a favorable outcome as compared to prior years. Out of the Company's
accounts receivable balance from third party customers as of December 31, 2022, approximately $
0.3
million, or
7.7
% has been collected
and the remaining balance is expected to be substantially collected from customers before December 31, 2023.
Allowance for doubtful accounts movement is as
follows:
December 31,
2022
December 31,
2021
Beginning balance
$
904,052
$
6,888,710
Bad debt provision
981,811
1,949,778
Write off
(
22,290
)
(
7,722,231
)
Reduction due to divestitures
-
(
299,544
)
Foreign exchange translation
(
91,812
)
87,339
Ending balance
$
1,771,761
$
904,052
Below is the aging schedule of accounts receivable
as of December 31, 2022 and 2021:
December 31,
2022
December 31,
2021
Accounts Receivable Aging:
Less than 3 months
$
462,575
$
294,481
From 4 to 6 months
1,262,588
197,465
From 7 to 9 months
1,440,668
28,134
From 10 to 12 months
86,712
107,317
Over 1 year
753,404
811,947
Bad debt reserve
(
1,771,761
)
(
904,052
)
Accounts Receivable, net
$
2,234,186
$
535,292
F-
22
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – ADVANCES TO SUPPLIERS, NET
Advances to suppliers include prepayments for
raw materials used for production of construction materials for the Company's construction projects, which consisted of the following:
December 31,
2022
December 31,
2021
Raw material prepayments for equipment production
$
466,619
$
751,409
Land reclamation prepayments
436,792
472,640
Advances to construction subcontractors
-
23,394
Total:
903,411
1,247,443
Less: allowances for doubtful accounts
(
449,517
)
(
965,843
)
Advances to suppliers, net, third parties
$
453,894
$
281,600
Our suppliers generally require refundable prepayments
from us before delivery of goods or service.
It usually takes 3 to 6 months for the suppliers to deliver raw material for our equipment
production and takes up to 6 to 12 months for the suppliers to deliver the construction materials.
The prepayment is necessary to secure
the supply in the market or secure a favorable price.
The changes of allowance for doubtful accounts for the years ended
December 31, 2022 and 2021 are as follow:
December 31,
2022
December 31,
2021
Beginning balance
$
965,843
$
1,112,374
Bad debt provision
(
454,072
)
259,861
Write off
-
(
428,553
)
Foreign exchange translation
(
62,254
)
22,161
Ending balance
$
449,517
$
965,843
NOTE 8 – INVENTORIES, NET
Inventories, net, consisted of the following:
December 31,
2022
December 31,
2021
Raw materials
$
148,145
$
135,049
Finished goods
221,180
340,798
Subtotal
369,325
475,847
Less: Inventory allowance
(
31,527
)
(
12,116
)
Inventories, net
$
337,798
$
463,731
Inventories include raw material and finished
goods. Finished goods include direct material costs, direct labor costs and manufacturing overhead.
For the years ended December31, 2022, 2021 and
2020, the Company provided an inventory allowance (reversion) of $
20,835
, $(
119,995
) and $
123,280
, respectively.
NOTE 9 – PREPAYMENTS AND OTHER CURRENT ASSETS
The Company's prepaid expenses and other current assets are as
follows:
December 31,
2022
December 31,
2021
Other receivable, net (1)
$
334,246
$
351,844
Value added tax receivable
67,905
38,020
Total
$
402,151
$
389,864
(1)
Other receivables mainly consisted of advances to employees for business development purposes and prepaid employee insurance and welfare benefit which will be subsequently deducted from the employee's payroll.
F-
23
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – LEASE
The Company has several operating leases for manufacturing
facilities and offices. The Company's lease agreements do not contain any material residual value guarantees or material restrictive
covenants. Rent expense for the years ended December 31, 2022, 2021 and 2020 was $
421,585
, $
283,168
and $
122,699
, respectively.
The Company's operating leases primarily
include leases for office space and manufacturing facilities. The current portion of operating lease liabilities and the non-current portion
of operating lease liabilities are presented on the consolidated balance sheet. Total lease expense amounted to $
306,824
, which included
$
35,154
of interest, $
271,185
of amortization expense of ROU assets and short-term lease expense of $
114,761
. Total cash paid for operating
leases amounted to $
294,115
for the year ended December 31, 2022. Supplemental balance sheet information related to operating leases is
as follows:
December 31,
2022
Right-of-use assets
$
424,999
Operating lease liabilities – current
$
277,036
Operating lease liabilities - non-current
158,650
Total operating lease liabilities
$
435,686
The weighted average remaining lease terms and
discount rates for all of operating leases were as follows as of December 31, 2022:
Remaining lease term and discount rate:
Weighted average remaining lease term (years)
1.73
Weighted average discount rate
7.42
%
The following is a schedule of maturities of lease liabilities as of
December 31, 2022:
2023
$
295,403
2024
164,903
Total lease payments
460,306
Less: imputed interest
24,620
Present value of lease liabilities
$
435,686
F-
24
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
December 31,
2022
December 31,
2021
Property and buildings
$
16,676,800
$
15,469,040
Machinery and equipment
1,481,983
1,594,700
Transportation vehicles
774,619
744,885
Office and electronic equipment
159,069
155,685
Leasehold improvement
43,519
-
Subtotal
19,135,990
17,964,310
Construction in progress ("CIP")
-
2,584,252
Less: accumulated depreciation
(
3,413,535
)
(
3,255,669
)
Impairment of fixed assets
(
7,000,020
)
(
7,585,291
)
Property, plant and equipment, net
$
8,722,435
$
9,707,602
Given the Company's net loss position, the
Company assessed that the expected future cash flows may not cover the carrying value of the Company's fixed asset equipment and
machinery. As a result, the Company recorded an impairment of approximately $
nil
, $
4.3
million and $
2.3
million on its fixed assets for
the year ended December 31, 2022, 2021 and 2020.
As of December 31, 2021, the Company's properties
with an aggregate carrying value of approximately $
0.2
million (RMB
1.1
million) have been used as collateral for the Company's
short-term loans (see Note 14).
Depreciation expense was $
414,841
, $
835,054
and
$
802,996
for the years ended December 31, 2022, 2021 and 2020, respectively.
F-
25
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – INTANGIBLE ASSETS, NET
Intangible assets, net consisted of the following:
December 31,
2022
December 31,
2021
Land use rights
$
1,599,693
$
1,730,978
Software
1,299,612
29,472
Others
2,284,860
2,472,376
Patent
114,851
124,277
Total
5,299,016
4,357,104
Less: accumulated amortization
(
429,362
)
(
246,075
)
Intangible assets, net
$
4,869,654
$
4,111,029
As of December 31, 2022 and 2021, land use rights
of
74,278
and
74,278
square meters with a carrying value of approximately $
1.4
million and $
1.5
million, respectively, was pledged
to the bank as collateral for the Company's Short-term bank loan (see Note 14).
Amortization expense was $
206,964
, $
34,671
and
$
29,695
for the years ended December 31, 2022, 2021 and 2020, respectively.
Estimated future amortization expense is as follows:
Twelve months ending December 31,
Amortization
expense
2023
$
160,446
2024
160,446
2025
160,446
2026
160,446
2027
160,446
2028 and Thereafter
4,067,424
$
4,869,654
NOTE 13–CONVERTIBLE LOANS
March Debenture
On March 1, 2021, the Company entered into a securities
purchase agreement with an accredited investor (the "Debenture Holder") for the issuance of a Convertible Debenture (the "March
Debenture") in the aggregate principal amount of up to $
2,300,000
with a maturity date of twelve months after the issuance thereof,
provided that in case of an event of default, the March Debenture may become at the Debenture Holder's election immediately due
and payable. In addition, the Company paid to an affiliate of the March Debenture Holder a fee equal to
3.5
% of the amount of the Debenture
and a one-time due diligence and structuring fee of $
10,000
at the closing.
F-
26
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13–CONVERTIBLE LOANS (continued)
The Debenture Holder may convert the March Debenture
in its sole discretion to Company's common shares at any time at the lower of $
2.50
or
95
% of the average of the two lowest daily
VWAPs during the ten consecutive trading days immediately preceding the conversion date, provided that the conversion price may not be
less than $
0.50
(the "March Debenture Floor Price"). The Debenture Holder may not convert any portion of a Debenture if such
conversion would result in the Debenture Holder beneficially owning more than
4.99
% of Company's then issued and common shares,
provided that such limitation may be waived by the Debenture Holder with a 65 days' notice. Any time after the issuance of the March
Debenture that the daily VWAP is less than the March Debenture Floor Price for a period of 10 consecutive trading days (each such occurrence,
a "March Debenture Triggering Event") and only for so long as such conditions exist after a March Debenture Triggering Event,
the Company shall make monthly payments beginning on the 30
th
day after the date of the March Debenture Triggering Event.
Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the March Debenture
Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of
20
% of such principal amount
and (iii) accrued and unpaid interest hereunder as of each payment date.
The Company has elected to recognize the March
Debenture at fair value and therefore there was no further evaluation of embedded features for bifurcation. The March Debenture was fully
converted into
2,369,501
common shares of the Company for the year ended December 31, 2021.
July Debenture
On July 6, 2021, the Company entered into another
securities purchase with the Debenture Holder for the issuance of a Convertible Debenture (the "July Debenture") in the aggregate
principal amount of up to $
2,500,000
with a maturity date of twelve months after the issuance thereof, provided that in case of an event
of default, the July Debenture may become at the Debenture Holder's election immediately due and payable. In addition, the Company
paid to an affiliate of the Debenture Holder a fee equal to
3.5
% of the amount of the July Debenture and a one-time due diligence and
structuring fee of $
5,000
at the closing.
The Debenture Holder may convert the July Debenture
in its sole discretion to Company's common shares at any time at the lower of $
1.50
or
95
% of the average of the two lowest daily
VWAPs during the ten consecutive trading days immediately preceding the conversion date, provided that the conversion price may not be
less than $
0.50
(the "July Debenture Floor Price"). The Debenture Holder may not convert any portion of the July Debenture
if such conversion would result in the Debenture Holder beneficially owning more than
4.99
% of Company's then issued and common
shares, provided that such limitation may be waived by the Debenture Holder with a 65 days' notice. Any time after the issuance
of the July Debenture that the daily VWAP is less than the July Debenture Floor Price for a period of 10 consecutive trading days (each
such occurrence, a "July Debenture Triggering Event") and only for so long as such conditions exist after a July Debenture
Triggering Event, the Company shall make monthly payments beginning on the 30th day after the date of the July Debenture Triggering Event.
Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the July Debenture
Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of
20
% of such principal amount
and (iii) accrued and unpaid interest hereunder as of each payment date.
The principal balance of $
1,130,000
of the July
Debenture was converted into
1,385,533
common shares of the Company for the year ended December 31, 2021. The remaining balance of $
1,370,000
of the July Debenture was converted into
1,068,078
common shares of the Company during the year ended December 31, 2022.
2022 March Debenture
On March 10, 2022, the Company entered into a
securities purchase agreement with an accredited investor for the issuance of a Convertible Promissory Note (the "Note") in
the aggregate principal amount of $
3,105,000
with a maturity date of twelve months after the payment of the purchase price for the Note,
which will be converted into Company's common shares. The Note carries an original issue discount of $
90,000
. In addition, the Company
paid $
15,000
to the investor to cover legal fees, accounting fees, due diligence etc. On October 13, 2022 the Company entered into a standstill
agreement with the investor. Pursuant to the standstill agreement, the investor will not seek to convert any portion of the Note for a
period beginning as of the date of the agreement and ending on December 10, 2022 (the "Standstill Period"). Balance of the
Note shall be increased by $
310,500.00
(the "Standstill Fee") as of the date of the agreement. The fair value of the Note
was $
3,922,686
as of December 31, 2022.
The principal balance of $
100,000
of the 2022
March Debenture was converted into
290,773
common shares of the Company on December 20, 2022. Subsequently to December 31, 2022, an aggregated
principal balance of $
350,000
of the March Debenture was converted into
1,388,804
common shares of the Company and the Company renewed
the 2022 March Debenture with the investors in 2023.
For the years ended December 31, 2022 and 2021,
due to change in fair value of convertible debentures, the Company recorded an unrealized loss of $
467,383
and $
1,908,830
in other expense,
respectively. Interest expense recognized for these convertible debentures for the years ended December 31, 2022 and 2021 were $
194,117
and $
132,516
, respectively.
F-
27
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14–SHORT-TERM LOANS
Short-term loans consisted of the following:
December 31,
2022
December 31,
2021
Hunyuan Rural Credit Cooperative Association (1)
$
725,000
$
784,500
Bank of Jiangsu (2)
362,500
784,500
Huaxia Bank (3)
231,990
784,500
Total
$
1,319,490
$
2,353,500
(1)
On December 6, 2021, Datong Ruisheng entered into a bank loan agreement with Hunyuan Rural Credit Cooperative Association to borrow approximately $
0.8
million (RMB
5
million) as working capital loan for a term of one year. The loan bears a fixed interest rate of
7.3590
% per annum. The loan is guaranteed by Beijing REIT. On December 4, 2022, the Company extended the loan to December 1, 2023. The extended loan bears a fixed interest rate of
7.05
% per annum.
(2)
On September 3, 2021, Xinyi REIT entered into a new line of credit agreement with Bank of Jiangsu. The agreement allows Xinyi REIT to obtain loans up to RMB
5
million for use as working capital between September 3, 2021 and August 26, 2022. The Company signed a bank loan agreement with Bank of Jiangsu to borrow $
0.8
million (RMB
5
million) on September 3, 2021 for a year with a monthly interest rate of
4.55
%. The loan is guaranteed by Mr. Huizhen Hou and Mr. Dapeng Zhou. Meanwhile, Xinyi REIT also pledged land use right of
74,254.61
square meters with carrying value of RMB
9.4
million (approximately $
1.4
million) as collateral to safeguard the loan. The loan was fully repaid in September 2022. The Company signed another bank loan agreement with Bank of Jiangsu to borrow $
0.7
million (RMB
4.5
million) on September 20, 2022 for a period of six months, with a fixed interest rate of
4.55
%. The loan was fully repaid in March 2023.
(3)
On November 19, 2021, Beijing REIT entered into a new line of credit agreement with Huaxia Bank. The agreement allows Beijing REIT to obtain loans to approximately $
0.8
million (RMB
5
million) for use as working capital between November 19, 2021 and November 19, 2022 for a term of one year. The loan bears a fixed interest rate of
5.655
% per annum. The loan is guaranteed by Beijing Zhongguancun Technology Financing Guarantee Co., Ltd. The Company repaid RMB
3.4
million (approximately$
0.5
million) in December 2022. The remaining balance was fully repaid in January 2023.
For the years ended December 31, 2022, 2021 and
2020, interest expense on all short-term loans amounted to $
132,921
, $
372,881
and $
473,845
, respectively.
NOTE 15–LONG TERM LOAN
December 31,
2022
December 31,
2021
Long-term loans
Jiangsu Yuantong Municipal Projects Construction Co., Ltd. (1)
$
1,160,000
$
-
Total
$
1,160,000
$
-
(1)
In October 11 2022 REIT Construction entered into a third-party loan agreement with Jiangsu Yuantong Municipal Projects Construction Co., Ltd to borrow approximately $
1.1
million (RMB
8
million) as working capital loan for two years.
The loan was from October 11, 2022 to October 10, 2024 and interest-free.
For the years ended December 31, 2022, 2021 and
2020 interest on the Company's long-term loans amounted to $
nil
, $
nil
and $ $
90,074
, respectively.
F-
28
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16–LOANS FROM THIRD PARTIES
Loans from third parties
December 31,
2022
December 31,
2021
Sanya Guohong Municipal Projects Construction Co., Ltd.
$
-
$
627,600
Changshu Tongjiang Engineering Co., Ltd.
145,000
219,660
Zhang Miao
145,000
156,900
Pen Jing
-
156,900
Chen Guo
61,363
66,399
Chai Guirong
145,000
313,800
Hainan Boxinda Science Technology Partnership
212,570
52,718
Yu Zhanfeng
246,500
-
(Qinhua) Beijing Dingji Rubik's Cube Model Technology Co. LTD
10,150
-
Xinyi Xinshuo Concrete Co., LTD
72,500
-
Chen Gang
68,150
-
Total
$
1,106,233
$
1,593,977
On May 9, 2021, Beijing REIT obtained a working
capital loan of $
766,500
from Sanya Guohong Municipal Projects Construction Co., Ltd. The loan was from May 9, 2021 to May 8, 2022 and
interest-free. the loan was fully repaid as of December 31, 2022.
On July 29, 2021, Beijing REIT obtained a working
capital loan of $
219,660
from Changshu Tongjiang Engineering Co., Ltd. The loan is from July 29, 2021 to July 28, 2022 and interest-free.
After partial repayment, the loan balance was $
145,000
as of December 31, 2022.
On February 8, 2021, Beijing REIT obtained a working
capital loan of $
156,900
from Zhang Miao. The loan is from February 8, 2021 to February 7, 2022 and interest-free. After partial repayment,
the loan balance was $
145,000
as of December 31, 2022. Subsequently on March 15, 2023, the Company borrowed $
362,500
(RMB
2.5
million)
from Zhang Miao for working capital. The loan is due on demanded and interest free.
On August 1, 2021, Hainan Yile IoT obtained a
working capital loan of $
156,900
from Pen Jing. The loan is from August 1, 2021 to January 31, 2022 and bears an annual interest of
1
%.
The loan was fully repaid as of December 31, 2022.
On October 21, 2021, Hainan Yile IoT obtained
a working capital loan of $
66,399
from Chen Guo. The loan is from October 21, 2020 to January 20, 2022 and bears an annual interest of
1
%. The loan balance was $
61,363
as of December 31, 2022.
On August 2, 2021, Hainan Yile IoT obtained a
working capital loan of $
313,800
from Chai Guirong. The loan is due on demand and bears an annual interest of
1
%. After partial repayment,
the loan balance was $
145,000
as of December 31, 2022.
On July 4, 2021, Yile Vehicles obtained a working
capital loan of $
52,718
from Hainan Boxinda Science Technology Partnership. The loan is from July 4, 2021 to July 3, 2023 and interest-free.
The loan balance was $
48,720
as of December 31, 2022. On January 30, 2022, Yile International obtained a working capital loan of $
101,500
from Hainan Boxinda Science Technology Partnership. The loan is from January 30, 2022 to January 29, 2023 and interest-free. On February
17, 2022, REIT Technology obtained a working capital loan of $
62,350
from Hainan Boxinda Science Technology Partnership. The loan is from
February17, 2022 to February16, 2023 and interest-free.
On July 29, 2022, Beijing REIT obtained three
working capital loans of $
246,500
from Yu Zhanfeng for four months. The loans are interest-free. The loans balance was $
246,500
as of
December 31, 2022.The loan was repaid $
174,000
in March, 2023.
On May 9, 2022, Beijing REIT obtained a working
capital loan of $
10,500
from Beijing Dingji Rubik's Cube. The loan was due on demand and interest-free.
On September 18, 2022, Beijing REIT obtained a
working capital loan of $
72,500
from Xinyi Xinshuo Concrete Co., LTD. The loan was from September 18, 2022 to September 17, 2022 and interest-free.
On September 19, 2022, Beijing REIT obtained a
working capital loan of $
72,500
from Chen Gang. The loan was from September 19, 2022 to September18, 2023 and interest-free. After partial
repayment, the loan balance was $
68,150
as of December 31, 2022.
F-
29
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17–TAXES
(a)
Corporate income taxes
The Company is subject to income taxes on an entity
basis on income arising in or derived from the location in which each entity is domiciled.
ReTo was incorporated in the British Virgin Islands
and is exempt from paying income tax. REIT Holdings is registered in Hong Kong as a holding company.
The Company's operating subsidiaries were
all incorporated in the PRC and are subject to PRC income tax, which is computed according to the relevant laws and regulations in the
PRC. Under the Enterprise Income Tax Law of PRC, the corporate income tax rate applicable to all companies, including both domestic and
foreign-invested companies, is
25
%. However, Beijing REIT, Hainan Yile IoT and IoV Technology Research were recognized as a High-New Technology
Enterprise by PRC government and subject to a favorable income tax rate of
15
%.
The following table reconciles income tax expense
by statutory rate to the Company's actual income tax expense:
For the Years Ended December 31,
2022
2021
2020
Income tax benefit computed based on PRC statutory income tax rate
$
(
3,849,305
)
$
(
5,118,519
)
$
(
1,179,508
)
Effect of favorable income tax rate in certain entity in PRC
181,088
889,716
(
164,071
)
Non-PRC entities not subject to PRC tax (1)
1,749,333
1,564,644
401,488
Research & Development ("R&D") tax credit (2)
(
240,150
)
(
260,213
)
(
251,178
)
Non-deductible expenses - permanent difference (3)
171,393
588,191
826,034
Change in valuation allowance
1,970,079
2,339,650
937,209
Effective tax (benefit) expense
$
(
17,562
)
$
3,469
$
569,974
(1)
Represents the tax losses incurred from operations outside of China.
(2)
According to PRC tax regulations,
200
% of current year R&D expense approved by the local tax authority may be deducted from tax income.
(3)
Represents expenses incurred by the Company that were not deductible for PRC income tax.
The breakdown of the Company's income (loss) before income tax
provision is as follows:
For the Years Ended December 31,
2022
2021
2020
Loss before income tax expense from China
$
(
9,398,680
)
$
(
13,889,029
)
$
(
3,280,706
)
Loss before income tax expense from outside of China
(
5,998,540
)
(
6,585,045
)
(
1,437,326
)
Total loss before income tax provision
$
(
15,397,220
)
$
(
20,474,074
)
$
(
4,718,032
)
F-
30
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17–TAXES (continued)
(a)
Corporate income taxes (continued)
Loss before income tax expense from outside of
China represents the losses incurred in ReTo, REIT Holdings, REIT India and REIT US, which are mainly holding companies incorporated outside
of China.
The income tax provision (benefit) for the years ended December 31,
2022, 2021 and 2020 was as follows:
For the Years ended December 31,
2022
2021
2020
Current
$
-
$
3,469
$
569,974
Deferred
(
17,562
)
-
-
Total
$
(
17,562
)
$
3,469
$
569,974
Deferred income taxes reflect the net effects
of temporary difference between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for
income tax purposes. The Company periodically evaluates the likelihood of the realization of deferred tax assets and reduces the carrying
amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. Due to continuous
losses incurred, the Company provided full allowance on the deferred tax assets as of December 31, 2022 and 2021.
Deferred tax asset
December 31
2022
December 31
2021
Provision of doubtful accounts
$
531,902
$
323,107
Tax loss carried forwards
5,443,492
4,482,385
Valuation allowance on tax losses
(
5,975,394
)
(
4,805,492
)
$
-
$
-
(b)
VAT
The Company is subject to VAT for selling products
in China.
The applicable VAT rate is 13% for products sold in the PRC.
The amount of VAT liability is determined by applying the applicable
tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input
VAT). Under the commercial practice of the PRC, the Company pays VAT based on tax invoices issued.
(c)
Taxes Payable
The Company's taxes payable consists of the following:
December 31,
December 31,
2022
2021
VAT tax payable
$
359,391
$
422,678
Corporate income tax payable
1,702,591
2,156,850
Land use tax and other taxes payable
15,106
20,242
Total
$
2,077,088
$
2,599,770
As of December 31, 2022 and 2021, the Company
had tax payables of approximately $
2.1
million and $
2.6
million, respectively, mostly related to the unpaid income tax and business tax
in China. For the years ended December 31, 2022 and 2021, the Company has not received any penalty and interest charge notice from local
tax authorities. Due to uncertainties associated with the status of examinations, including the protocols of finalizing audits by the
relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these unpaid tax balances.
The final outcome of this tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or
expiration of the statute of limitations. The Company believes it is likely that the Company can reach an agreement with the local tax
authority to fully settle its tax payables in a short term but cannot guarantee such settlement will ultimately occur.
F-
31
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18–COMMITMENTS AND CONTIGENCIES
Contingencies
From time to time, the Company is a party to various
legal actions arising in the ordinary course of business. The majority of these claims and proceedings are related to, or arise from,
lease disputes, commercial disputes, worker compensation complaints, default on guaranteeing third-party lease obligations, and default
on loans. The Company first determines whether a loss from a claim is probable, and if it is reasonable to estimate the potential loss,
the loss will be accrued. The Company discloses a range of possible losses, if a loss from a claim is probable but the amount of loss
cannot be reasonably estimated.
Contractual commitments
As of December 31, 2022, the Company's contractual
obligations consisted of the following:
Contractual Obligations
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
Operating lease commitment
$
460,306
$
295,403
$
164,903
$
-
$
-
Repayment of bank loans
1,319,490
1,319,490
-
-
-
Total
$
1,779,796
$
1,614,893
$
164,903
$
-
$
-
NOTE 19–RELATED PARTY TRANSACTIONS
The Company records transactions with various
related parties. These related party balances as of December 31, 2022 and 2021 and transactions for the years ended December 31, 2022,
2021 and 2020 are identified as follows:
(1)
Related parties with transactions and related party relationships
Name of Related Party
Relationship to the Company
Mr. Hengfang Li
Chief Executive Officer and Chairman of the Board of Directors
Q Green Techcon Private Limited
Owned by the minority shareholder of REIT India
Shexian Ruibo
The Company owns 41.67% ownership interest in Shexian Ruibo
Zhongrong Honghe Eco Construction Materials Co., Ltd
An entity controlled by Ms. Hong Ma
Hunyuan Baiyang Food Co., Ltd.
An entity controlled by Mr. Hengfang Li
Bei Qi Yin Jian Yi Le (Haikou) Smart Move Science Technology Co., Ltd.
Hainan Yile IoT owns 45% ownership interest in this company
Zhongtou REIT Information Service (Beijing) Co., Ltd
An entity controlled by Mr. Xinyang Li and Ms. Xinran Li, children of Mr. Hengfang Li
Handan Ruisheng Construction Material Technology Co., Ltd.
An entity controlled by Shexian Ruibo
(2)
Due to related parties
As of December 31, 2022 and 2021, the balance of due to related parties
was as follows:
December 31,
2022
December 31,
2021
Mr. Hengfang Li
$
208,225
$
472,439
Mr. Hengfang Li is the Chief Executive Officer
and major shareholder of the Company. Mr. Li periodically provides working capital loans to support the Company's operations when
needed. Such advances were non-interest bearing and due on demand.
(3)
Accounts receivable from related parties
Accounts receivable from related parties consisted of the following:
December 31,
2022
December 31,
2021
Accounts receivable from– related parties
Q Green Techcon Private Limited
$
-
$
2,981
Hunyuan Baiyang Food Co., Ltd.
37,048
40,088
Bei Qi Yin Jian Yi Le (Haikou) Smart Move Science Technology Co., Ltd.
46,688
50,520
Total accounts receivable from related party
$
83,736
$
93,589
The Company fully collected the accounts receivable as of December
31, 2022 from related parties as of the date herein.
F-
32
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19–RELATED PARTY TRANSACTIONS (continued)
(4)
Advance to suppliers, related party
Advance to suppliers, related party, consisted of the following:
December 31,
2022
December 31,
2021
Advance to supplier – related party
Shexian Ruibo*
$
3,769,138
$
3,656,118
Q Green Techcon Private Limited
15,310
174,099
Handan Ruisheng Construction Material Technology Co., Ltd.
2,588
12,403
Total
$
3,787,036
$
3,842,620
*
The balance represents the Company's purchase advances for eco-friendly materials and equipment supplied by Shexian Ruibo.
(5)
Accounts payable to related parties
Accounts payables to related parties consisted of the following:
December 31,
2022
December 31,
2021
Accounts payable – related part
- Zhongtou Ruitu Information Service (Beijing) Co., Ltd
$
-
$
10,199
Total
$
-
$
10,199
(6)
Sales to related parties
Sales to related parties consisted of the following:
For the Years Ended December 31,
2022
2021
2020
Sales to related parties
Changjiang Zhongrong Hengde Environmental Protection Co., LTD
$
215,693
$
-
$
-
Shexian Ruibo
82,453
61,177
-
Q Green Techcon Private Limited
6,729
220,607
228,814
Total
$
304,875
$
281,784
$
228,814
Cost of revenue associated with the sales to these
related parties amounted to $
471,849
, $
175,053
and $
148,034
for the years ended December 31, 2022, 2021, and 2020, respectively.
(7)
Purchases from related parties
Purchases from related parties consisted of the
following:
For the years ended December 31,
2022
2021
2020
Purchase from a relate party
Q Green Techcon Private Limited.
$
266,544
$
228,838
$
1,039,152
Shexian Ruibo
1,141,377
235,946
1,837,841
Total
$
1,407,921
$
464,784
$
2,876,993
F-
33
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20
–
SHAREHOLDERS' EQUITY
Statutory reserve
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 restricted amounts as determined pursuant to PRC statutory laws totaled $
1,066,554
and $
1,230,387
as of
December 31, 2022 and 2021.
Shares issuances
The Company is a company limited by shares established
under the laws of the British Virgin Islands with
200,000,000
common shares authorized at $
0.001
par value. As of December 31, 2022 and
2021,
43,398,885
and
28,965,034
common shares were issued and outstanding.
On September 5, 2019, the Company entered into
a consulting service agreement with FirstTrust Group, Inc. ("FirstTrust"), pursuant to which FirstTrust would assist the Company
with strategic initiatives over the service period from August 16, 2019 to August 15, 2020. The Company issued
400,000
common shares valued
at $
448,000
based on the fair market price of the Company's common shares, at $
1.12
per share on September 5, 2019. The stock-based
compensation is amortized over the service period. The Company recognized stock-based compensation expenses of $
nil
, $
nil
and $
280,000
for the years ended December 31, 2022, 2021 and 2020, respectively.
Pursuant to the Company's 2018 Share Incentive
Plan, on January 22, 2020, the Company's board of directors approved the issuance of an aggregate of
685,000
common shares of the
Company with a fair value of $
650,750
based on the Company's share price of $
0.95
per share at the grant date, as stock-based compensation
to its directors and executives in exchange for their services for the period from January 1, 2020 to December 31, 2021. For the years
ended December 31, 2022, 2021 and 2020, the Company recognized stock-based compensation expenses of $
nil
, $
325,375
and $
325,375
, respectively.
In addition, on February 3, 2020, the Company's
board of directors further approved the issuance of
290,000
common shares of the Company with a fair value of $
333,500
based on the Company's
share price of $
1.15
per share at the grant date, to award certain employees and one officer, in exchange for their services during the
period from January 1, 2020 to December 31, 2021. For the years ended December 31, 2022, 2021 and 2020, the Company recognized stock-based
compensation expenses of $
nil
, $
166,750
and $
166,750
, respectively.
In April 2021, the Company entered into a consulting
service agreement with Geniusland International Capital Ltd., ("Geniusland") Pursuant to the agreement, Geniusland will assist
the Company with strategic initiatives over the service period between January 23, 2021 to January 24, 2024. For the first-year service,
the Company issued
1,000,000
common shares valued at $
1,330,000
based on fair market price of the Company's common shares, at $
1.33
per share on April 9, 2021. Stock-based compensation is amortized over the service period. For the years ended December 31, 2022 and 2021,
the Company recognized stock-based compensation expenses of $
nil
and $
1,330,000
.
In January 2022, the Company revised the consulting
service agreement with Geniusland International Capital Ltd., ("Geniusland"). Pursuant to the new agreement, the service will
cease on March 28, 2022. For the service provided between December 29, 2021 to March 28, 2022. The Company issued
500,000
common shares
valued at $
735,000
based on fair market price of the Company's common shares, at $
1.47
per share on January 3, 2022. Share-based
compensation is amortized over the service period. For the year ended December31, 2022, the Company recognized share-based compensation
expenses of $
735,000
.
Number of
shares
Weighted
average
grant date
value
Nonvested as of December 31, 2021
$
1,000,000
$
1,330,000
Granted
500,000
735,000
Vested
1,500,000
2,065,000
Nonvested as of December 31, 2021
$
-
$
-
F-
34
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20–SHAREHOLDERS' EQUITY
(continued)
On May 11, 2021, the Company issued
75,000
common
Shares to Yorkville Advisors Global LP for services rendered in connection with Company's corporate strategy on the Nasdaq Stock
Market. For the year ended December 31, 2021, the Company recognized stock-based compensation expenses of $
84,637
.
On December
27, 2021, the Company entered into an acquisition agreement to acquire
100
% equity interest in REIT Mingde and its subsidiaries from
two unrelated parties for a consideration of $
1,569,000
(or RMB
10
million). REIT Mingde, through its subsidiaries, is
primarily engaged in providing roadside assistance services and software development services. The acquisition was completed on December
28, 2021 (the "acquisition date"). The Company believes the acquisition will expand the Company's technology application
in the transportation market. In lieu of cash consideration of RMB
10
million, the Company issued an aggregate of
2,580,000
common
shares to the sellers, based on a price of $
0.61
per share and the exchange rate of USD to RMB of
6.39
on February 22,
2022.
On April
22, 2022, the Company's board of directors approved the issuance of an aggregate of
1,025,000
common shares to its employees
for their services under the 2018 Share Incentive Plan; and also approved the issuance of an aggregate of
3,000,000
common shares
to its employees, officers and directors for their services under the 2021 Share Incentive Plan, both of which were registered under the
registration statement on Form S-8 which was filed with the SEC on April 26, 2022. The Company issued an aggregate of
4,025,000
shares
between May 9, 2022 and June 4, 2022 and recognized share-based compensation expenses of $
3,296,475
related to the issuance.
On May 25,
2022, the Company issued
5,970,000
Common Shares to Hainan Tashanshi Digital Information Co. Ltd. at $
0.60
per
share for aggregate gross proceeds of $
3,582,000
.
On March 8, 2023, the Company's board of
directors approved the issuance of an aggregate of
5,000,000
Common Shares to its employees, officers and directors for their services
under the 2022 Share Incentive Plan
.
On February 27, 2023, the Company entered into
a consulting service agreement with Express Transportation Ltd. ("ETL"). Pursuant to the agreement, ETL has agreed to provide
feasibility, analysis and risk management services on investment project in mainland China in exchange for
2,000,000
Common Shares, which
were issued on March 8, 2023.
On February 27, 2023, the Company entered into
a consulting service agreement with Maxleed Investment Holding Ltd. ("MIHL"). Pursuant to the agreement, MIHL has agreed to
provide strategy, due diligence, business expansion and optimization services in exchange for
2,000,000
Common Shares, which were issued
on March 8, 2023.
Conversion of convertible debentures
For the year ended December 31, 2022, the Company
issued an aggregate of
1,358,851
common shares for conversion of convertible debentures based on the conversion price ranging from $
0.24
-$
0.34
.
(see Note 13).
For the
year ended December 31, 2021, the Company issued an aggregate of
3,755,034
common shares for conversion of convertible debentures
based on the conversion price ranging from $
0.97
-$
1.11
. (see Note 13).
Purchase
of non-controlling interest in Xinyi REIT
On
April 8, 2022, the Company signed an agreement with the minority shareholder of Xinyi REIT. Pursuant to the agreement, the Company agreed
to purchase the minority shareholder's
30
% equity interest in Xinyi REIT for an aggregated consideration of RMB
18
million
which is payable in four installments of RMB
4
million, RMB
4
million, RMB
5
million, and RMB
5
million
by the end of April 2022, June 2022, September 2022, and December 2022, respectively. The Company has paid RMB
13
million (approximately
$
1.9
million) as of December 31, 2022. As of December 31, 2022, the balance amounted to RMB
5
million (approximately $
0.7
million).
The Company further paid RMB
3
million (approximately $
0.4
million) in 2023.
However, as of the date herein, the
remaining balance of RMB
2
million (
approximately $
0
.3million
) is due by Beijing REIT.
Non-controlling
shareholder contribution
On April
6, 2022, Hainan Shi Yuan Tong Da Ye Feng Private Equity Partnership (Limited Partnership) signed an investment agreement with REIT
Mingde to invest RMB
5
million (approximately $
0.8
million) into REIT Mingde 's subsidiary Fangyuyuan in exchange
for
10
% equity interest.
F-
35
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21–SEGMENT REPORTING
ASC 280, "Segment Reporting", establishes
standards for reporting information about operating segments on a basis consistent with the Company's internal organizational structure
as well as information about geographical areas, business segments and major customers in financial statements for details on the Company's
business segments. The Company uses the "management approach" in determining reportable operating segments. The management
approach considers the internal organization and reporting used by the Company's chief operating decision maker for making operating
decisions and assessing performance as the source for determining the Company's reportable segments. Management, including the chief
operating decision maker, reviews operation results by the revenue of different products or services. Based on management's assessment,
the Company has determined that it has four operating segments as defined by ASC 280, including machinery and equipment, construction
material, municipal construction projects, and technology consulting and other services.
Construction material segment manufactures and
sells eco-friendly construction material. Machinery and equipment segment manufactures and sells machinery and equipment used to manufacture
construction material. Construction service segment generates revenue from contracting municipal construction projects. Technological
consulting service segment generates revenue from providing environmental-protection related consulting services to customers.
The following table presents summary information
by segments for the Company's continuing operations for the years ended December 31, 2022, 2021 and 2020, respectively:
For the Year Ended December 31, 2022
Machinery
and
Equipment
sales
Construction
materials
sales
Municipal
construction
projects
Technological
consulting
and other
services
Total
Revenues
$
4,298,649
$
805,576
$
527,101
$
842,347
$
6,473,673
Cost of goods sold
3,931,147
904,679
485,656
345,526
5,667,008
Gross profit
367,502
(
99,103
)
41,445
496,821
806,665
Interest expense and charges
138,365
63,880
510
118,931
321,686
Interest income
(
31,710
)
55
72
34,817
3,234
Depreciation and amortization
130,059
341,935
(
15,506
)
165,317
621,805
Capital expenditures
1,790
8,436
(
26,522
)
165,843
149,547
Income tax benefit
-
-
-
(
17,562
)
(
17,562
)
Segment loss
(
10,537,321
)
(
1,425,875
)
(
510,366
)
(
2,906,095
)
(
15,379,658
)
Segment assets
$
8,427,875
$
11,425,531
$
(
2,531
)
$
4,207,527
$
24,058,217
F-
36
RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21–SEGMENT REPORTING (continued)
For the Year Ended December 31, 2021
Machinery
and
Equipment
sales
Construction
materials
sales
Municipal
construction
projects
Technological
consulting
and other
services
Total
Revenues
$
1,799,741
$
1,658,385
$
141,952
$
-
$
3,600,078
Cost of goods sold
1,501,420
1,562,975
149,954
-
3,214,349
Gross profit
298,321
95,410
(
8,002
)
-
385,729
Interest expense and charges
132,136
(
121,449
)
77,153
15,500
103,340
Depreciation and amortization
167,468
705,703
2,524
-
875,695
Capital expenditures
14,463
2,556,181
-
-
2,570,644
Income tax expenses
3,469
-
-
-
3,469
Segment loss
(
12,497,629
)
(
7,804,642
)
(
37,782
)
(
137,491
)
(
20,477,543
)
Segment assets
$
12,742,545
$
12,646,798
$
98,625
$
5,473,099
$
30,961,067
For the Year Ended December 31, 2020
Machinery
and
Equipment
sales
Construction
materials
sales
Municipal
construction
projects
Technological
consulting
and other
services
Total
Revenues
$
6,455,995
$
1,776,525
$
106,695
$
-
$
8,339,215
Cost of goods sold
4,429,869
1,901,060
10,610
-
6,341,539
Gross profit
2,026,126
(
124,535
)
96,085
-
1,997,676
Interest expense and charges
672,778
48,719
136,054
-
857,551
Depreciation and amortization
164,538
701,077
4,110
-
869,725
Capital expenditures
6,900
57,858
-
-
64,758
Income tax expenses
569,974
-
-
-
569,974
Segment loss
(
725,938
)
(
4,300,671
)
(
261,398
)
-
(
5,288,007
)
Segment assets
$
16,389,063
$
41,233,143
$
347,917
$
3,950
$
57,974,073
NOTE 22–SUBSEQUENT EVENTS
On March 13, 2023, REIT New Materials Xinyi Co.,
Ltd. and Weiying Zhou were named as defendants in a lawsuit. The complaint demanded for a repayment of a loan of RMB
550,000
and the related
interest calculated based on the PRC's one year borrowing benchmark rate. The Company filed a response to dispute the allegations
and intended to defend itself vigorously in this matter.
On March 23, 2023, REIT New Materials Xinyi Co.,
Ltd. was named as defendants in a lawsuit. The complaint demanded for a repayment of a loan of RMB
25,607
. On April 11, 2023, REIT New
Materials Xinyi Co., Ltd. was named as defendants in a lawsuit. The complaint demanded for payment of transportation fee of RMB
700,000
.
The Company disputed the allegations and intends to defend itself vigorously in these matters.
In addition, the Company is regularly subject
to claims and litigation. The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant
uncertainties, and could be material to our operating results and cash flows for a particular period. The Company evaluates, on a regular
basis, developments in its legal proceedings and other contingencies that could affect the amount of liability, including amounts in excess
of any previous accruals and reasonably possible losses disclosed, and make adjustments and changes to the accruals and disclosures as
appropriate. For the matters the Company discloses that does not include an estimate of the amount of loss or range of losses, such an
estimate is not possible or is immaterial, and the Company may be unable to estimate the possible loss or range of losses that could potentially
result from the application of non-monetary remedies. Until the final resolution of such matters, if any of the Company's estimates
and assumptions change or prove to have been incorrect, the Company may experience losses in excess of the amounts recorded, which could
have a material effect on the Company's business, consolidated financial position, results of operations, or cash flows.
F-
37